Don't Withdraw from NAFTA, Strengthen It

With NAFTA negotiations underway, Tom Donohue, President and CEO of the U.S. Chamber of Commerce, recently wrote an article in the Wall Street Journal explaining why an exit from NAFTA would be harmful to U.S. consumers and entrepreneurs. I agree with him that, instead of withdrawing from NAFTA, President Trump should focus on improving areas that need fixing, such as strengthening NAFTA’s Intellectual Property (IP) Chapter in order to better protect the rights of artists, creators, and inventors throughout North America.

In his article, Mr. Donohue explains why withdrawing from NAFTA would be detrimental to the entire U.S. economy:

Fourteen million American jobs depend on trade with Canada and Mexico, which are by far the U.S.’s largest export markets. Our North American neighbors buy more than $600 billion in U.S.-manufactured goods each year, more than the next 10 largest markets combined.

Thanks to NAFTA, virtually all North American trade is tariff-free. After withdrawing from the deal, tariffs on all products would snap back to an average of 3.5% for the U.S., 4.2% for Canada, and 7.5% for Mexico—a terrible deal for all three countries.

The increased tariffs would hit American consumers and exporters in the pocketbook, but the losses would accumulate well before that. Supply chains would shift away from the U.S., as Canada and Mexico looked to their other free-trade partners, in Europe and Asia, for manufactured goods and food. Hundreds of thousands of American jobs would be lost, and that’s a conservative estimate. 

In a July 2017 blog, “Strengthen NAFTA’s IP Chapter,” I contended that withdrawing from NAFTA would eliminate strong protections of IP rights that have been established among the U.S., Canada, and Mexico. While there is room to strengthen the existing protections, removing them entirely surely would be harmful to securing protection of copyrights and patents here in the U.S. and throughout North America.

In the blog, I discussed some of the areas where NAFTA’s IP Chapter can be improved. For example:

Some parts of Canadian and Mexican IP laws, along with enforcement practices, do not protect U.S. interests. For example, the position of both Canada and Mexico with regard to the transshipment of counterfeit and pirated goods into the United States is too relaxed. This places a high burden on U.S. border officials to police illicit trade. Pirated and counterfeit digital goods have become increasingly available since NAFTA was implemented in 1994, just before the digital economy started to grow. The distribution of pirated and counterfeit goods was listed as a key area of weakness for both Canada and Mexico in the Global IP Center’s (GIPC) 2017 International IP Index.

Stronger IP rights protections will incentivize more innovation and investment in all three NAFTA member countries. This will benefit artists and inventors in the member countries by helping to ensure that they receive the just rewards for their labors, and it will also benefit the entrepreneurs and consumers that undergird thriving market-based economies. With $1.3 trillion in annual economy activity and 14 million jobs on the line in the United States, President Trump should not be focusing on withdrawing from NAFTA but rather on updating the treaty, including in a way that strengthens the all-important Intellectual Property Chapter.