By on October 13, 2017

lansing assemblyl

Automotive trade groups have issued warnings about the scrapping of the North American Free Trade Agreement all year. In January, the Center for Automotive Research claimed killing NAFTA could result in the elimination of at least 31,000 auto jobs within the United States. This week, a new study sponsored by the Motor Equipment Manufacturers Association upped that estimation to around 50,000.

With early negotiations not going particularly well at the moment, the new tally serves as a potential warning. If NAFTA is abandoned, North American countries would all likely revert to rules dictated by the World Trade Organization, resulting in higher tariffs from all sides.

While 50,000 fewer jobs is the upper echelon of what could be expected, a few things have to go wrong for it to reach that point. First, Mexico and Canada would have to revert to pre-NAFTA tariff levels — which were comparably higher than the United States. If so, manufacturers would almost assuredly begin sourcing more parts from the same countries where the vehicles are assembled, and gradually move production to lower-cost regions like China. 

Reported by Reuters, the study also estimates job losses could be as high as 24,000 if renegotiations result in the content requirements proposed by the United States. The U.S. wants North American parts content to rise to 85 percent overall from the current 62.5 percent. In addition, the country is also pressing to add a new 50-percent U.S.-specific content requirement on all American-made automobiles. The issue is fiercely opposed by both officials in both Canada and Mexico — some have even called it a deal killer.

Those are worst-case scenarios, of course. We don’t know what’s going to happen. On Wednesday, President Donald Trump spoke to Canadian Prime Minister Justin Trudeau in the oval office on the future of NAFTA. After the meeting, Trump issued no concrete assessment of the situation.

“It’s possible we won’t be able to make a deal, and it’s possible that we will,” he said. “We’ll see if we can do the kind of changes that we need. We have to protect our workers, and in all fairness, the prime minister wants to protect Canada and his people also.”

When asked if he would be willing to make a deal with Canada if Mexico was unwilling to compromise, Trump said: “Oh sure, absolutely. It’s possible we won’t be able to reach a deal with one or the other, but in the meantime we’ll make a deal with one.”

The president has repeatedly stated that a NAFTA revision was essential to procuring additional U.S. jobs, but numerous industry trade groups have balked at the idea.

“Counter to the incoming Trump administration’s goal of creating manufacturing jobs, the withdrawal from NAFTA or the implementation of punitive tariffs could result in the loss of 31,000 U.S. jobs,” said the Michigan-based Center for Automotive Research during Trump’s initial suggestion to abandon the agreement.

With the Motor Equipment Manufacturers Association’s data, sourced from Boston Consulting Group, yielding even higher estimates, backing out of NAFTA doesn’t look like a great play for parts suppliers or automakers. But the fact remains that, while the trade agreement appears to have created more employment than it killed, the United States still lost quite a few automotive placements to Mexico since 1994. It is also believed to have contributed to some mild wage-suppression over the last two decades.

However, there are no guarantees that abolishing NAFTA will change anything for the better. Numerous research firms and industry groups have claimed losing the deal would cripple an industry interdependent with all-three countries by exacerbating the cost and complexity of doing business.

[Image: General Motors]

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40 Comments on “Ending NAFTA Could Cost U.S. 50,000 Auto Jobs: Study...”


  • avatar
    gtemnykh

    Hmm so a lobbyist group with their investors’ bottom line in mind paid a consulting firm to cook up a study claiming that any alterations to the current status quo of the US bleeding out jobs to cheap-labor source countries is a bad idea? Who would have thought?

    • 0 avatar
      TW5

      It’s worse than that. They are positing a unrealistic hypothetical (no trade agreements of any kind) to make people panic so the pillage of the United States can continue. The same tactic is used to ensure the US never changes its taxation and spending patterns.

      Some people simply prefer certain death to uncertain life. Why anyone listens to them is beyond me.

  • avatar
    Pig_Iron

    50,000? That’s it?

