Getting Close to a Modernized NAFTA – the Deal Tech Wants to See

We are optimistic that a deal between Canada, Mexico, and the United States to modernize the North American Free Trade Agreement (NAFTA) could be reached in the coming weeks or even days. Since NAFTA first came into force in 1994, the world has become more digitized and interconnected, and new technologies have revolutionized the ways we do business. Because of this, we have always believed that a modernized NAFTA has the potential to set a new standard for digital trade that will solidify North America as a global hub of innovation by bolstering the strong foundation of the original agreement.

We have been encouraged by the willingness of negotiators in all three countries to prioritize digital trade provisions that enable data to flow freely across borders; eliminate tariffs on technology products; ease and simplify customs requirements for low-value shipments; prohibit requirements to localize data or share algorithms or source code; and ensure value-added services are not subject to ill-fitting or technically infeasible regulations. These provisions would enable the technology and services trade that has been the backbone of the North American economy, with U.S. exports of over $200 billion in tech goods and $400 billion in services to the Canadian and Mexican markets. A modernized NAFTA can set the global standard for digital trade, and negotiators should find the strongest and most comprehensive language possible.

Indeed, some of the most difficult issues can be resolved in a way that further encourages growth and cooperation between all three countries. In the way that this agreement can set a standard for ensuring growth in the technologies that enable every part of the economy, it can also set harmful precedents for future agreements, including rules of origin that require unprecedented amount of content from one country. This ignores realities of global supply chains, leading to higher prices for consumers; unbalanced copyright rules that harm innovators, content creators, and service providers; or a sunset clause that eliminates the long-term certainty that is the hallmark of trade agreements. Any modern, first-class agreement should be future-proofed and not need to be renegotiated every five years, and the competitiveness of North America will be diminished if companies fear the rules are at risk of constant change. In short, these potential provisions risk jeopardizing the incentives for businesses to innovate, invest, hire, and produce across North America.

ITI is committed to these efforts since the beginning of the modernization process, clearly outlining our priorities to assist the administration as it progresses towards a modernized NAFTA:

  • In comprehensive recommendations to the U.S. Trade Representative (USTR), ITI encouraged the United States to modernize NAFTA and support digital trade provisions.
  • In testimony at the ITC, ITI urged the U.S. trade commission to enable digital trade in NAFTA modernization. Our testimony emphasized the importance of the tech sector in U.S. exports, jobs, and competitiveness and the digital trade outcomes that we believe are essential for a truly modernized NAFTA.
  • In an op-ed in Morning Consult, we advised the administration to stay focused on what is important for U.S. manufacturers, innovators, service providers, and workers by taking a pragmatic approach to the discussions and by securing strong outcomes on digital trade.
  • In a subsequent blog post, ITI expressed concern regarding the administration’s proposed changes to the government procurement chapter which would have a negative impact on the agreement.
  • We submitted a letter expressing the need for a strong and balanced approach to copyright in NAFTA.
  • In a recent blog post, we explained how a modernized NAFTA will support a more tech-enabled economy and outline which objectives need to be included in future negotiations.

Fourteen million American jobs rely on NAFTA, and the North American economy depends on Canada, Mexico, and the United States getting this deal right. Negotiators should build on an already strong foundation to create a modernized agreement that will drive job creation and growth for the next 24 years and beyond.

Public Policy Tags: Trade & Investment