By on July 18, 2017

Old Assembly Factory floor

Despite President Trump having initially framed his proposed NAFTA renegotiations as a hardline “America First” endeavor, the administration’s stance has soften significantly. In a recent summary of objectives, U.S. Trade Representative Robert Lighthizer highlighted fairness as the key issue throughout.

Absent were any mention of abandoning the deal if certain conditions were not met and the steep tariffs previously alluded to by the president. In fact, any mention of tariffs specifically targeted their reduction or elimination — for both imported and exported goods. There are, however, numerous examples that reaffirm the Trump administration’s earlier objectives and a handful of inclusions that should please domestic automakers.

The biggest of these is a streamlining of the regulatory practices between participating countries, something manufacturers have wanted for quite some time. While the White House has pressed for deregulation in the United States, automakers have more to gain though uniform regulatory practices between countries. One of the first items in the summary states the importance of promoting “greater regulatory compatibility with respect to key goods sectors to reduce burdens associated with unnecessary differences in regulation, including through regulatory cooperation where appropriate.”

With the automotive industry existing as one of the most heavily regulated industrial businesses on the planet, it isn’t difficult to surmise who Lighthizer is targeting.

Matt Blunt, president of the American Automotive Policy Council, a group representing U.S. automakers, told Reuters the regulatory streamlining would be a boon to automakers. He also said the summary’s focus on eliminating currency manipulation was a worthwhile endeavor.

A statement from Ford Motor Company echoed Blunt’s assertion: “Foreign currency manipulation is the 21st century trade barrier, and we strongly support the inclusion of this top-tier issue in the U.S. negotiating objectives for NAFTA.”

However, currency manipulation hasn’t been much of an issue between the North American partners — indicating that the NAFTA renegotiation is an attempt at being proactive, or will serve as a framework for whatever replaces the Trans Pacific Partnership Agreement.

Also included in the summary are numerous references to bringing labor provisions into the center of the agreement, in the hope that member countries legally adopt standards as recognized in the ILO Declaration. That includes the abolishment of all child labor and the right to organize without fear of repercussion. It also discusses holding participating countries accountable for providing fair minimum wages and worker safety without being explicit as to those guidelines.

While that’s all well and good, it does little to establish clear-cut boundaries or provide the sweeping changes that were initially promised. It does hint at minimizing the country’s trade deficit with Mexico — a double-edged sword, as it technically results in the U.S. having access to exceptionally affordable goods — but there’s nothing mirroring the president’s earlier tough talk.

On Monday, Trump promised to bolster U.S. manufacturing by reducing the $64 billion trade deficit with Mexico while showcasing products made in all 50 states. “No longer are we going to allow other countries to break the rules, to steal our jobs and drain our wealth,” Trump said from the White House’s South Lawn.

However, the summary makes very few strict demands — opting instead to “promote” fairness or “improve” industrial trade disparities. Depending on your politics, it may not have needed to either. But there is a clear distinction between the presidents stern rhetoric and what Lighthizer will be asking for.

If you’re interested, the full document is available on Office of the United States Trade Representative’s website for perusal.

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20 Comments on “U.S. Seeking a Trade Deficit Reduction in Early NAFTA Talks and Not Much Else...”


  • avatar
    rmigoya

    As the Germany’s economy minister said “…build better cars!..”. I would expand this idea to everything the U.S. produces. When we, the Mexicans, receive quality items, we are willing to pay an overcharge for it.

    • 0 avatar
      GoHuskers

      Mexico is a narco state that depends on the largess of US manufacturing. It has nothing to do with better cars…which, by the way, Mexicans are building. Perhaps we should fire all of the Mexicans employed in US factories and import US workers??

      • 0 avatar
        rmigoya

        Since cars, SUVs and trucks like the Tacoma, Versa, Sentra, CR-V, Fit, Mazda 2 and 3 are built in Mexico it seems that the problem is the U.S. engineering. You can move the production of the Dodge Journey or Fiat 500 to Detroit and still being unreliable cars due, again, to a bad engineering. Regarding the narco problems, well, if there wasn’t a market that wants to live stoned we would not have these problems.

  • avatar
    sirwired

    Shocker. A president with little grasp of nuance or subtlety makes wild promises, and then hands off the actual work to a bunch of former executives and lobbyists that he spent months telling the American people he was going to protect them from.

  • avatar
    TW5

    Trade rebalancing is the goal of America First. What other outcome would we be looking to achieve? Widening the deficit according to some arcane industry-developed efficiency screed? Furthermore, we aren’t interested in replacing imports. We are interested in making our trade partners buy US exports, if they expect to have access to our market.

    Our trade partners have a choice to make, sell cheap goods in the United States which requires them to buy US goods (particularly high tech manufactured goods and IP) or reallocate their production to supply domestic demand rather than dumping goods in the US. No more exploiting US consumers and then lavishing riches upon the US asset class as a means of balancing payments. That FDI is creating bubbles not jobs. To be fair to foreign countries, Congress is a huge part of the problem, particularly the idiots who passed Obamacare, rather than dismantling the phony employer-care system.

