NAFTA and the Free Flow of Labor Across the Border

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With the re-negotiation of the North American Free Trade Agreement (NAFTA) about to get under way, much of the discussion will be on the source, content, type and value of goods that cross the border on a regular basis. An important part of the re-negotiation should also include the free movement of labor across the border.

The existing NAFTA agreement does ease the movement of workers across the borders by eliminating the need for business visitors to hold a work permit. For others looking to work outside their country of citizenship – say a Canadian looking to work in the U.S. or Mexico – the agreement expedites the work visa process. But, the agreement only applies to approximately 60 professional occupations such as doctors, scientists, and engineers, with proof of education required.  There are also multiple examples of cases where the agreement has been inconsistently applied and misses skilled labor jobs or jobs that did not exist (particularly around technology) at the time the original agreement was signed. As such, it remains a cumbersome process.

Why is freer movement of labor important? We know that mobility allows adjustments to the labor market and enhances economic productivity at both the individual and societal level as workers find a better fit for their skills. This includes greater income opportunities for the individual, along with greater corporate and taxation revenues. Consequently, a revised agreement that better enables the flow of workers across the U.S. – Mexico – Canada borders would enhance economic productivity. An agreement that looks more like the European Schengen agreement, where mobility between European countries is largely unrestricted, may be ideal and encourage both short- and long-term mobility. In the North American case, citizens of the three countries could then easily relocate across the border, while restricting the movement of other visitors.

Unfortunately, it is unlikely that there will be major changes to the labor mobility agreement within NAFTA, particularly given the current U.S. Administration’s protectionist stance. Longer-running concerns with lower-cost labor from Mexico flooding into the U.S. remain, despite decreased undocumented movement between Mexico and the U.S. The failure to flag labor mobility as an objective of the renegotiation provides an early indication of the reluctance to change the agreement, while there has been little willingness on the part of the U.S. government to include labor mobility in other agreements. Consequently, the status quo may be the outcome.

 

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