Mexico And Canada Push Back Against Trump NAFTA Plan

Last week, putative president Donald Trump roiled the waters the economic waters with threats to pull the United States out of NAFTA, the North American Free Trade Agreement. He claims NAFTA has led to the loss of millions of high paying American jobs. As usual his reasoning is about one micron deep and fails to take into account the economic benefits NAFTA has conferred on the United States since 1994. Both Mexico and Canada have a lot at stake in the NAFTA debate, so they have begun planning how to bring pressure to bear on people in the US who may have some influence in Washington.

NAFTA era trade deficits
Source: Reuters via Automotive News

Auto assembly plants account for tens of thousands of jobs in both countries. People who work for automotive parts suppliers account for tens of thousands more. Both countries have hired lobbyists to push their point of view in the capitol. Vice President Pence and House Speaker Paul Ryan are considered prime targets of the lobbying campaign.

Mexico has approached the governors of Texas, Arizona, and Indiana for support. Decision makers in Michigan, North Carolina, Minnesota, Illinois, Tennessee, Wisconsin, Ohio, Florida, Pennsylvania, Nebraska, California, and New Mexico are also on Mexico’s priority list, according to people involved in talks. Canada has drawn up a list of 11 U.S. states, mostly the same as targeted by Mexico, that stand to lose the most if the trade pact enacted in 1994 unravels.

After Trump blustered that he was going to withdraw the US entirely from NAFTA, the lobbying effort swung into high gear. “There was huge mobilization,” said Moises Kalach, foreign trade chief of the Mexican private sector team leading the defense of NAFTA. “I can tell you the phone did not stop ringing in (Commerce Secretary Wilbur) Ross’s office. It did not stop ringing in (National Economic Council Director Gary) Cohn’s office, in the office of (White House Chief of Staff Reince) Priebus. The visits to the White House from pro-NAFTA allies did not stop all afternoon.”

Kalach’s team identified an instance in which one type of engine was responsible for about a fifth of Indiana’s $5 billion a year exports to Mexico. “We said: talk to the governor, talk to the members of Congress, talk to your ex-governor, Vice President Pence, and explain that if this goes wrong, the company is done,” Kalach says. He credits the mobilization with getting Trump to reconsider and say he would “only” seek to renegotiate the trade deal rather than cancel it.

A central part of Mexico’s strategy is to argue that the three nations have a common interest in fending off Asian competition and sourcing more content regionally. The defenders of NAFTA also say that it supports millions of jobs in the United States and point out that U.S. trade shortfalls with Canada and Mexico have declined over the past decade while the trade deficit with China has ballooned.

Officials for the U.S., Canada, and Mexico are looking at ways the three countries can reduce auto parts imports from China, Japan, South Korea or Germany. “The key thing is to see how we can get a win-win on the products most used in our countries, and to develop common manufacturing platforms that allow us just to buy between ourselves the biggest amount of inputs we need,” said Luis Aguirre, vice-president of Mexican industry group Concamin. That argument makes a great deal of sense, which means it is probably too intellectual for the Great and Powerful Trump to comprehend.

Source: Automotive News

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.