One thing was clear after the latest round of talks aimed at renegotiating terms of the North American Free Trade Agreement ended in Washington, D.C., last week. We aren’t very close to a new deal on NAFTA.
Negotiators for Canada and Mexico have rejected demands from the United States to move more production of car parts and other products to the U.S. as a way of “rebalancing” trade flows and restoring jobs in the domestic manufacturing sector.
However, by focusing narrowly on trade deficits, in particular with Mexico, the Trump administration may be missing the bigger picture of global trade expansion.
American Trucking Associations Chief Economist Bob Costello asks a simple question. “If something wasn’t made in Mexico, would production come to the U.S.? I would argue it wouldn’t. It would be made somewhere else, like China.”
Ann Wilson, senior vice president of government affairs for the Motor Equipment Manufacturers Association, told Transport Topics that a demand by U.S. negotiators to raise the minimum domestic content for auto parts from 62.5% to 85% would eliminate as many as 50,000 direct jobs and 250,000 support jobs.
“Unrealistic rules of origin, such as those proposed recently, would burden American parts manufacturers and leave them unable to compete,” she said.
U.S. Chamber of Commerce President Thomas Donohue, in a recent speech to business leaders in Mexico City, delivered an even starker warning. “We’ve reached a critical moment,” Donohue said. “If the administration issues a withdrawal order — which requires a six-month waiting period — it would not be viewed by our partners as a negotiating tactic. Instead, it would abruptly slam the door on future negotiations. ... The U.S. could then reasonably expect trade retaliation ... higher tariffs ... broken supply chains ... and potentially less cooperation on other priorities like anti-terrorism and anti-narcotics efforts. And who would be hurt the most as a result? The very Americans that this administration seeks to put first.”
Harsh warnings, every one. But the situation doesn’t have to get that bad. Let’s hope that cooler heads prevail, because a sensible and fair NAFTA is good for the U.S. economy — and good for trucking.
In other words, Mr. President, this is no time to turn our back on trade. Let’s negotiate a deal that improves our ability to compete and keeps the U.S. connected to our neighbors and the rest of the world.