As talks on NAFTA resume Monday in Washington, D.C., negotiators from Canada, Mexico and the United States will be doing their best to represent the interests of their respective nations. While President Donald Trump’s delegates have many industries in mind, American small businesses, given their importance in our economy, must be considered a top priority. The reality is U.S. small businesses need NAFTA, including the low barriers to trade and investor protections it provides.
Since taking effect in 1994, NAFTA has bolstered significant growth in trade between individuals and businesses in Canada, Mexico and the United States.
The U.S. and Canada had first entered into a free trade agreement that took effect in 1989. From that agreement’s creation to 2017, U.S. goods exports to Canada grew by 294.3 percent. And under NAFTA, from 1993 to 2017, U.S. goods exports to Mexico increased by 484.4 percent.
Along with expanding trade between the countries has come an expansion of U.S. enterprises involved in trade. The growth in the number of U.S. firms exporting to both Canada and Mexico has been dramatic. From 1992 to 2015, there was an 81.4 percent increase in the number of U.S. exporters to Canada and a dramatic 365.5 percent increase in those exporting to Mexico. The same trend exists regarding imports. In 2015, there were 16,799 U.S. firms that were importers related to Canada, and 15,290 businesses tied to imports from Mexico.
For good measure, these firms overwhelmingly are small and mid-sized businesses. For example, 75.4 percent of firms exporting to Canada and 72.7 percent of firms exporting to Mexico have fewer than 50 employees. In addition, 54.8 percent of U.S. firms handling imports from Canada and 67.5 percent of Mexico importers have fewer than 50 employees.
NAFTA is one reason why America ranks as a great place to start and run a business. For small businesses, the opportunity to trade freely across our northern and southern borders enables success, and supports the families and livelihoods of countless American business owners and their employees.
Reduced barriers to trade and intellectual property protections under NAFTA certainly have been critical to the success of small businesses. But it doesn’t stop there. The investor-state dispute settlement (ISDS) protections in NAFTA exist to provide independent, neutral arbitration for trade disputes between countries. They ensure that foreign investment disputes don’t turn into state-to-state conflicts, and keep businesses protected from unfair treatment by foreign legal courts or jurisdictions.
The Trump administration should keep in mind that ISDS provisions align perfectly with the goal of protecting American interests on the international stage. As noted by Claudio M. Loser, president of the Centennial Group Latin America and former IMF Western Hemisphere director from 1994 to 2002, since the early 2000’s, the U.S. government has faced 18 ISDS cases filed by foreign investors, and won every single one. It’s clear that this provision of NAFTA will go a long way towards the continued success of small businesses, who with limited resources need such dispute resolution measures.
Without ISDS, American small businesses could see their legal rights and contracts jeopardized in foreign countries. They could be subjected to biased foreign courts that do not value the same private property protections that we do in the U.S. ISDS provides real protection against potential foreign mistreatment.
Just recently, over 100 members of Congress signed a letter to U.S. Trade Representative Lighthizer insisting that “ISDS provisions at least as strong as those contained in the existing NAFTA must be included in a modernized agreement to win Congressional support.” These Congressional leaders represent constituents from across the country working in a myriad of different industries and businesses of all sizes – a testament to the importance of ISDS provisions in NAFTA.
NAFTA is one reason why America ranks as a great place to start and run a business. It protects American business interests through ISDS provisions, and has opened up markets for entrepreneurs of all kinds. For small businesses, the opportunity to trade freely across our northern and southern borders enables success, and supports the families and livelihoods of countless American business owners and their employees. The preservation of this agreement is crucial to the continued success of small business.