For more than 30 years, free trade agreements have facilitated international trade, fueled economic growth, raised living standards and allowed American families access to affordable goods and services. Many businesses large and small understand the benefits of FTAs and have adjusted their business plans to center around international expansion. However, globalization is also fueling a vigorous national debate on the parameters of free trade.
While free trade seems to be an ongoing discussion in Congress, one thing is already clear: technology, advanced logistics and the removal of trade barriers have forever changed the global marketplace, giving more U.S. companies than ever before an opportunity to reach the 95% of consumers who live beyond U.S. borders.
From the very beginning, free trade agreements were designed to give U.S. businesses — and the thousands of employees who rely on them — an advantage by making it more cost-effective to export. One of the most well-known and successful trade agreements is North American Free Trade Agreement with our Canadian and Mexican neighbors. NAFTA has generated $1.2 trillion in trade and supported 14 million U.S. jobs since it was created in 1994. In fact, Canada and Mexico are buying more American-made goods and services than any other countries in the world. NAFTA has leveled the playing field by letting small businesses export to Mexico at costs similar as large companies and removing the requirement that a business establish a physical presence in Mexico in order to do business there.
Today, the United States has 14 free trade agreements in place with 20 different countries. Trade policy should continue to support the original goal behind their adoption: to help U.S. companies compete in a complex global environment.
That is not to say that these free trade agreements do not need to evolve with the global marketplace in which they operate. Clearly, new trade policies should be enacted to modernize the way that the U.S. regulates and enforces the movement of goods across borders with its trading partners, while keeping the framework of the trade agreements in place.
When you consider that NAFTA went into effect more than 20 years ago, it only makes sense that it should be revisited so next steps for modernization can be taken. Trade agreements should now take border facilitation procedures, intellectual property, product standards, investments and even data flow into account in addition to tariff reductions to support a growing economy.
NAFTA and other FTAs predate the entire e-commerce marketplace. FTAs should be reviewed to ensure that they are meeting the unique demands of e-commerce and that small and medium-size businesses are encouraged to leverage their benefits. Prioritizing the processing of low-value shipments and ensuring that innovations are protected overseas is especially critical for online retailers and their customers.
In addition, in the past 20 years, there have been many technological advances. Electronic border clearance systems have been developed and trade agreements should specifically encourage their quick implementation to reduce barriers at the border.
The goal, then, should be to make it easier for U.S. businesses to bring their goods to consumers abroad, further leveling the international trade playing field. That means modernizing the standard framework of free trade agreements while customizing them based on bilateral and multilateral interests. For instance, there should be cooperation between U.S. Customs and Border Protection and trading partners’ border clearance agencies, barriers for low-value goods should be removed and the implementation of pre-clearance border processes with partners should be encouraged.
Simply put, free trade agreements are most effective when they create regulatory harmonization between countries and promote cooperation and automation between border clearance agencies. By establishing a rule of law that allows for the faster and more cost-effective movement of goods, free trade agreements make it easier for companies to operate — especially smaller companies that have fewer staff and administrative resources available to comply with varying trade rules.
Ultimately, it makes sense to revisit and modernize not just NAFTA but other U.S. FTAs to increase U.S. exports, prioritize the streamlining and harmonization of trade regulations between the U.S. and its trade partners and meet the demands of the digital economy. As a result, U.S. companies will get a global boost at the very time when international expansion is becoming easier than ever.
Eugene Laney has 20 years of experience in public and governmental affairs and has worked with the Food and Drug Administration, the Department of Agriculture, the Federal Aviation Administration and the U.S. State Department, among others. He manages international trade affairs for DHL, including customs and cargo security issues to help customers meet U.S. regulations, understand the processes and protect their interests.