G OVERNOR G REG ABBOTT

April 4, 2018

The Honorable Robert Lighthizer
U.S. Trade Representative
Office of the U.S. Trade Representative
600 17th Street, NW
Washington, D.C. 20508
Dear Ambassador Lighthizer:
I commend your efforts to update and modernize the North American Free Trade Agreement
(NAFTA) and am confident your work will produce timely and substantive benefits for U.S.
businesses, workers and consumers. However, as negotiations to update NAFTA continue, I
urge you to safeguard two sets of provisions in the agreement critical to the economic growth
and stability of both Texas and the entire nation, the Investor-State Dispute Settlement (ISDS)
provisions and the rules of origin provisions, and to reconsider the addition of a five-year Sunset
provision.
NAFTA’s ISDS provisions establish binding arbitration procedures that allow private investors
to pursue claims against the U.S., Mexican and Canadian governments for alleged violations of
investor protections contained in the agreement. Those protections reflect fundamental private
property rights under U.S. law, including fairness and due process, non-discrimination, and
compensation for expropriation. They have been upheld in numerous ISDS lawsuits against
Mexico and Canada, resulting in settlements for American companies totaling over $100 million.
The enforceability of those protections is one of the driving forces for Texas businesses and
businesses across the country to invest in Mexican and Canadian infrastructure and natural
resource development. For instance, following the 2013 constitutional reforms that opened up
Mexico’s energy industry to direct investment by foreign investors, American oil and gas
companies, emboldened by NAFTA’s investor protections, are making significant investments in
energy infrastructure throughout Mexico.
Investments like those in the Mexican energy industry make it possible for U.S. exports to enter
more foreign markets and to be more effectively tailored, marketed and distributed to foreign
consumers. This is crucial for the rapidly increasing volume of U.S. crude oil, natural gas and
petroleum product exports, more than half of which come from Texas. Currently, a significant
portion of U.S. energy exports are bound for Mexico and Canada, with Mexico purchasing about
half of all gasoline exported by U.S. refiners and Canada importing more U.S. crude oil than any
other country. In order for American companies to continue to invest in Mexican and Canadian
infrastructure and natural resource development and for our country to fully realize the
associated benefits for U.S. exports, those companies must be assured of fair and equitable
POST OFFICE BOX 12428 AUSTIN, TEXAS 78711 512-463-2000 (VOICE) DIAL 7-1-1 FOR RELAY SERVICES

 The Honorable Robert Lighthizer
April 4, 2018
Page 2

treatment by our NAFTA trading partners. The ISDS provisions are the best means of ensuring
such treatment and, accordingly, must be retained.
NAFTA’s rules of origin provisions play an important role in ensuring that the benefits of the
agreement extend only to goods produced by the parties to the agreement and not to goods
produced wholly or in large part in other countries. Negotiators have discussed amending the
current rules of origin to raise regional content requirements and to impose U.S. content
requirements with respect to certain goods, particularly in the motor vehicle industry. Such
changes could radically disrupt the vast network of supply chains throughout North America,
drive up costs, and create inefficiencies for American companies. Texas annually imports 40
percent of its intermediate goods under NAFTA, including $6 billion in auto parts from Mexico
and $11.5 billion in petroleum products from Mexico and Canada. Stricter rules of origin will
force Texas businesses and businesses throughout the country to produce greater numbers of
goods without NAFTA benefits, which will lead to increased production costs, higher consumer
prices and job loss. It is essential for the protection and growth of manufacturing companies and
jobs in the United States that you take these factors into consideration before drastically altering
current rules of origin provisions.
For more than 20 years, NAFTA has been an important trade agreement for Texas. The stability
and predictability of the agreement have enabled investment decisions that have led to a
substantial increase in exports between Texas and our NAFTA trading partners. Since NAFTA
took effect, Texas exports to Mexico have increased by 13 percent annually. This organic
growth in exports stems from the stability inherent in a long-term trade agreement. Likewise, it
has played a significant role in the diversification of Texas’ economy and fostered a robust, yet
stable labor market. Today, Texas’ unemployment rate is at an all-time low, thanks in large part
to more than 1 million Texas jobs that depend on NAFTA. Your work to update and rebalance
the agreement will undoubtedly ensure that the next generation of American companies and
workers will reap even more benefits from a more just and modernized trade agreement. For that
reason, the addition of a five-year Sunset provision to the agreement is unnecessary and will only
interject uncertainty into the thriving trade relationship between us and our neighbors to the north
and south.
Again, thank you for all of your efforts thus far to review and strengthen NAFTA. As you
continue the work of modernizing the trade agreement, I hope you will champion the
preservation of the provisions that have contributed to the economic prosperity of our state and
the nation as a whole.
Sincerely,

Greg Abbott
Governor
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