Arizona’s economy expanded under the North American Free Trade Agreement, the 25-year-old trilateral trade pact between the United States, Canada and Mexico. Thanks to our already-outstanding business environment and some state-of-the-art additions under the new United States-Mexico-Canada Agreement, we’re poised to do even better.
Overall trade between the three countries represents the largest trading bloc on earth, totaling $1.3 trillion annually. That’s a lot of dollars, pesos, and loonies.
It’s hard to overstate the importance of Arizona’s relationship with Mexico and Canada, our state’s top-two export markets.
New data released earlier this month by the U.S. Census Bureau finds that total bilateral trade between Arizona and Mexico and Canada grew to $20.2 billion in 2018, representing a 7.7 percent year-over-year increase with Mexico and a 2.4 percent increase with Canada.
According to a just released paper, “The USMCA and its Impact on Arizona,” the USMCA modernizes NAFTA in a way that places the state in position for even more robust economic growth and to grow the over 228,000 Arizona jobs that depend on trade and investment with Canada and Mexico.
The report was commissioned by the Chamber and our friends at the Arizona-Mexico Commission (AMC) and the Arizona Chamber Foundation. It makes clear why the USMCA not only updates the existing trade framework for today’s economy, but is also central to Arizona’s future competitive standing nationally and globally.
Jessica Pacheco, the president of the AMC and chair of the Chamber Foundation, unveiled the paper March 19 at the 2019 Arizona-Mexico Commission Governor’s Luncheon hosted by Gov. Doug Ducey, which welcomed special guest Martha Bárcena, the Mexican ambassador to the U.S.
The ambassador’s comments before a packed house were heartfelt, insightful, and spot-on. She spoke eloquently of the deep ties between Arizona and Sonora and the rest of Mexico.
“This Arizona and Mexico relationship, in particular, this very specific region of Sonora and Arizona, has resulted in thousands of new jobs, considerable tourism exchanges and a border that needs to work efficiently for the benefit of both Arizona and Mexico,” Ambassador Bárcena said. But she was also clear about the need to adopt the USMCA. “The ratification of the USMCA is key. If the agreement gets rejected, it will send a very bad signal for relationships with Mexico and Canada.”
The USMCA is more than just a little polish on NAFTA. It brings trade policy into the 21st century, addressing e-commerce, and the changing landscape of intellectual property into areas like bioscience, so Arizona companies can sell highly innovative and technologically advanced product lines into Mexico and Canada with confidence.
USMCA also means new opportunities for continued growth in the services sector, including in transportation, finance, IT, education, insurance and more. U.S. services exports to Canada and Mexico have resulted in an average of a $32.7 billion trade surplus.
Its updated automotive sector articles will further deepen our ties with our neighbor Sonora, as illustrated by the major investment by Lucid Motors in Pinal County, which, thanks to the best-in-class binational working relationship between Gov. Ducey and his counterpart Sonora Gov. Claudia Pavlovich, is growing its automotive supply chain.
Arizona has the tools in place to strengthen its position as a logistics hub under USMCA, too. Thanks to the agreement’s higher de minimis thresholds, sellers can sell more goods and services into Canada and Mexico duty free, which is also good news for consumers in those countries. And because of the SkyBridge project at Phoenix-Mesa Gateway Airport, shipments can reach customers in Mexico without additional inspections in that country since the Gateway Airport is home to Unified Cargo Processing, where U.S. and Mexican customs personnel inspect cargo side-by-side.
The job to ratify the deal now rests with the U.S. Congress, the Mexican Congress, and Canadian Parliament. Lawmakers should move quickly. The Chamber agrees with Gov. Ducey, who wrote in a letter to the state’s congressional delegation, “As we seek to secure Arizona’s economic future, a strong trade deal with Mexico and Canada is crucial. I urge you to work with your colleagues in Congress to move towards ratification of the USMCA as quickly as possible.”
Free trade has proven advantageous to Arizona’s producers and consumers; more markets are available to goods manufactured and grown here, while store shelves are full of a wide variety of quality goods at affordable prices. The trade model established under NAFTA has resulted in tremendous economic expansion for Arizona. The USMCA is going to make a good thing even better.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry