Despite trade rise under NAFTA, cross-border regulatory hurdles still hurting business, report says

In the 20 years since the North American Free Trade Agreement took effect, trade between the United States and Canada has tripled, but those gains have occurred despite ongoing — and often unnecessary — hurdles to cross-border business, according to a recent study by the Canadian Council of Chief Executives. “The report is striking because it acknowledges that the NAFTA objective of a single market for goods and services hasn’t been achieved,” notes Christopher Sands, a senior fellow at the Hudson Institute.

Titled “Made in North America: A New Agenda to Sharpen Our Competitive Edge,” the study offers several strategies to reach that objective.

One is to improve border operations so goods can travel more smoothly between the three North American countries. This is especially important to foster efficiency and growth in cross-border supply chains — small, mid-sized and large companies in the U.S., Canada and Mexico that make things together.
The auto industry is perhaps the most obvious example of this type of economic interconnectedness; car and truck components can cross the border six or seven times before a vehicle is completely assembled.
But getting these components across the border in a timely, seamless fashion remains a challenge. The three countries have been slowly chipping away at some of these delays, through the use of trusted-shipper programs (giving registered companies access to fast lanes) and electronic manifests that list the goods on a truck before it gets to the border. The Canadian Council’s study, however, says the promise of these initiatives has not yet been realized: “Many businesses complain that the trusted-trader programs ... demand significant investments but yield minimal benefit.” More information sharing (between the two governments and businesses) is needed to make these programs work better, the study’s authors say. 

Another strategy is to better align regulations, a move that Sands says is critical to making North America operate more like a single market.

“[It is] not because we want to deregulate and have a race to the bottom,” Sands says, “but because there is a benefit if companies do not have to go through a lot of separate steps.”

In fact, the U.S. and Canada are already in talks to harmonize regulations. For example, they are working on common safety standards for new vehicles as well as for the rail cars used to carry dangerous materials.

And a joint regulatory approach to food safety could save time and money for producers and regulators.

Many of the report’s recommendations focus on federal-led initiatives, but there also is a role for states and provinces. Improved border operations, for instance, are contingent on state and provincial governments making needed investments in infrastructure.

The report notes, too, the need for more skilled and trained workers. Many skilled trades require certification, but there currently are wide differences in how workers in these fields are trained and accredited.
“Work on standardization would lay the foundation for mutual recognition of trades and professions across North America,” the report concludes.


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