    So basically they’re saying the damage has already been done.

  • avatar
    TW5

    Ending NAFTA is not the end game. Ending NAFTA and replacing it with another agreement is the end game, hence the renegotiation effort that is currently underway. Businesses are balking because they don’t care about the national workforce. They only care about regulatory certainty. Risk aversion may not be the best strategy, but that’s what huge oligopolies prefer.

    Unfortunately, we’ve put ourselves in such a state with public debt, budget deficit, and foolish entitlement spending that the Trump admin feels like we have to put the US economy and the global economy on the brink to scare people to the negotiating table. He’s using the same strategy in healthcare by canceling subsidy payments to the health insurers to make them beat congress into submission. The American people may be hurt in the meantime.

    While these strategies are heavy-handed they have an underlying psychological tool that makes them work. If the current tax-spending-trade regimes continue unabated, there will not be a United States with which to negotiate. Taking deals away abruptly brings people to this realization, but it may not generate the results we’re looking for.

    • 0 avatar
      Kevin Curry

      Ah yes, a cleaned up and smart sounding rewrite of the 4D chess argument. Be real, Trump has no grand plan here. He’s a bull in a china shop with one thing on his mind, destroy anything Obama or any other dem got credit for. There’s no master plan here, his tax plan hurts the middle class, his healthcare destruction hurts the middle class, his handling of North Korea might kill many children of the middle class, his trade deals will hurt the middle class. There’s no end game in Trumpland, there’s just tribalism. Hurt the liberals, even if it means doing equal or greater harm to conservatives while you’re at it. He’ll happily serve his base a shit covered cake and they’ll eat it as long as those damn liberals have to smell it.

    • 0 avatar
      volvo driver

      “Ending NAFTA is not the end game. Ending NAFTA and replacing it with another agreement is the end game, hence the renegotiation effort that is currently underway. ”

      Sort of like “repeal and replace”. Because that worked out so well.

      • 0 avatar
        carguy

        Also, much like “repeal and replace” the criticisms of NAFTA have been big on hyperbole and short on details. NAFTA is not a bad for US workers and nor would TPP have been.

        You will find that in many of these cases that the snake-oil cure will be much worse then the mostly imaginary disease.

      • 0 avatar
        TW5

        @ volvo driver

        NAFTA renegotiation is not similar to repeal and replace.

        • 0 avatar
          volvo driver

          “Ending NAFTA is not the end game. Ending NAFTA and replacing it with another agreement is the end game, hence the renegotiation effort that is currently underway.”

          “NAFTA renegotiation is not similar to repeal and replace.”

          Oh yeah, I’m sure this is going to go so much better than the ACA “repeal and replace” dumpster fire.

          • 0 avatar
            TW5

            @ volvo driver

            I’m not going to waste my time explaining all of the ways international trade treaties are different from repealing and replacing a healthcare law. You know they are different, but your entire point was based upon a ridiculous literal interpretation, which was obviously going to be blown up. Don’t double down.

        • 0 avatar
          volvo driver

          “I’m not going to waste my time explaining all of the ways international trade treaties are different from repealing and replacing a healthcare law. ”
          You wouldn’t know the difference if it hit you in the head.

          • 0 avatar
            JimZ

            “You wouldn’t know the difference if it hit you in the head.”

            that’s the bad part about the internet. any idiot with access can spend 5 minutes at the corner of Google and Wikipedia and declare themselves an expert in anything.

            thus the phrase “a little knowledge is a dangerous thing.” People gain a little knowledge about something, then go on acting like they know everything about it while failing to realize just how little they know. a certain pair of writers here tend to do that a lot.

          • 0 avatar
            TW5

            @ JimZ

            The problem, Jim, is that I have quite a bit of experience and educational degrees in economics, including international economics. Neither you nor volvo have any, which is made apparent by the pointless ad hominem arguments you attempt to execute.

            I am not the incompetent one, and the burden of your educations is not mine to bear.

