By on August 3, 2017

nafta-secretariat

Mexico and Canada are finally in agreement that NAFTA could use an update, not that the Trump administration gave them much of an opportunity to refuse renegotiations. However, after taking a critical look at the two-decade old agreement, representatives from all three nations have reached the consensus that it’s time for a change.

At Wednesday’s CAR Management Briefing Seminars, Colin Bird, minister-counselor for trade and economic policy at the Canadian Embassy, and Francisco Sandoval-Saqui, a Mexican trade official for his country’s Ministry of the Economy, laid out their country’s agendas for the NAFTA trade talks slated to begin in Washington, DC on August 16th.

Both countries are eager to make cross-border trade more fluid without handing an unfair advantage over to the United States. President Trump has previously accused NAFTA of being “the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country,” and immediately moved to dismantle it upon taking office. While his stance has softened over the last few months and the reins have been handed over to Robert Lighthizer, Trump has remained bullish on the issue — claiming domestic automakers are giving away U.S. jobs and income to Canada and Mexico. 

Sandoval-Saqui refuted those accusations outright, stating that NAFTA had succeeded in integrating the supply chains in the automotive industry without giving Mexico an unfair advantage. According to Automotive News, he claimed that automobiles assembled in Mexico used an average of $5,500 worth of parts made in the United States per vehicle, while cars built in the U.S. used $3,800 worth of Mexican-made parts per vehicle. “Mexican auto parts are key for U.S. auto industry competitiveness,” Sandoval-Saqui said.

Ideally, Mexico wants the negotiations to reduce tariffs and provide a smoother flow of trade between countries. “We want to look at how to reduce friction at the borders and remove regulatory framework that is not needed. That is the challenge and opportunity to do that,” he said.

Canada is hoping for the same. “We have an opportunity to look at our shared transportation infrastructure, improve our border crossings and avoid needless regulatory differences that have nothing to do with health and safety,” said Bird. “Modernizing NAFTA goes beyond a drafting exercise, and the level of high-level political attention we have on NAFTA right now is too big an opportunity; we must not squander it.”

“For Canada, it is important that we simplify and modernize the Rules of Origin, we avoid rules that are so complicated and marginal that they actually encourage production offshore. There are over 300 pages on Rules of Origin in the existing NAFTA, and that seems like a bit of excessive red tape.”

Automakers are in agreement. The industry is mainly seeking a swift and unambiguous update that doesn’t rock the boat too severely. However, if NAFTA changes in a manner that allows car manufacturers to move product between countries more easily, all the better.

Additionally, Bird stated his country hopes to see an updated NAFTA encourage small and medium-sized companies to trade across borders, bolster support to female entrepreneurs, acknowledge the economic aspirations of Canada’s indigenous communities, and ensure workers across North America see their interests reflected in the revised agreement.

Protecting workers has also been an interest within the United States, where the United Automobile Workers’ leadership, both past and present, has urged the government to be mindful of the domestic workforce. In May, former president of the UAW, Bob King, even claimed he supported the plan to reconfigure the trade agreement — provided it maintains labor’s best interests. “Workers have to be protected, our economy has to be protected, and the environment has to be protected,” King said. “NAFTA didn’t do that. If [Trump] renegotiates NAFTA to do all that, great. I’m skeptical, because everything I’ve seen him do so far is to take care of the wealthy, not to take care of the workers or the environment.”

Some of that sentiment is echoed by the White House, which explicitly stated it wants to see all countries adhering to basic workers’ rights and “establish rules to ensure that NAFTA countries do not impose measures that restrict cross-border data flows.”

However, for all the agreement, neither Mexico nor Canada want to roll over and let the United States take whatever it wants from the deal. Canadian industry groups have warned Prime Minister Justin Trudeau to be exceedingly careful not to upset the current balance and let the Trump administration steamroll its neighbor to the north.

“What I hear from the business community is for NAFTA to be trilateral,” Perrin Beatty, president and CEO of the Canadian Chamber of Commerce, told Bloomberg in a recent interview. “There are very few businesses who’d want to see stranded assets as a result of changes.”

Magna International, one of the world’s largest automotive parts suppliers, is Canadian-based but does an equal share of business in all three member nations — and is wary of sudden changes to the accord. While CEO Don Walker believes updating NAFTA could benefit the automotive industry, he’s worried about alterations to the Rules of Origin.

“A change to one element of the rule could have a cascading effect on other rules that may result in unintended consequences,” Walker said.

