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<p style="color:rgb(51,51,51);font-family:Verdana,Arial,Helvetica,sans-serif;line-height:17px;font-size:large">The Promise of a North America-European Union Free Trade Agreement</p><p style="color:rgb(51,51,51);font-family:Verdana,Arial,Helvetica,sans-serif;font-size:13px;line-height:17px">
<strong>By Carla A. Hills, Jaime Serra, and Michael Wilson</strong><br><em>El Financiero April 15, 2013</em></p><p style="color:rgb(51,51,51);font-family:Verdana,Arial,Helvetica,sans-serif;font-size:13px;line-height:17px">
The United States and the European are discussing the possible launch of negotiations to create a U.S.-EU Trade Agreement. Enlarging the proposed negotiations to include all three North American nations, Canada, Mexico, and the United States would create a unique, historic and much larger opportunity that has the potential to give a real boost to the economies of all of the nations involved as well as to the global economy. <br>
<br>The United States’ economy is tightly linked with those of its two neighbors. As a result of geographic proximity, supply chain integration, cultural bonds, and the certainty of rules laid out two decades ago by the North American Free Trade Agreement (NAFTA), the North American region has become highly integrated economically and one of the most competitive in the world. <br>
<br>An integrated supply chain has developed among the three nations that is truly unique. Canada, Mexico and United States not only sell things to one another, they make things together. For every dollar Canada and Mexico export to the United States, there is 25 cents worth of American content in the Canadian goods and 40 cents in the Mexican goods. By comparison in the case of Chinese and Japanese exports, the U.S. content is 4 cents and 2 cents respectively. <br>
<br>The time that technology transfers take to increase labor productivity has been substantially shortened. Firms have been investing in research and development centers across borders. <br><br>Since the NAFTA was enacted, intraregional trade flows have increased nearly 400 percent particularly in manufacturing and foreign investment flows in the region have increased by almost 500 percent both in manufacturing and services.<br>
<br>As a result the economic cycles of the three nations have become strongly correlated. Interest rates have converged and the volatility of exchange rates of the Canadian dollar and the Mexican peso with respect the American dollar under the free float regime have become strikingly similar.<br>
<br>This extraordinary economic integration makes it clear that America, Canada, and Mexico are stronger when acting together as a region than when acting separately.<br><br>In addition a Free Trade Agreement involving the three North America nations and the European Union would capture valuable efficiencies that would be lost if the regional platform is ignored. Mexico already has a free trade agreement with the European Union, and Canada is in the final stages of its negotiations with the EU. <br>
<br>A single agreement across the Atlantic would greatly reduce transaction costs of three separate agreements in terms of rules of origins, customs measures and border red tape which would be of enormous benefit to entrepreneurs on both sides of the Atlantic. The lower costs would be especially beneficial to and multiply the opportunities for small and medium size businesses, the backbone of job creation.<br>
<br>In short a Trans-Atlantic Free Trade Agreement that included Canada, Mexico, and the United States would strengthen the North American region by expanding market access, creating jobs, reducing transaction costs, and eliminating distortions that accompany different tariffs and rules of origins. <br>
<br>Not to be overlooked is the fact that a negotiation of a North American-European Union Trade Agreement has the potential to create the largest free trade area in the world. In 2011 the two regions together represented more than half of world GDP. History suggests that such a major trade agreement could have very positive effects on global trade negotiations. Some will remember that after the Uruguay Round of Multilateral Trade Talks collapsed in 1990, the NAFTA negotiations were announced in 1991, completed in 1992, and approved in 1993. Within months, the members of the World Trade Organization returned to the bargaining table and completed the Uruguay Round negotiation to the great benefit of global economy. A broadened Trans-Atlantic Agreement just might have a similar effect on the now stalled Doha Round.<br>
<br>The future of the North American region is very bright and can be even brighter. Building on the benefits made possible by the NAFTA, the three North American governments working together to achieve a free trade agreement with the European Union could create new and exciting opportunities that could generate very substantial additional benefits for their citizens. It is an ideal time. Our governments should not let this opportunity pass.<br>
<br> ______________________________________________________________<br>**Carla A. Hills served as U.S. Trade Representative 1989-1993; Jaime Serra Puche served as Mexico’s Secretary of Trade and Industry (1988-1994); Michael H. Wilson served as Canada’s Minister of International Trade 1991-1993. The three were the lead negotiators of the NAFTA.<br>
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