    • 0 avatar
      Fordson

      “The American people may be hurt in the meantime.”

      Surely this is a minor consideration.

      “What have you got to lose?”

      We’re for sure gonna find out.

      Nothing Trump has attempted, that requires anyone else to agree with him to accomplish (so that excludes executive orders), has succeeded.

      Turns out that running a nation, like other challenging enterprises, requires people who actually know what they’re doing. Who’d a thought it?

      • 0 avatar
        TW5

        @Fordson

        The Senate is competent. They use their competence to further the impoverishment of the American middle class.

        Seeking competent politicians is like checking to make sure they have a GED. After you’ve determined they have competence, looking at their old high school report cards to determine who has the most competence is irrelevant. After competence is established, their intentions are paramount.

        Furthermore, the current Republican congress was elected to resist more frivolous regulation like ACA, during the Obama era. It should not really shock anyone they the only thing they know how to do is shoot down regulation. They will have to be replaced at the ballot box or flogged by the donors.

        • 0 avatar
          quaquaqua

          Calling the ACA “frivolous regulation” is a big sign that you’re not someone whose life depends on being able to buy your own insurance. I can’t say the same for myself. Consider yourself lucky. Heartless, but lucky.

          • 0 avatar
            JimZ

            it’s only “frivolous” if it doesn’t benefit him.

          • 0 avatar
            TW5

            @ quaquaqua

            It was frivolous because it had little or nothing to do with healthcare. It was a giant raft of new taxes on investment income, medical devices, “Cadillac” health insurance plans, fines for people who can’t afford to buy health insurance, and imputed taxes run through the average person’s policy via modified risk corridors. Worse, it provides demand subsidies to low income households which actually increased (as they normally do) the equilibrium market price, despite claims to the contrary.

            If you do not know that ACA is frivolous, you do not realize that you’ve been adversely impacted or you’ve not looked at the US market overall to witness the poor cost-benefit.

            ACA was a terrible bill. It had virtually nothing Democratic voters were asking for, and it had virtually everything Republicans said they would never tolerate. ACA was an utter embarrassment, and it has virtually wiped out the Democratic Party.

          • 0 avatar
            JimZ

            I know of a few people who were able to buy health insurance and get some long-standing issues treated thanks to the ACA.

            You remind me of a 4-panel comic I saw recently. in it 2 bald eagles are sitting in recliners, drinking coffee:

            Eagle 1: “Do you think Owl is a predator?”
            Eagle 2: “Not at all. He’s never bothered me.”
            Eagle 1: “Exactly.”
            (sips coffee)
            Eagle 1: “No idea what Mr. Mouse was on about.”

          • 0 avatar
            TW5

            @ JimZ

            Despite insistence from various socialist organizations, democracy does not closely mimic predation in nature, unless you’re referring specifically to the apathy shown by the general public towards violent crime.

            In this instance, Mr. Mouse doesn’t have a house. The solution proposed in ACA was that we cut 33.33% from the eagles’ houses and 33.34% from the owl’s house to make a house for Mr. Mouse. Then we will also raise everyone’s taxes to pay for the construction and transportation costs required to button-up the donor houses and build the donee house. ACA is an utterly ridiculous and frivolous waste of resources and human ingenuity.

            If there were true social justice, all ‘yea’ votes in the 111th Congress and President Obama himself would have been jailed on the spot for enacting ACA. It has been a blight on our nation, and an unfortunate reminder that political nonsense has a better chance of passing Congress than a real bill.

          • 0 avatar
            JimZ

            You missed the point so completely I have to assume it was intentional.

          • 0 avatar
            TW5

            @ Jim Z

            I can’t miss what never existed in the first place

        • 0 avatar
          Lou_BC

          “ACA was a terrible bill. It had virtually nothing Democratic voters were asking for, and it had virtually everything Republicans said they would never tolerate. ACA was an utter embarrassment, and it has virtually wiped out the Democratic Party.”

