2018-02

Supporting the Improvement of the North American Free Trade Agreement (NAFTA)

REPRESENTATIVE JOSEPH E. MIRO, CHAIR (DE) BUSINESS, ECONOMIC DEVELOPMENT AND TRADE TASK FORCE

Sponsored by: Rep. César Chávez (AZ)

WHEREAS, negotiated by President George H. W. Bush and signed by President Bill Clinton, the North American Free Trade Agreement (NAFTA) is one of the world's largest free trade areas, substituting tariffs between the United States, Mexico, and Canada with incentives to do business across borders; and,

WHEREAS, NAFTA replaced the prior U.S.–Canada Free Trade Agreement of 1991; and,

WHEREAS, before NAFTA, Mexican tariffs on U.S. imports were 250 percent higher than U.S. tariffs on Mexican imports; and,

WHEREAS, since NAFTA, the economies of the United States, Mexico and Canada have become intertwined; and,

WHEREAS, a recent study by the Congressional Research Service concluded that “it is of national interest for the United States to have a prosperous and democratic Mexico as a neighboring country. Mexico is the United States’ third-largest trading partner, while the United States is, by far, Mexico’s largest trading partner. Mexico ranks third as a source of U.S. imports, after China and Canada, and second, after Canada, as an export market for U.S. goods and services. The United States is the largest source of foreign direct investment (FDI) in Mexico;” and,

WHEREAS, the cultural ties between Mexico and the United States cannot be understated, with over 35 million Mexican Americans living in the United States; and,

WHEREAS, research by Christopher Wilson, an expert from the Woodrow Wilson International Center for Scholars, shows that thanks to NAFTA, “the United States and Mexico no longer simply sell finished products to one another. Instead, they build things together, using a regional system of manufacturing production comprised of supply chains that crisscross the U.S.-Mexico border. This allows the two countries to effectively combine their individual comparative advantages into a highly competitive regional system, improving North America’s ability to compete on the global stage;” and,

WHEREAS, in 2014, the most recent year for which data is available, Mexican industries consumed $136 billion dollars in U.S. intermediate goods, and U.S. industries consumed $132 billion worth of Mexican inputs — “this is direct evidence of joint production taking place between the United States and Mexico on a massive scale;” and,

WHEREAS, despite having a trade deficit in trade in goods with Mexico every year since 1995 (including a $71 billion deficit in 2017) , “the United States sells even more inputs to Mexico than Mexico sells to the United States. Given that Mexico sends approximately 80 percent of its gross exports to the United States, it should be no surprise that the vast majority of the inputs sent from the United States to Mexico make their way back to consumers in the United States;” and,

WHEREAS, the business cycles of the United States and Mexico now move in tandem and the two countries are linked in productivity and competitiveness; and,

WHEREAS, as of early 2017, 4.9 million U.S. jobs depend on trade with Mexico, some are in manufacturing and primary goods production, thanks to cost efficient inputs from Mexico and exports to Mexico, but the vast majority are actually in multiple service sectors, from finance to healthcare and retail, benefiting from the household consumption made possible by access to low-cost, high-quality Mexican necessities; and,

WHEREAS, despite NAFTA’s aggregate benefits, the truth is that those benefits are ill-distributed, going mainly to those already doing well economically, necessitating not only the sort of workforce development programs that NHCSL has championed through prior Resolutions like 2017-13 Expanding Apprenticeship Programs, but also a commitment to ensuring that workers are free to join in unions and negotiate with their employers; and,

WHEREAS, President Donald Trump has entered the United States into a renegotiation of NAFTA with Mexico and Canada; and,

WHEREAS, given the changes since in the quarter century since NAFTA was negotiated and approved, and the current characteristics of the Hispanic economy in the United States, particularly our growing entrepreneurship — Hispanics, particularly Latinas, are the main driver of small business growth in the United States — there is certainly room for improvement in areas like ensuring that NAFTA's rules do not unfairly advantage the largest companies and raising the value of shipments that face customs processing and revisions, which could incentivize small business exports; and,

WHEREAS, NAFTA failed to provide actionability, certainty and meaningful standards to its protection of labor rights and, therefore, effectively “incorporating labor issues into NAFTA itself, rather than leaving them in a weak side agreement, could add teeth to the commitment to respect national standards and thereby ensure that companies do not leave the United States in an effort to avoid the cost of respecting workers’ rights.”

THEREFORE, BE IT RESOLVED, that The National Hispanic Caucus of State Legislators understands that an improved North American Free Trade Agreement that more equitably distributes its benefits is vital to the interests of the United States and to Hispanic Americans in particular; and,

BE IT FURTHER RESOLVED, that The National Hispanic Caucus of State Legislators advocates for the improvement of NAFTA with fair rules that benefit small businesses and labor as detailed above.

THIS RESOLUTION WAS AMENDED AND RATIFIED BY THE NATIONAL HISPANIC CAUCUS OF STATE LEGISLATORS ON FEBRUARY 24, 2018 AT ITS ANNUAL MEETING HELD IN CHICAGO, ILLINOIS.

1. See the NAFTA page on the U.S. Trade Representative’s website at https://ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta
2. Id.
3. Institute for Agriculture and Trade Policy, NAFTA Key Provisions. Available at: https://www.iatp.org/files/NAFTA_Key_Provisions.htm. For a detailed industry-by-industry report on the tariffs prior to NAFTA, see USITC, The Likely Impact to the United States of a Free Trade Agreement with Mexico, pp. xi to xvii (USITC Pub. 2353, Feb. 1991). Available at: https://www.usitc.gov/publications/332/pub2353.pdf
4. M. Angeles Villarreal, U.S.-Mexico Economic Relations: Trends, Issues, and Implications, Summary (CRS, April 27, 2017). Available at: https://fas.org/sgp/crs/row/RL32934.pdf5.
5. See http://www.pewhispanic.org/2017/09/18/facts-on-u-s-latinos/
6. Christopher Wilson, Growing Together: Economic Ties Between the United States and Mexico, p. 2 (Woodrow Wilson Center, May 20, 2017). Available at: https://www.wilsoncenter.org/sites/default/files/growing_together_economic_ties_between_the_united_states_and_mexico.pdf
7. Id., at p. 7.
8. United States Census Bureau figures for 2017, https://www.census.gov/foreign-trade/balance/c2010.html
9. Id., at p. 13.
10. Id., at p. 14.
11. Id, at pp. 36 and 38.
12. Id., at p. 43. This is a problem for Hispanics because, according to Pew Research, “Hispanics are less likely than some other groups to enroll in a four-year college, attend an academically selective college and enroll full-time.” And, nearly half of Hispanics “who go to college attend a public two-year school, or community college, the highest share of any race or ethnicity. By comparison, among college-goers, 30% of whites, 32% of Asians and 36% of blacks go to a community college.” Available at: http://www.pewresearch.org/fact-tank/2015/05/26/5-facts-about-latinos-and-education/ft_16-07-26_latinoseducation_dropoutrate/
13. Source: Stanford University and the Latino Business Action Network (explaining that between 2007 and 2012, the number of Latino Owned Businesses grew by 46.9% compared to just 0.7% for non-Latino owned businesses, and that Latinos have the highest rates of new entrepreneurs with an index of 0.46 compared to 0.29 for Whites and 0.22 for African Americans)
14. See Wilson, supra n. 6, at p. 52. (Stating that since the United States raised its de minimis shipment value amount to $800 in 2016, both Mexico and Canada should reciprocate).
15. Id., at p. 53.