Canada’s Automotive Parts Manufacturers’ Association concurred, suggesting that any level of protectionist policy taken by any of the three countries could be detrimental to the industry as a whole.

[Image: NAFTA Secretariat]

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44 Comments on “NAFTA Trading Partners Agree: It’s Time for a Change...”


  • avatar
    wsn

    “claiming domestic automakers are giving away U.S. jobs and income to Canada and Mexico. ”

    That’s true. The big 3 has many plants in Canada and hired a lot of people.

    However, Canadians also bought a lot of American cars and trucks. Would it be better for the US, if all jobs move back home, while at the same time American brands are no longer treated as “domestic” in Canada?

  • avatar
    mikey

    @wsn In fairness, Honda, and Toyota, have have made a pretty strong investment here.

    The last thing in the world we need is a pi$$ing contest. We will lose

  • avatar
    Arthur Dailey

    For decades prior to NAFTA there was the Canada-US Auto Pact. As per the Encyclopedia Canadiana entry:

    The agreement also contained two annexes, both written by Canada. These limited participation in the Auto Pact to auto assemblers already producing in Canada in the period August 1963 through July 1964 — notably including General Motors, Ford, Chrysler, American Motors (acquired by Chrysler in 1987), Studebaker (ceased production in 1966) and Volvo (a small operation in Halifax that closed in 1998). They also set a minimum level of Canadian value added that assemblers had to achieve. And they effectively required that for every vehicle sold in Canada, a vehicle must be produced in Canada.

    Through the life of the Auto Pact, Canada tended to have surpluses in vehicles and deficits in parts.

  • avatar
    mikey

    @Arthur Dailey…I do recall the provisions of that agreement.

    It was rumoured that we might need to mount Moose Antlers on the hoods of the Alliston built Hondas.

  • avatar
    jacob_coulter

    NAFTA was a terrible deal for the US signed by Bill Clinton. I’d be glad to have a trade war with Mexico if it comes to that.

    • 0 avatar
      Charliej

      Are you ready for the farmers in Iowa and Nebraska to starve? Are you ready for the dairy industry in Wisconsin to fail? Mexico is already negotiating deals to import corn from Argentina and Brazil instead of the US. Same with dairy products. There will be a lot of corn not sold and that means failing farms. Twenty five percent of the corn grown in the US goes to Mexico. A large amount of dairy products from Wisconsin go to Mexico. A trade war will hurt Mexico, but it will hurt the US more. Mexico has negotiated new trade agreements with Europe for cars and manufacturing. The US has no such agreements. The US has to pay tariffs to send cars to Europe, Mexico does not. Making their products cheaper in Europe than US products. You might need to rethink your position.

    • 0 avatar
      ect

      jacob_coulter, that is complete nonsense. Economic studies of the impact of NAFTA generally conclude that it delivered a permanent increase of about 1% to US gdp.

      And BLS data shows that the value of US manufacturing output, in constant dollars, has doubled since NAFTA was signed. During the same period, direct manufacturing employment has declined by about 1/3, but that is due to technology, not trade agreements.

      BTW, NAFTA was negotiated by the the Bush 41 administration, and ratified by Congress due to Republican votes. In the House, Republicans voted 132-102 in favour, while Democrats voted 156-102 against. In the Senate, Republicans voted 34-10 in favour, Democrats voted 28-27 against.

      Those are facts.

      • 0 avatar
        agent534

        @ect
        Any positive impact to gdp is seen in the bottom line of the top capitalists at the expense of workers as the top 1% continue consolidation of wealth. Net 15,000 jobs are lost annually to NAFTA. Any gains in GDP come at the expense of workers in the USA.

        • 0 avatar
          ect

          agent534, pulling numbers out of the air is not data.

          Both the Congressional Research Service and OECD have independently and extensively reviewed studies of the net impact of NAFTA on US employment, and concluded that any net impact on job numbers has been minimal.

          What is clear to everyone who has looked at the subject (including the union-backed Economic Policy Institute, which opposes NAFTA) is that the jobs NAFTA has created are higher-skilled, higher-paying jobs than those that have been destroyed.

          During his Administration, President Obama regularly sent bills to Congress to enlarge job retraining programs, precisely to address this point. The Republican leadership in the House refused to even allow debate on them.

          At present GDP levels, a 1% impact represents $185 billion in economic activity. That inevitably creates jobs.

