The art of negotiation is so important — to harmonize different points of view, experience, and needs is a challenging task. As the head of a business, I know a thing or two about negotiation and compromise, as well as the resulting benefits.
This week, efforts resume to modernize the North American Free Trade Agreement (NAFTA). While talks are proving to be difficult in some areas, and are testing our ability to compromise, we believe there are greater benefits for all. NAFTA is a necessity for our country to continue to be globally competitive. The modernization of NAFTA is key, not only to competitiveness, but also to growth, particularly for small- and medium-sized businesses.
As the CEO of UPS, I’m proud to lead a company that fuels the engine of global trade. UPS moves 6 percent of the U.S. and 3 percent of the world’s GDP. The company has grown from a small business in Seattle run out of a basement, to the $60-plus billion global company we are today. We operate in more than 220 countries and territories. We have seen firsthand the positive impact of trade agreements – as our export volume to the partner country has grown on average 20 percent following the implementation of each trade agreement with America. Export growth stimulates investment in both countries and that creates good-paying jobs at home and abroad.
States like Georgia, where UPS is headquartered, benefit from more efficient and less burdensome trading with Canada and Mexico and it is essential for Georgia and America’s continued prosperity. Canada and Mexico are Georgia’s two largest trading partners. In 2016, Georgia exported $5.8 billion in goods and services to Canada and $3.2 billion to Mexico. Cross-border trade is set to grow as more women, small businesses, and rural communities reach new overseas customers, often thanks to e-commerce.
The statistics about how NAFTA has benefited the U.S. are tangible. Fourteen million American jobs are supported by trade with Canada and Mexico. Trade with Canada and Mexico has nearly quadrupled to $1.3 trillion since 1994, with the two countries buying more than one-third of U.S. merchandise exports, and 68 percent of inputs for U.S.-produced goods come from Canada and Mexico.
NAFTA was instrumental in turning North America into the world’s largest free trade area. But as with any agreement written a quarter-century ago, NAFTA needs to be updated to reflect the 21st century economy. The Internet only took off after NAFTA was enacted, and the pace of change has only accelerated since.
Over the course of my 40-year career, I’ve seen the emergence of many disruptive technologies — everything from e-commerce and advanced manufacturing to the Internet of Things. We can’t backtrack now on a trading relationship to which we owe a great deal of our success — not with other countries in Asia and Europe threatening to pass us by. Instead, we need to harness the collective resources of our North American neighbors and leverage the opportunities that the new technologies create.
The U.S. is already on top, but we cannot maintain that position of economic strength without adapting to harness the resources of our North American neighbors and the advantages that our two largest trading partners provide, as we simultaneously leverage the opportunities that technological innovation offers to grow more together.
NAFTA has irreversibly integrated the economies of Canada, Mexico, and the United States. The benefits have far outstripped any negative impacts among the parties, which we can and should address but, overall, it’s been a win-win-win.
North America is a global powerhouse when we combine the capabilities of the U.S., Mexico and Canada. Separately and without NAFTA, the U.S. stands to lose more than an estimated $15.5 billion in taxes or tariffs. Regional integration through NAFTA gives us comparative advantage vis-à-vis other regions everywhere in the world.
The agreement needs modernizing to be more conducive to today’s digitally enabled trade. UPS and other Georgia-based companies seeking to reach customers across North America have much to gain from modernization and much to lose if negotiators are not successful. Each country must focus on what’s at stake, drawing on the art of negotiation and enlightened self-interest to create a brighter future for us all.
David Abney is CEO and chairman of the board of UPS. He also serves as a member of the World Affairs Council of Atlanta as well as the Business Roundtable.
