Before President Bill Clinton signed the North American Free Trade Agreement on Dec. 8, 1993, he declared that the deal “will tear down trade barriers between our three nations.” He went on to note that NAFTA would “create the world’s largest trade zone.”
Relatively quickly the agreement transformed the nature of the relationship among United States, Canada and Mexico by removing most barriers to trade and investment. And it led to dramatic changes across many industries’ supply chains.
“The deal created a North American supply chain,” says Nate Herman, senior vice president of supply chain at the American Apparel and Footwear Association. For example, the deal enabled U.S. apparel manufacturers to ship U.S. fabrics, yarn and zippers to Mexico where they could be cut and sewn before being sent back to the U.S., duty free, to be sold to consumers.
But the three nations couldn’t see into the future. The free trade agreement was signed nearly a year before Jeff Bezos incorporated Amazon.com Inc. and 18 months before the retail giant opened its doors. Another 21 months would pass before Pierre Omidyar launched AuctionWeb, a site “dedicated to bringing together buyers and sellers in an honest and open marketplace” that in September 1997 was renamed eBay. As a result, the word “internet” doesn’t appear a single time in NAFTA’s hundreds of pages, 22 chapters and seven annexes.
In the more than quarter century since Clinton signed NAFTA, the three countries’ economies have significantly changed. Retail has shifted online, the volume of data that retailers collect on consumers has proliferated and books, music, games and other goods have been digitized. That’s why Herman says “it’s time to bring [the agreement] up to date.”
Modernizing NAFTA is the goal of the new North American free trade agreement, or the U.S.-Mexico-Canada Agreement (USMCA), a deal agreed to in principle in 2018. And while the agreement languished for more than a year after the three nations’ negotiators secured an agreement, on Tuesday Democrats in the U.S. House of Representatives announced support for the the deal. The House is expected to vote on the deal next week (it still will need to be passed in the Senate, as well as the legislatures in Mexico and Canada before it can take effect). The deal, which would be the first U.S. free trade agreement to include a chapter on digital trade, includes a few key provisions that explicitly address ecommerce and that many believe will yield key benefits for online retailers while also serving as a model for future trade deals.
“The deal should help online retailers,” Jeffrey Weiss, a partner in law firm Venable LLP’s International Trade Group who previously served as the U.S. Commerce Department’s deputy director for policy and strategic planning. More importantly, it is designed to serve a template for future trade deals that should help retailers, he says.
The deal will lead both Mexico and Canada to increase their de minimis shipment value levels…
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