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House committee takes testimony on NAFTA

Business leaders testify about importance of trade agreement.

The House Ways and Means Trade Subcommittee held a hearing July 18 on the North American Free Trade Agreement to learn more about specific issues exporters want addressed as the United States, Mexico and Canada begin renegotiating the trade agreement that went into effect in 1994.

Stan Ryan, president and CEO of Darigold in Seattle, testified that Darigold and other U.S. dairy companies have benefitted from NAFTA through “stronger demand for their milk than would otherwise be the case."

“NAFTA has been a driving force behind remarkable growth in dairy exports and is the reason the United States’ share today of Mexico’s dairy imports is 73%,” Ryan said, adding that U.S. dairy sales to Mexico have risen to $1.2 billion in 2016 from just $124 million in 1995.

Ryan noted that the preferential tariffs enjoyed by the United States could be undermined if the dairy-specific benefits of NAFTA are watered down in a revised pact. He also said Mexico is negotiating a trade agreement with the European Union and exploring possible agreements with New Zealand and Australia, all of which are significant dairy exporters with an interest in expanded sales to North America.

NAFTA is “the vehicle the U.S. will need to ensure that we remain competitive in that market, should Mexico decide to use its ongoing trade discussions with major dairy exporting nations to open up new inroads to its market,” Ryan said.

He also mentioned the lack of U.S. dairy access to Canada.

“NAFTA modernization discussions are an unmissable opportunity to address just that type of unfinished business in order to truly open up the North American market and put our dairy exports to Canada on par with the vast majority of the rest of the U.S. economy,” Ryan said.

Others offering testimony:

Jason Perdue, President of the York County, Nebraska Farm Bureau, spoke in favor of the agreement.

"NAFTA has been overwhelmingly beneficial for the vast majority of farmers, ranchers and associated businesses in the United States, Canada and Mexico. U.S. farmers and ranchers across the nation have benefited from an increase in annual exports to Mexico and Canada from $8.9 billion in 1993 to $38.1 billion in 2016.

Nebraska exported more than $2.4 billion worth of products to both Mexico and Canada in 2016 with agricultural products making up $1.5 billion — more than half — of that total. Mexico alone is Nebraska’s second-largest trading partner with $1.3 billion dollars’ worth of agricultural products being exported there, which supported nearly 1,200 Nebraska jobs."

Farm Bureau priorities for a modernized NAFTA include:

  • Updated, science-based sanitary and phytosanitary rules;
  • Improved dispute settlement procedures for fresh fruits, vegetables and horticultural products;
  • Eliminated or reduced Canadian tariff barriers to dairy, poultry eggs and wine, as well as the recently implemented barriers to ultra-filtered milk;
  • Addressing the misuse of geographical indicators; and
  • Developing a consistent, science-based approach to biotechnology. 

Christine Bliss, president, Coalition of Services Industries, outlined four principles governing NAFTA modernization:

  1. Preserve the existing NAFTA framework, which provides a commercially stable and efficiently integrated environment for U.S. service suppliers. Even a 1% loss of U.S. service jobs would equate to a million job losses.
  2. Ensure modernization of NAFTA is consistent with the negotiating objectives set forth in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA).
  3. It should remain a trilateral agreement with common North American rules. This integration of the North American markets is fundamental to continue to reap the highest level of rewards from NAFTA.
  4. The process must be carried out in a transparent and efficient manner that minimizes any commercial uncertainty and facilitates trade and investment flows.

Althea Erickson, Senior Director – Global Advocacy and Policy, Etsy, Inc., said 44%of Etsy sellers in the U.S. are international exporters.

"We see an enormous opportunity to modernize NAFTA to foster digitally-enabled, microbusinesses exports. By focusing on the needs of our smallest exporters, we could set new global standards for peer-to-peer trade around the world."

Erickson also advocates for the inclusion of a small and micro-business chapter in NAFTA.

Susan Helper, Frank Tracy Carlton Professor of Economics, Case Western Reserve University, testified that economic studies have found that some groups have benefitted from NAFTA, while others have not.

"Appropriately designed, trade deals can set rules so that everyone shares in the resulting gains. For instance, we should negotiate trade deals to ensure competition is based on technology and innovation  — rather than on other nations’ willingness to  exploit  workers  or  the  environment.  However, NAFTA’s current rules allow companies to compete based on who can exploit workers or the environment more, undercutting firms that would like to compete on innovation."

She suggests four ways to improve NAFTA.

  1. Increase worker protections.
  2. Increase environmental protections.
  3. Reform or eliminate special courts for investors.
  4. Strengthen U.S. supply chains. 

Tom Linebarger, Chairman and CEO, Cummins, Inc., advocated modernizing and strengthening NAFTA.

"A modernized NAFTA should incorporate trade, investment and related regulatory reforms in Canada and Mexico since its adoption; promote digital commerce and cross-border data flows; ensure fair U.S. competition with foreign state-owned enterprises and protect U.S. intellectual property rights."

Patrick J. Ottensmeyer, CEO, Kansas City Southern, said he supports efforts to modernize NAFTA without disrupting current trade as 14 million American jobs depend on NAFTA.

Dennis Arriola, Executive Vice President – Corporate Strategy and External Affairs, Sempra Energy, said four critical benefits must be maintained as NAFTA is renegotiated:

  • zero tariffs on all energy goods, including electricity and natural gas;
  • open markets and non-discriminatory treatment for energy services and investment, including power generation and transmission;
  • strong investment protections for cross-border projects, enforceable by Investor-State Dispute Settlement (ISDS); and
  • a provision that locks in market opening reforms, including in the energy sector, that Mexico has enacted since NAFTA was signed, known as “the ratchet."

Celeste Drake, Trade and Globalization Policy Specialist, AFL-CIO, said U.S. workers have lost more than 850,000 jobs under NAFTA.

"The structure of the new NAFTA must recognize that trade and globalization have pushed wages down and weakened worker negotiating power — and build in counterbalancing incentives and tools to raise wages and empower working people. In addition, in conjunction with the deal itself, Congress should enact a broad set of domestic industrial and economic policies to rebuild, repair and modernize U.S. infrastructure; support research, development and advanced manufacturing; and provide working people with state of the art skills."

Source: House Ways and Means Trade Subcommittee, U.S. Dairy Export Council, AFBF

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