          • 0 avatar
            agent534

            @ect if you don’t know the facts, the CFR has them for you

            https://www.cfr.org/backgrounder/naftas-economic-impact
            Most estimates conclude that the deal had a modest but positive impact on U.S. GDP of less than 0.5 percent

            he U.S.-Mexico trade balance swung from a $1.7 billion U.S. surplus in 1993 to a $54 billion deficit by 2014. Economists like the Center for Economic and Policy Research’s (CEPR) Dean Baker and the Economic Policy Institute argue that this surge of imports caused the loss of up to 600,000 U.S. jobs over two decades

            A 2014 PIIE study of NAFTA’s effects found that about 15,000 jobs on net are lost each year due to the pact—but that for each of those jobs lost

            The best thing they can say about NAFTA is it wasn’t as disruptive as China joining the WTO.

          • 0 avatar
            ect

            Whether the gain to US GDP from Nafta has been in the range of 1% (the number I’ve most frequently seen) or is 0.5%, it’s still a benefit.

            CERP is as openly left-wing as the Heritage Foundation is right-wing. I wouldn’t trust analysis from either of them. Similarly, EPI is run by the labour movement, and so cannot be seen as unbiased.

            The PIIE report you cite refers to the 15,000 number as the findings of others, without any clarity on how that number was derived. It goes on to recognize that jobs created by NAFTA pay significantly more that those lost to NAFTA, and calculates that the economic benefit to the US per job lost is about $450,000 (again, with little clarity as to how this figure was arrived at). It also notes that 4.5 million US jobs are dependent on exports to NAFTA countries.

            The PIIE report also very usefully places the US trade deficit with Mexico in a larger context:

            “The main reason for the growing US bilateral trade
            defi cit with Mexico over two decades was the growing imbalance
            between income and spending within the United States.
            Reflecting this widening imbalance, between 1994 and 2013,
            the US nonpetroleum goods deficit with the world expanded
            from $120 billion to $510 billion.11 Th e global enlargement
            of the trade deficit is not an outcome of NAFTA or other
            free trade agreements, as the appendix clearly shows. Rather, it reflects the fact that the United States gradually altered its
            status from small net borrower to huge net borrower driven
            largely by rising federal budget deficits and falling household
            savings.”

            The reality is that NAFTA has been benficial to the US and to millions of American workers. But this impact takes place broadly across the economy, while the losers tend to be concentrated in spcific industries or locations, which makes them more visible.

    • 0 avatar

      For this and many other reasons Bill Clinton will be remember as one of the worst presidents. I like to think he was impeached not for getting a blow job, but for screwing the American worker.

      Clinton also failed to capture Bin Laden in the Sudan in 1995 when he was there for the taking. A lot of the problems America faces today can be traced back to the Clinton Administration. We all should be grateful the Clintons are out of power. In hindsight they wrecked havoc on the nation.

      • 0 avatar
        Ubermensch

        Clinton was the first of the 3rd way Democrats. He was essentially a Republican from 20 years prior. However, I would argue he was probably the best recent Republican president. Damning with faint praise.

      • 0 avatar
        ect

        akear, as much as you don’t like to hear it , Bill Clinton presided over the largest peace-time economic expansion is US history, and managed to balance the budget for the first time in decades. As I noted above, NAFTA (which Clinton should get no credit or blame for, since he had nothing to do with it for) has been very beneficial to the US.

        In late 2000, President Clinton noted that the US was on track to completely eliminate the national debt within 10 years. His Republican successor sure screwed that up!

    • 0 avatar
      redapple

      There are NO unfair advantages for Mexico plants!
      Yeah – OK.

      Cut my finger in a US Ford Plant and 3 drops of blood falls on the floor. Next All Activity in that area STOPS. If that prevents a container of parts being moved to the assy line- so be it. Pull the Andon. Haz Mat is called. Safety Dept is called for the paperwork.

      Mexico? – 3 back and forths of my booth and the spot on the floor is gone.

      Foundries in the USA? Air permits for the furnace exhaust stack. Tight ones too. Breathable silica rules. and on and on.
      Mexico- Lets just say it s the wild west.

      I have more examples but for the sake of brevity I ll stop.

      THERE ARE COSTS OF COMPLIANCE THAT MAKE THE US BASED PLANT MORE EXPENSIVE. THIS IS AN ADVANTAGE FOR MEXICO PLANTS.

      UNDERSTAND NOW??????????

