Jul262019

Guest View: California manufacturers will grow with new free trade agreement

Posted by Kassy Perry

By Lance Hastings
July 26, 2019
The Business Journal

If California were its own country, it would rank as the fifth largest economy in the world. Here, production doesn’t just refer to movies, and tech isn’t just an industry. From cars to computers, smartphones to spaceships, California manufacturers are innovating and making products that will pull our country into the future—doing so with technology that already exists. Our state’s manufacturing industry is poised to grow and thrive as long as lawmakers provide pro-growth policies to enable it—which is exactly why manufacturers here in California and across the nation are calling on Congress to support the United States-Mexico-Canada-Agreement (USMCA) when it comes to a vote.

Last year, leaders from the United States, Canada, and Mexico came together to update the 25-year-old North American Free Trade Agreement (NAFTA). NAFTA, while forward-thinking for its time, has become increasingly outdated as our technology and modern economy continue to outpace our economic policy. Our countries’ leaders recognized this and signed the USMCA in November 2018. The next step is for Congress to ratify it expeditiously once the administration formally submits it for approval—which we expect to happen soon.

This new deal not only protects free trade throughout North America, it provides a number of long-awaited improvements that will help to shepherd our economy and our manufacturing industry forward for decades to come.

First, the new agreement includes best-in-class rules that would strengthen United States intellectual property (IP) protection and enforcement. Being in such a technology-driven and innovative state, IP rights are critical to a number of sectors and businesses. With even better IP standards that reflect the modern economy, California manufacturers will be emboldened to create new, environmentally friendly, and economical ways to put food on tables across the United States or even to find the next discovery in outer space.

The USMCA would also improve digital rules to ensure companies in the United States using online storefronts have safe and unfettered access to consumers across Mexico and Canada that would help their businesses grow. And let’s not forget about the ways it levels the playing field for many American businesses by improving the way anti-competitive behaviors by state-owned enterprises are addressed and by expanding access into both Canada and Mexico by removing unfair trade barriers. This agreement is undoubtedly beneficial to each North American nation.

To date, Mexico is the only country that has ratified the USMCA. And with data from the National Association of Manufacturers (NAM) showing the positive economic impact the USMCA would have, it is surprising that some in Congress have not shown the same sense of urgency.

California has more than 25,000 manufacturing firms, 93 percent of which are small- and medium-sized, that depend on free trade throughout North America. And these jobs can be found across our state and throughout many different industries, creating well-paying, career-track jobs. In fact, the jobs in our state that are supported by North American trade pay an average of $100,060 in wages and benefits in comparison to an average $54,329 in nonfarm industries.

According to the same NAM study, California’s economy would suffer without the passage of a strong North American trade agreement, with the state’s manufactured goods exported to Canada and Mexico potentially facing between $1.2 billion and $10.1 billion in extra taxes. That’s in comparison to zero tariffs today and it’s completely unacceptable.

Each day that the USMCA is not approved is another day that goes by without certainty for manufacturers. It’s another day that manufacturers could be creating more well-paying, stable jobs for the middle class. As is so often the case, manufacturers are looking to California to lead, to show what is possible and to pull our country into the future by signing the USMCA. We are up to the task, and let’s get to work!

Lance Hastings is president of the California Manufacturers & Technology Association.