There is no need to sunset NAFTA

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U.S. negotiators have proposed adding a “sunset clause” to the North American Free Trade Agreement. If the clause is enacted, NAFTA would automatically expire at the end of five years unless the United States, Canada and Mexico take affirmative action to maintain it.

When you consider that Congress is generally unable to complete its own budget on time, let alone plan ahead to vote on a trade agreement, and then add in the vagaries of politics in the United States, Canada and Mexico, you have the recipe for a nailbiter every five years that will throw billions of dollars of investment and millions of jobs into turmoil.

Even if the agreement is renewed, it could lapse for periods of time. The political uncertainty alone will create costs for producers, reduce the competitiveness of our products, and inhibit job creation. It is hard to find any manufacturing investor who thinks this is a good idea.

There is a better solution, and we do not have to wait five years to implement it. The governments can ensure their federal policy and regulatory agencies are structured to be consistently and strategically focused on the North American economy. Mexico and Canada have each, in their own way, created internal structures to do exactly that.

Mexico’s foreign affairs agency has a sub-Cabinet official whose sole responsibility is relations with Canada and the United States. The Canadian government created a team within the Office of the Prime Minister that has broad power to ensure Canadian agencies are working closely and in coordinated fashion with their U.S. counterparts.

The United States is far behind. An assistant secretary for international affairs at the Department of Homeland Security is responsible for our land borders, but must also manage security concerns globally. The Department of Defense has a single military command responsible for North America, but other elements of national security policy, such as counterterrorism and cybersecurity, report to the secretary of Defense through other chains of command.

At the Department of State, the only person who covers both Canada and Mexico at the policy level also deals with the entire Western Hemisphere. As a result, the crisis of the day in Venezuela or Nicaragua often overshadows our relatively smooth, but arguably more existentially important, relations with our immediate neighbors. At the White House, the National Security Council has a mid-level official focused on Canada and Mexico, but that official does not have authority over innumerable other areas of domestic policy impacted by those countries.

These differing structures are an important reason why NAFTA is controversial in the United States. In both Canada and Mexico NAFTA is widely considered to be a success. Problems like skills mismatches and border bottlenecks that we have left unaddressed, in part because there is nobody in the U.S. government with the authority to address them, have been successfully dealt with in Canada and Mexico.

At almost no cost, and without adding personnel, the U.S. government can address this gap quickly by ensuring key agencies are staffed in ways that promote more attention to North America as a region. In each agency, a senior position should report directly to the head of the agency and have authority over policy and operations in Canada and Mexico.

Furthermore, the Office of the U.S. Trade Representative should have a deputy U.S. Trade Representative for North America. These officials can then form a North America Council within the White House, coequal with the National Security Council and the National Economic Council, reporting directly to the president’s chief of staff and the president.

This kind of reorganization is challenging, as bureaucracies always resist change. But with the right political preparation, it can be done. The National Security Council itself is evidence of this, and with the right personalities in charge it can be highly effective.

Canada and Mexico are our largest export markets and our closest allies and security partners. We are home to millions of citizens from each country, and millions more travel, own homes and do business in all three countries. Still more work in one country and retire in another. We share river basins and power grids, TV and radio stations.

In fact, it has been said that our relations with our neighbors are “intermestic” because they touch on both international and domestic issues. We need a corresponding ability to make “intermestic” policy. If not, we will be blindsided by crises we should see coming. If we can, we can seize opportunities to wring the potential from this strong regional economic relationship, and we will not need a sunset clause in NAFTA.

 

Matthew Rooney is director of economic growth at the George W. Bush Institute

 

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