    • 0 avatar
      joeaverage

      He signed it and the Republicans negotiated it.

      From Wikipedia: “After much consideration and emotional discussion, the House of Representatives passed the North American Free Trade Agreement Implementation Act on November 17, 1993, 234–200.

      The agreement’s supporters included 132 Republicans and 102 Democrats.

      The bill passed the Senate on November 20, 1993, 61–38. Senate supporters were 34 Republicans and 27 Democrats.

      Clinton signed it into law on December 8, 1993; the agreement went into effect on January 1, 1994.

      • 0 avatar
        agent534

        Clinton went all in on NAFTA when he sent Al Gore to debate Ross Perot on NAFTA on Larry King Live
        https://www.youtube.com/watch?v=5XEziSYRqhU
        Clinton took full ownership of it.
        Hillary tried the same path on TPP. Sanders opposed it, she called it the gold standard. The DNC’s platform after the convention included minor points that trade deals should support jobs. It would have allowed her to add some minor changes to TPP and again claim it the gold standard when she pushed it.

  • avatar
    conundrum

    “Mexico and Canada are finally in agreement that NAFTA could use an update, not that the Trump administration gave them much of an opportunity to refuse renegotiations.”

    Oh aye. Trudeau agreed to it on Nov 16 last year, if that’s recent. The way we were told it, Trump wanted to dump NAFTA completely. He was the one who had to come around to the idea of renegiotating, and then he made BS remarks about Canada outdoing the US back in 1994 and bamboozling dumb US negotiators. The opposite was true, we got slaughtered. But such is the chip on the man’s shoulders, he’d rather believe US negotiators were dumb bunnies. Let’s not rewrite history. We’ve had enough brain farts as facts to last us a lifetime.

    http://globalnews.ca/news/3071492/justin-trudeau-mocked-for-telling-donald-trump-canada-willing-to-renegotiate-nafta/

  • avatar
    mikey

    Correct me if I’m wrong…The Canada -U.S agreement was originally signed by Ronald Reagan. Was it Bill Clinton that included Mexico ?

    • 0 avatar
      ect

      It was actually George H.W. Bush. The deal came to Congress for ratification in 1993 – iirc, Clinton had campaigned on a promise to add labour and environmental protection clauses to the agreement, so there were a few token changes after he became President.

      But you’re entirely correct that Canada-US FTA was negotiated by the Reagan administration.

  • avatar
    Advance_92

    Actually it was George Bush. Clinton signed it, though.

  • avatar
    Lou_BC

    NAFTA partners agree that NAFTA needs to be modernized not axed in its entirety. The biggest issue I see for Canadians is Chapter 19 covering trade disputes via a bi-national panel review system. Twitterpotus and some industries want that removed but Canadian’s so far have stated that they will not let that mechanism be removed from the agreement.
    A new study showed that 38% of Canadians viewed USA’s power and influence as a threat but only 25% saw China as a threat. In 2013 the same survey saw 23% of Canadians feeling that way about the USA.

  • avatar
    ACCvsBig10

    Can’t wait for drug prices to get a whole lot cheaper

    • 0 avatar
      tod stiles

      Always like all the cons screaming about “free trade”.
      Except for big pharma, big ag and all the other big business “free traders”.

    • 0 avatar
      ect

      Sadly, that has nothing to do with NAFTA.

      During the Bush 43 administration, the Republican majority in the House, the Republican majority in the Senate and the Republican President enacted a law that forbids Medicare and Medicaid from negotiating prices with Big Pharma – they have to pay whatever price the Pharma wants to charge them.

      In Canada, by contrast, the federal and provincial governments have long had in place the Patented Medicines Price Review Board, which negotiates the prices that drugs can be sold at in Canada. It’s far from perfect, but in my experience prescription drugs in Canada generally sell for about 40% of the going price in the US, and Big Pharma is quite content to promote and sell their drugs at those prices.

      To give credit where credit is due, Trump campaigned on a promise that Medicare/Medicaid would be freed to negotiate drug prices, with a view to substantially lowering the cost. To date, he hasn’t done anything about it, and one wonders if Congress would go along – after all, all those Republican votes to forbid price negotiation may have been well compensated…

      • 0 avatar
        Ubermensch

        “Trump campaigned on a promise…”

        Hahahahahahahaha… haha haha… aaaaaa…. *sigh*

        • 0 avatar
          Lou_BC

          Ubermensch – it worked

        • 0 avatar
          agent534

          lol, the same one Obama campaigned on.

