Participación de Manuel J. Molano sobre NAFTA en la Oficina del Representante Comercial de Estados Unidos

Washington, DC, June 29th, 2017
My name is Manuel Molano. I am a Mexican economist and the Deputy Director of the Mexican Institute for Competitiveness (IMCO), a private, non-partisan, non-profit think tank in Mexico.
I will summarize in three points our proposal on what the objectives of the NAFTA negotiations should be:

  1. The primary objective should be to increase the competitiveness of the North American region.

NAFTA has increased our region's trade. Since NAFTA was enacted, our trade with the rest of the world has doubled[1]. NAFTA's potential outperforms the world’s other major regions. The United States’ innovation and deep capital markets, Canada's financial stability and abundant natural resources, and Mexico's youth and energetic population are a winning combination.[2],[3]
However, other regions are also pushing forward. From the year 2000 to date, China's total exports have grown eight-fold. In the same period, the European Union’s total exports grew by one hundred and nineteen percent, while NAFTA's exports grew by only eighty-seven percent. The upcoming negotiation must be viewed as an opportunity to revamp North-American competitiveness.
Consumers in the region should be at the center of the debate. Our governments should defend the right of citizens to have access to cheaper and more diverse products and services. Each year, roughly two million consumers in the US buy a car manufactured in Mexico, with 41% of parts coming from the USA[4]. This depends on North American technology and finance, the regional supply chain, and the quality of assemblers on the three sides of the two borders. The regional cost structure allows us to produce and export vehicles at a competitive price[5]. A return to protectionism will impede this, and harm households and companies in our three economies.

  1. Another important objective must be to preserve our mutually beneficial partnership.

According to a 2014 study by the Peterson Institute for International Economics[6], based here in Washington:
NAFTA has not fueled the US trade deficit, and the consensus among economists is that the trade deficit can be explained by an imbalance between savings and investment in the US;
has not raised US unemployment;
has not depressed wages in the US;
In addition, there is no evidence of a connection between US agricultural exports and illegal immigration.
In fact, immigration from Mexico to the US has diminished during recent years, to the point where net migration is currently negative[7].
While the Mexican economy did not grow as expected, many of the regions within Mexico have become prosperous partners of the US and Canada[8].
Our joint population pyramid is more robust than that of competing regions. The NAFTA population under thirty years of age is forty-four percent of the total population, while the same group in China is forty-two percent, in Europe thirty-four percent, and in Japan twenty-nine percent[9]. A young population is important for many reasons, including a healthy ratio of workers to non-workers, affordability of healthcare and pensions, and long-term expectations.
Newer challenges for regulation, such as electronic commerce and services trade, must also be discussed. Issues like labor and environmental regulations, dispute settlement mechanisms, governance, public procurement, corruption, and security will certainly be on the negotiating table.
The spirit of the treaty should be preserved. NAFTA was born to remove tariff, regulatory and tax barriers to trade. Parallel agreements could be signed on each of the new issues of interest.

  1. NAFTA has been a boon to investment, trade and consumer choice. The agreement has been beneficial to our three economies. NAFTA must be relaunched as a tool to create North-American prosperity, opportunities and goodwill.

The freedom to trade is also freedom to choose. Greater diversity and availability of goods and services, as well as lower prices, are a good reason to allow everyone to trade freely. While supermarkets in New York or Mexico City sell millions of different products, less open places do not. In our vicinity, declining economies can blame trade isolation for much of their woes.
It is in the interest of the US to have a prosperous southern partner. Mexico is the US's third largest goods trading partner, and is the second largest importer of US goods and services[10].  “Twenty-Two American states depend on Mexico as an important destination for exports”[11]. Nearly five million jobs in the US depend on trade relations with Mexico[12].
Despite the difference in size between our economies (the US economy is fifteen times bigger than Mexico's), Mexico has also become an increasing investment force in the US. The total stock of Mexican direct investments in the US is close to thirty-six billion dollars[13]. Mexican companies are invested mainly in food, plastics, business services, metals, auto components, and hospitality sectors in the US[14].
Our continued joint progress depends largely on NAFTA and its possibilities. It is in the interest of the three countries that our integration as a competitive region continues. Our shared challenges are many, but so are the opportunities for our countries. May God help us in reaching a beneficial negotiation for all.  Thank you.
[1] Own calculations with WTO data.
[3] IMCO (2015), "Índice de competitividad internacional 2015", available in . Last retrieved on June 12th, 2017.
[4] Own calculations with US Department of Commerce,  International Trade Administration data. Available in
[6] Hufbauer, Gary Clyde, Cathleen Cimino and Tyler Moran, "NAFTA at 20: Misleading Charges and Positive Achievements", Peterson Institute for International Economics, PB14-13, May, 2014. Available in . Retrieved on June 12th, 2017, page 3.
[7] González Barrera, Ana (2015), " More Mexicans Leaving Than Coming to the U.S.", Pew Research Center Hispanic Trends. Available in . Retrieved on June 28th, 2017.
[8] IMCO (2016), "Un puente entre dos Méxicos", Instituto Mexicano para la Competitividad, 2016. Available in!/un-puente-entre-dos-mexicos/introduccion . Retrieved on June 12th, 2017.
[9] Own calculations with (2010) data.
[10] USTR (2017), "US - Mexico Trade Facts", . Retrieved on June 24th, 2017
[12] Mexico Institute at the Wilson Center (
[14] Idem.

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