          ACA was a sell out to the ruling class that at least superficially gave coverage to those who had none.
          On the subject of sellouts, tax reform is a sellout to the ruling class that will enrich them and put the USA further in debt.

          Both political parties in the USA are bought and paid for by the ruling class. The whole “drain the swamp, put the moron in power” populist movement is an attack upon the ruling class but from the right wing side. MoronPotus is too unstable to affect any real change. Goldman Sachs alumni in key positions wasn’t a good sign of any swamp drainage.
          “Feel the Burn” is seen as “commie” and was a threat to the ruling class’s preferred puppet aka Hillary Clinton. “Left wing” anything in the USA is truly an oxymoron. Post WWII communist/socialist paranoia as well as anti-left sentiments fueled by those who actually run the country have ensured that what is seen as “left” is by definition centrist.

          You aren’t going to affect much change in a corrupt political system until both sides of the political spectrum unite to force change.

          • 0 avatar
            TW5

            The elites are not a united front. The larger business community would love nothing more than to dump their health insurance expenses onto the federal government, and the government would love the same since it would effectively abolish the tax exclusion for health insurance paid by an employer.

            Unfortunately for them, the health insurance companies and healthcare providers want no part of socialized medicine, and quite a few businesses are convinced costs will spiral out of control because our government can’t even manage our current public system which only covers 1/3 of Americans. Also, some people in congress are terrified of what will happen if healthcare industry employment and pay falter, considering the ridiculous debt load of modern medical students.

            Our problem is that we are rich, and we’ve never hesitated in recent years to toss a few trillion in the trash to avoid making reforms. Furthermore, everyone in Congress is adamant that the middle class should get nothing. Conservatives and liberals both give everything to the nonworking poor and elderly. The only difference between the parties is how punitive they want the tax code to be. Deficit never changes because high taxes damage our fragile economy, and low taxes fail to generate revenue.

            Congress has no competence. This is a spending problem. Too much spent on the wrong people for the wrong reasons. But spending patterns have been turned into a matter of morality, not budgeting or economics. In short, we’re screwed. Democracy has been replaced by political religion.

          • 0 avatar
            Hummer

            Obama let CitiBank make his cabinet, let’s start there. Bernie was a sellout that was quick to support Hillary and change his positions at the snap of a finger, not to mention we can look at Venezuela to see how Bernie would have worked out. The left in America isn’t left rather its Far left. Trump was a democrat for most of his life, his policies are all centrist with many leaning to the left. Of course when your swinging from the far left agenda of the previous administration I can definitely see how it could be a shock to return to center.

            Trumps Healthcare changes allows folks to buy across state lines, that has been pushed for 30 years unsuccessfully because the insurance and health companies have lobbied against it. It’s the first step in a long list of needed steps to make healthcare affordable so that we don’t end up with the train wreck of a healthcare system such as in the U.K.

  • avatar
    Big Al from Oz

    Yup, its good to see the far left unionised people and the right wing Nationalist try and explain their theories on trade.

    Globalisation is great. How can any of you guys even state that it is not?

    Imagine a town, with only one rich family and the rest are poor because the rich ones deny the poor from developing and progressing?

    Or, on the other hand imagine a town full of richer people. There will be more people eating out and buying new stuff and making the town richer. This is what globalisation does.

    Why are you guys scared of others doing well in life to the point you want to deny them access to enriching not only themselves, but the Good Ole US of the A?

    Face it, with the way the US and even the UK are heading it appears we are witnessing the slow demise of the “Anglo” stamp of authority on the world order and Trump is accelerating this with Mays help. First Trump handed the Chinese the Pacific trade deal, now he wants to sh!t in his own backyard.

    Warships and every American owning guns isn’t going to make America Great again. You need trade.

    America was built on trade, once upon a time it had massive leverage over trade. We in the West wondered why others weren’t like “us”. We went out and helped them become more like “us”. Now they compete like “us” and most don’t like to compete. Why? Because that requires effort.