    • 0 avatar
      ect

      Focusing solely on trade is overly simplistic, to put it VERY mildly. One has to look at all elements of the bslance of payments, which politicians and most voters find much too complex for their small minds.

      As one small example, Canadian subsidiaries of US companies send annual dividends, management fees, royalties, etc., to their US parents, and Canadian companies that borrow in the US have to fund debt service costs to US lenders. Canada pays for this by selling goods (especially raw materials and resource products) to the US. So, Canada has a surplus in merchandise trade, which is necessary to pay these other amounts.

      • 0 avatar
        TW5

        Oh, I’ve had it backwards all these years. The profits are just sitting there in Canada, waiting to be harvested by US companies. The profits and national product are not generated by the sale of natural resources. I’ve been so confused.

        • 0 avatar
          ect

          Backwards is your word, as is confused. There are many others….

          The fact is that the Canadian subsidiaries of US companies generate substantial profits, which of course they remit to their US parent. This requires that they exchange Canadian dollars for US dollars. Which they do.

          To finance this demand for US dollars at a national level, Canada has historically sold more goods to US customers than it buys, and the bulk of Canadian exports have always been forestry, mineral, oil & gas and agricultural products, mostly products which the US does not have sufficient of from domestic sources (the US runs a trade surplus with Canada in manufactured goods).

          In addition, the US runs a huge trade surplus with the world in the sale of services, which focusing solely on trade in goods ignores. And then there are investment flows, dividend and interest flows, and other non-merchandise flows in which the US has historically had a surplus.

          All of this is oversimplification, but it serves to illustrate that international payments flows are complex – which is anathema to politicians and a mystery to most people.

          And btw, contrary to the Trump falsehoods, US manufacturing is not in crisis. BLS data shows us that US manufacturing output (in constant dollars) has doubled since NAFTA was signed. During the same time period, US manufacturing employment has declined by 1/3 – due to technology (automation).

          Just as technology devastated agricultural employment in the late 19th and early 20th centuries, it has been busy killing unskilled and semi-skilled manufacturing jobs in the late 20th and the 21st century to date. Notwithstanding the data, the GOP refuses to acknowledge that the issue is upgrading workforce skills to meet the needs of the new economy (where a great many jobs go begging because people with the necessary skills do not exist), not trying to recreate a primitive industrial economy that has long since gone away.

          Sadly, the present Administration prefers dogma to data, which will have profound negative consequences for the US in the years to come.

          • 0 avatar
            turf3

            Yes, automation is why the US Midwest is full of automated factories making I Phones, kitchen ware, inexpensive T shirts, shoes, and so on.

            Oh, wait – you mean it’s not?

            Oh, wait – you mean, all those electronic goodies are being assembled by hand in largely un-automated factories in China, not in all those highly automated factories in Ohio?

            Sorry but the “jobs were lost due to automation” is just the latest lie from the anti-manufacturing cabal.

          • 0 avatar
            TW5

            @ect

            No offense, but you have no idea what’s going on in the international capital markets. Furthermore, Canada does not fit the description of a destitute third world country that must pump oil and deforest its wilderness to help balance its capital account activity. None of the major economies driving our current account deficit fit this description. Some OPEC nations might fight that bill, but not a G20 nation with standard of living comparable to ours. Japan doesn’t even have cheap widgets or resources to send us anymore.

            Instead, some of our G20 trading partners exploit a trade deficit with the US, which creates a surplus of capital that they must employ. Unfortunately, the market for capital is adversely affected by regulation. For instance, US repatriation taxes often thwart repatriation of capital earned by US companies. This adversely affects China, and China has responded by a-bombing our middle class by using their central bank to invest in US forex (another form of policy interference in capital markets). Japan has actually done the same, though they plea poverty, and they know we need them as a counterbalance to China.

            Anyway, I don’t care about the relative ethics of public policy. I’m only illustrating what is actually going on, which is not hapless lumberjacks chopping down Canadian lumber because their bankers and wealthy individuals refuse to invest domestically.

            We can either sit by and watch the capital market rancor continue unabated, which destabilizes the global economy or we can make an appeal to reason, and get our trading partners to buy US more exports (goods and services), which will drastically improve the global economy, and help prevent another ridiculous asset bubble as occurred in the US mortgage-credit market.

          • 0 avatar
            Big Al from Oz

            TW5,
            ect gave a very accurate representation of what occurs.

            If one looks at the US economy and really delves into the ratio of tax vs GDP, you will find the US is paying more in taxation than many competitors.

            Look at what ect described as financial services, how much impact does this have on GDP and how much of this money is flowing back into the hands of the “workers”. And workers doesn’t just mean manufacturing.

            How much money is wasted in the US for an inadequate health system? The US government is paying twice as much than the next country for a health system that ranks in the 30s and 40s globally for quality.

            Insurance premiums, how much does the average US person pay for insurances.

            Yes, you might be able to buy a car for a decent price. But, this isn’t the problem with the US. It’s the cost of living.

