NAFTA benefits not fully realized, study says
The North American Free Trade Agreement has brought significant economic benefit to the United States, Mexico and Canada since it took effect in 1994, but has not realized its full potential because of insufficient modern infrastructure to handle traffic at land ports of entry and bureaucratic red tape for cross-border cargo processing, according to new research from the Texas A&M Transportation Institute.
The report, "NAFTA 20 Years After," is a study of studies that distills the findings of dozens of published papers about the successes and challenges of implementing the historic free trade agreement that now links 444 million people annually producing $17 trillion worth of goods and services.
During the past 20 years, surface trade between the United States and Canada has doubled in value to more than $520 billion, and surface trade between the United States and Mexico has quadrupled to more than $400 billion per year, according to the U.S. Department of Transportation.
Increasing ratios of value to weight, especially for U.S. imports from Mexico, indicate that Mexico has moved up the value chain to produce more high-value products, such as computers and airplanes.
The study was released this week at the NAFTANEXT Summit in Chicago, where panelists reiterated the research's findings that infrastructure for passenger vehicles and trucks has not kept pace with the growth in trade, leading to congestion that undercuts some of the duty advantages from NAFTA and makes the continent less competitive.
Industry and government officials at the conference expressed frustration that NAFTA provisions, intended to allow full access to motor carriers in each country, have not been fully implemented on the southwest border, which has led to the perpetuation of an inefficient system of cargo hand-offs to intermediaries along the border zone.
Research cited by the Texas Transportation Institute also indicated that harmonizing truck size and weight regulations could facilitate cross-border traffic. The United States limits tractor-trailers to 53 feet and 80,000 pounds of gross weight. Achieving such a goal could be difficult, however, since there is wide variety even among U.S. states in the size of combination vehicles allowed on highways.
Although a coordinated approach toward reducing emissions from freight transportation is still desired, one of NAFTA's structural strengths has been the trilateral Commission for Environmental Cooperation, which was created to implement environmental provisions of the free trade agreement.
Juan Carlos Villa, a Latin America regional manager at TTI who led the literature analysis, said at a press conference that the CEC is probably the only true North American governmental organization, and could be a good model for implementing other aspects of NAFTA.
Accelerated oil and gas development in previously inaccessible shale rock formations is lowering energy costs and could soon make North America energy independent, while increasing its manufacturing competitiveness. Experts say NAFTA could be a major factor in facilitating energy trade within the continent. Canada and the United States have extensive shale-oil operations, and Mexico is believed to have similar reserves that could also be tapped with fracking technology.
North American energy production and transportation will be the "biggest game changer for NAFTA" in the next decade, Matt Rose, executive chairman of BNSF, said in an address.
BNSF's railroad subsidiary is a major hauler of crude oil, especially from the Bakken shale region in the upper Plains states to U.S. refineries and storage facilities around the country.
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