    Protectionism is not the answer. Encouraging other countries to become richer will make all richer, like the town scenario I gave above.

    • 0 avatar
      TW5

      Globalization is great as long as you’re not the United States, and you haven’t paid $20T to keep the world on welfare, while your own populace slowly slides into economic obscurity.

      US consumer imports power the global economy. The rest of the world is either going to buy our exports, or we are going to boost domestic production and kick imports out of our economy. No more free rides via US trade deficit and currency manipulation. I’m not going to have $500,000 national debt hanging around my family’s neck so someone in China can buy a new car.

      To be fair to the rest of the world, many of our problems are caused by the US federal government, which has slowly converted the budget from working-class STEM into welfare, healthcare, and pensions for non-workers. You’d think the rest of the world would help us bring the people who did this to justice so the US economy can recover and we can increase total imports and total global trade. But, the world tends to do the opposite.

      Why are we keeping the global economy afloat, if the rest of the world is actively working against our best interest? Once you start asking this question, it’s easy to understand the current political climate in the US and how Trump was elected.

      • 0 avatar
        Lou_BC

        “To be fair to the rest of the world, many of our problems are caused by the US federal government, which has slowly converted the budget from working-class STEM into welfare, healthcare, and pensions for non-workers.”

        I do agree that many of your problems are caused by the federal government but it is because of pandering to the wealthy elites. Most developed countries have socialized healthcare, welfare, and pensions and most fair better than the USA when it comes to implosion of the middle class and destitution of the lower class. The USA has traditionally neglected the poor. Incarceration rates in the USA are considerably higher than many despotic nations. Mortality rates among the lower class are worse as well. Most indices are worse as well.

        It is much easier to blame the rest of the world for your problems than it is to take a realistic internal look at what is happening and what has happened in the past.

        • 0 avatar
          TW5

          @ LouBC

          They do fair better than the United States, but a big part of that is the United States import machine, and the trillions we spend to keep it running. This allows Europe to sell their high tech components to China who turn them into finished goods bound for the US, and then China has the money to buy heavy equipment and other consumer goods from Europe. China purchases some products from the US, but not much.

          Our government tells us this is good policy because it makes our politicians think they are beneficent people with moral leverage over other countries. In reality, the world is laughing at for giving our wealth away, and China is spending a great deal of money to establish transcontinental trade infrastructure with Europe.

          Yes, this strategy is at the behest of our elites who are happy to sell the US down the river to gain access into foreign markets. It makes sense that Trump would hate the arrangement because he’s a hospitality mogul (primarily), which is sustained mainly by domestic activity. Unfortunately, Trump maybe doesn’t realize the entire continent is being isolated. Canada and Mexico will also be affected so some of his NAFTA bombast may be counterproductive.

          We’ll see what happens. North America is loaded with natural resources, and we still have quite a few competitive advantages to exploit.

          • 0 avatar
            highdesertcat

            “we still have quite a few competitive advantages to exploit.”

            I’m very happy to see that the current administration recognizes that and is actively beginning to exploit those advantages.

            So far, I like the changes that have been set in motion over the past 10 months.

            The Stock Market, Housing, etc, all UP! Hey, that’s great news!

            Finally! America is out of the malaise of the past eight years.

          • 0 avatar
            TW5

            @highdesertcat

            Trump has done several good things so far. We’ll see what happens from here. His inexperienced cabinet prioritized his legislative initiatives incorrectly, and now infrastructure is a distant objective. The good news is that he’s enacted very little of his agenda and still the business sector is ebullient.

            Trump also understands the threat/opportunity of China. They can be a great ally for the United States because they are a business-centric nation, but many of their economic strategies are not predicated on sound theory, rather imperialism. This has the potential to harm the global economy (too late?) and disrupt international relations. Previous administrations have been much too casual about the rise of a mercantile empire. Trump gets it.