          “Obama says he will renegotiate NAFTA”
          http://www.youtube.com/watch?v=PF9gpvI2UfU

          But then…
          “Barack Obama’s senior economic policy adviser privately told Canadian officials to view the debate in Ohio over trade as “political positioning,” according to a memo obtained by The Associated Press”
          “He cautioned that this messaging should not be taken out of context and should be viewed as more about political positioning than a clear articulation of policy plans.”
          http://www.cbsnews.com/news/canadian-nafta-remarks-rile-obama-campaign/

          And then…APRIL 20, 2009
          WASHINGTON — The administration has no present plans to reopen negotiations on the North American Free Trade Agreement to add labor and environmental protections, as President Obama vowed to do during his campaign, the top trade official said on Monday
          http://www.nytimes.com/2009/04/21/business/21nafta.html

  • avatar

    NAFTA maybe the most destructive legislation in American history. First it caused a trade deficit with Mexico, which would be unheard of decades ago. It has almost completely outsourced the entire US animation and VFX industry to Canada. Many working in Hollywood now call Vancouver the new film Capital. Hollywood has become a become a creative desert with abandoned special effects studios littering the landscape. It now looks more like Flint Michigan than a once proud film capital of the world. America its seems has lost its entertainment industry to both Canada and England. Entertainment was supposed to be something America was good at.

    The most egregious result of all this is having an auto parts trade deficit with Mexico. If the US can’t fairly compete with Mexico how are they going to take on the German and Japanese.

    Because of NAFTA the US has a rubbish auto and entertainment industry.

  • avatar
    Erikstrawn

    “…automobiles assembled in Mexico used an average of $5,500 worth of parts made in the United States per vehicle, while cars built in the U.S. used $3,800 worth of Mexican-made parts per vehicle.”

    US has 160% more population, but car makers only use 40% more US-built parts when building cars. I think we have room to move more of that production back to the US.

  • avatar
    hreardon

    Lest we all get into a p!ssing match over republican versus democrat – we’ve got both parties selling us out.

    Yes, I understand the arguments for free trade – in theory they’re all very strong, reasonable arguments. However, like anyone who says that “in theory Socialism works”, they’re completely disconnected with reality. Same goes for those who believe in completely unfettered capitalism: they’re forgetting that big component known as “human nature”. Socialism only works when you force or steal others’ labor and unfettered capitalism, by its nature, allows the fox to run loose in the henhouse.

    NAFTA has helped manufacturers lower labor costs and has opened up some markets for US products. It’s very hard to explain that to anyone who works in an Ohio manufacturing plant who lost their job when the factory was moved to Mexico.

    I have a problem with any trade deal that allows someone to take advantage of environmental or labor law arbitrage. Free trade with Europe or Canada – sure. We’ve got relatively similar value placed on the importance of health/safety/labor and environmental laws. Unfettered trade with Mexico and China ignores the major disparity in values between our nations and leads to unfair trade. It’s immoral and unfair for us to preach labor and environmental safety here, but it’s okay to allow offshored production to pollute and abuse so long as it’s not within our borders.

    • 0 avatar
      TrailerTrash

      I agree to an extent.

      There should be controls set in the agreement for such things as environmental or labor abuse. Many nations grab people from rural parts, stack them into ghetto high rises without care and allow horrible destruction of the environment for cheaper Mfr cost.

      Set up these and like restrictions or limitations and you would have a “freer” trade.

      However, we don’t really have complete free trade even here in the united states.

      TN pays its workers less than does MI or WI…thus an advantage. Union vs non union states. Some states offer huge tax incentives to entice companies to relocate.

      It’s really war among our own states for business.

      But at least these are still following the civilized laws of SOME kind for employment and environment.

      • 0 avatar
        hreardon

        Trailer –

        I get the point, but it’s not wages I’m concern about for the same reason you mentioned here: it’s just flat out cheaper to manufacture in the US South than it is in much of the US North because salaries differ from state to state/county to county.

        I’m concerned about the labor, safety and environmental arbitrage that occurs because these are things that can be harmonized. Now of course, *enforcement* is a completely different matter, and we could of course argue that enforcement from state to state here in the US differs, but in general, we’re pretty well aligned as compared to, say, China.

  • avatar
    Heino

    Right after the bill was signed Jesse Jackson went in front of the cameras and screamed “NAFTA is a SHAFTA!”. It was a great movie too.

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