            All countries have their issues.

            The US problem is freedom of economic activity. The US is as regulated and more regulated than some EU nations.

            That’s why I laugh at some of the comments that come out of this site regarding what people believe, rather than looking at data and information on what is actually occurring.

            The US is similar to Scandanavian countries.

            https://en.wikipedia.org/wiki/Indices_of_economic_freedom

  • avatar
    Lou_BC

    “Foreign currency manipulation is the 21st century trade barrier, and we strongly support the inclusion of this top-tier issue in the U.S. negotiating objectives for NAFTA.”

    Since when are Canada and Mexico currency manipulators?

    “The biggest of these is a streamlining of the regulatory practices between participating countries, something manufacturers have wanted for quite some time.”
    Every new vehicle that is imported into Canada or exported to the USA already meets the same standards. Mexico, not so much.

    All of this rhetoric should be aimed at countries outside the current NAFTA zone or does someone need to break out some crayons and draw #miencovfefepotus a picture?

    • 0 avatar
      Big Al from Oz

      Lou,
      Oddly the biggest currency manipulator in the 21st Century has been the US after the GFC.

      Look at how the US Fed dropped interest rates to push down the USD.

      I do believe many in the US should stop looking at themselves as always the victim. This seems to be the American Way of late.

      The reality is many in the US want the ways of old to remain. This ain’t go’in to happen. The world outside the US is moving forward.

      The US is not in the same position it was in after WWII, that is over 50% of the global economy was the US and the US had lots of leverage for the world to adopt it ways and business.

      The US is still a huge economy, but it’s only a third of what it was in the 50s and 60s.

      You have the EU, the Chinese and the rest of the world and the US. All of these are roughly broken down into equal economic value.

      So, if the US can’t build exportable quality vehicles (or any product) that are competitive the rest of the world will buy them elsewhere.

  • avatar
    ect

    “That includes the abolition of all child labor…”

    There, fixed it for you.

  • avatar
    v8fairy

    Interesting pic – that isnt an American assembly line, its British. The car being assembled is the Morris Oxford MO, made from 1948 to 1952

    https://en.wikipedia.org/wiki/Morris_Oxford_MO

  • avatar
    threeer

    What’s $64 Billion here (Mexico) or $300+ Billion there (China) leaving our shores each year? I just wish when the President stumped American-made, the stuff bearing his name actually, you know…came from America.

    But I digress. It’s a tough nut to crack. I’m about as pro-American manufacturing as it gets, but on the flipside, don’t want to see us continue to race to the bottom. Where are the business regulation reforms? But in the end, the biggest “vote” out there is the dollar, namely, the consumer’s dollar. If they continue to buy on price alone, I’m not sure America will ever stand a chance to gain back some of the losses we’ve experienced over the last several decades. I look at labels and buy as much as I can from American-made sources, even if it costs a bit more, but I realize not everybody is in a position to be able to afford to do so.

    • 0 avatar
      ect

      Threeer, it is a tough nut to crack, but here’s a true story.
      Since 1985 (due to job changes), I have purchased 4 HP-12C calculators. It’s a tribute to the design that it hasn’t changed in all these years, and had outlived at least 2 products that HP has tried to replace it with.

      The first one I bought was made in the US. The second, in Singapore. The third, in Malaysia. The fourth, in China.

      I can tell you that neither Singapore nor Malaysia mourn the “loss” of these manufacturing jobs. They’ve been busy using the income from these jobs while they had them to upgrade their workforce and their economy to produce higher-value goods that make their people and their economy more money.

      Developed countries like the US and Canada have historically followed the same route. We pay high wages to an educated and productive workforce, and rely on technology leadership to maintain our advantage.

      But we can only maintain this advantage by moving forwards, not backwards. Protecting old jobs is a mug’s game, we need to focus on continually upgrading our workforce.

      The only way to protect old jobs is through a race to the bottom, and that hasn’t worked anywhere.

      • 0 avatar
        threeer

        I agree that one area (amongst many) that we’ve fallen down on is continually educating the workforce. Apprenticeships and the like are a thing of the past and more and more people want to occupy the corner office, not figure out better ways to build it. We march our kiddies off to college and prepare them not one whiff to actually innovate. STEM ain’t sexy, apparently. I don’t want a race to the bottom more than the next person does, but there still needs to be an avenue for a percentage of Americans that are largely skilled/labor. Not everybody is going to be a robotics engineer (or even robotics operator).

        It won’t happen, but a large-scale shift in our educational system is desperately needed.

  • avatar
    GoHuskers

    Yet another Trump lie.

  • avatar

    H. Ross Perot called this one correctly.

    The Dems sold out their base with this one, which is why they listen to Donald, even though he could not care less like any real con man. The Union, democratic strongholds, main street USA, was gutted.

    I drive around all day in upstate NY, looking at small towns that used to have a factory and downtown, now they have a dollar store and rehab clinic. I wish I were exaggerating.

    My young adult world was way more fair overall than today….now get off my lawn !!!!

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