            Also, above I said China didn’t buy many US exports, I meant relative to US imports. They obviously buy quite a bit of our stuff. Should be a lot more.

  • avatar

    The problem is cheap transportation. Once you realized that the t shirts made in Andover, MA were way more expensive than ones made in XXX, and shipping, while taking some time, was cheaper…..

    The race to the bottom commences. Look up the ship breakers in india. It isn’t like there are ANY regulations for health and safety-ten year olds with a hammer breaking mercury switches and catching the liquid metal ? sure.. Likewise, there will always be a place where a polluting activity can be done with zero enforcement or cleanup cost.

    Do we want to live in that world ? Companies do, and the number of Chinese parts on new cars tells up that the USA supplier can’t compete with slave labor in a zero enforcement no-regulations environment.

    Those savings are often NOT passed on to you, they are kept by the company in question.

    I still refuse to accept the current 1600 Penn Ave occupant as legit, but I agree that NAFTA and worse, the TPP, did no favors for Americans and were written for, by and for the benefit of major corporations, many of whom are now multinational and play every government against the other, looking for a best deal. They have no loyalty to any body politic or population. The factory owner no longer lives in town, contributes to the local library, and has no connection to the people who make his stuff.

    • 0 avatar
      Lou_BC

      It would make much more sense to sanction any country that allows exploitation of labour or allows lax safety/environmental standards to exist. Corporations and the elites that run them do not care about anything other than financial gain. Force a level playing field. Walling off one’s country literally and figuratively isn’t going to work.

  • avatar
    thornmark

    >>In January, the Center for Automotive Research claimed killing NAFTA could result in the elimination of at least 31,000 auto jobs within the United States. This week, a new study sponsored by the Motor Equipment Manufacturers Association upped that estimation to around 50,000.<<

    And yet NAFTA in practice has led to the actual loss or actual gain of auto-related jobs?

    • 0 avatar
      28-Cars-Later

      More data is needed to make the determination, however in the 90s there were a number of plants which were moved to Mexico from the US.

      nytimes.com/1995/10/31/business/fruit-of-the-loom-to-close-six-us-plants.html

      nytimes.com/1999/02/23/business/levi-is-closing-11-factories-5900-jobs-cut.html

      • 0 avatar
        gtemnykh

        Heck in addition to the Carrier plant that made the news, Indianapolis just also lost 300 jobs from Rexnord bearing moving south of the border. The theory behind ‘lifting every boat’ and eventually everyone’s quality of life is so high that we’re not having this massive jobs drain is a nice one. In reality, 20 some years on and we’re still bleeding out in the heartland. The Japanese transplants and their suppliers are a welcome reverse trend, but in terms of numbers it is still very much a net loss.

  • avatar
    threeer

    A country that cannot produce for itself becomes slave to those that can…

    While *some* investment has come back to the US, as a whole, I believe we continue to drain wealth to other countries that in turn use that wealth to gain influence around the globe at our expense. Just look at China’s massive build-up of their military and their growing desire to push their weight around. Not saying war is in the near (or even semi-distant) future with them, but if it ever came about it would be the height of irony that they did it largely financed by us.

    As for NAFTA…while it is my personal belief that this was not negotiated in America’s best interests, I will concede that a deeper study would be needed to determine the true economic loss that was caused by this. Maybe it’s not as lopsided as I think, but I’m not entirely sure ol’ Ross was that far off, either.

    • 0 avatar
      JimZ

      that’s because we all want to have our cake and eat it too. we “want” to bring jobs back here for people to make stuff, but even if it happened we’d still buy the Chinese stuff because “Well I save so much money!”

    • 0 avatar
      Big Al from Oz

      Theeer,your initial comment is nonsense. How and where is the US a slave?

      Where is the US working for cheap incomes? Let alone in a remotely slave like situation?

      Sounds pretty when it rolls off the tongue.

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