House Members Aren't Digging Trump Administration's Auto Trade Proposals
A bipartisan group of over 70 members of the U.S. House of Representatives has asked the Trump administration to reconsider its North American Free Trade Agreement proposal on auto parts rules of origin. Seen as a sunset clause by Canada and Mexico that tweaks international agreements to lower the United States’ trade deficit, the rule has also received some serious blowback from domestic automakers. They’ve even used trade groups to craft awareness campaigns and reach out to congress, a decision that appears to be working.
Currently, NAFTA mandates at least 62.5 percent of the materials used in a car or light truck be sourced from North America in order to avoid tariffs. The Trump administration’s proposal would up that requirement to 85 percent, with 50 percent of the total being from the United States.
However, letters arrived at the White House on Wednesday from a handful of Republican senators and dozens of House representatives, from both sides of the aisle, condemning the proposal.
According to Reuters, they wrote that the push from U.S. negotiators “would eliminate the competitive advantages provided to the U.S. auto industry under the current NAFTA rules — or lead to rejection by Canada and Mexico and the end of the agreement.” They also suggested “either outcome would adversely affect the U.S. auto industry — reducing sales, production, and exports and harming U.S. workers in the process.”
These claims are echoed by automotive trade groups and numerous industry experts, but run counter to the current administration’s claims. Donald Trump himself has said that the renegotiation of NAFTA would serve to bring more jobs to the U.S. and improve the country’s $74 billion automotive trade deficit with Mexico (and $5.6 billion gap with Canada).
It’s difficult to know where to stand on this one when looking only at the facts, primarily because NAFTA has done both harm and good for the country and North America as a whole. But U.S. Trade Representative Robert Lighthizer has repeatedly reiterated that the deficit cannot stand.
NAFTA [s]bickering[/s] negotiations resumed on Wednesday, with cabinet-level officials from all three nations saying they’ll skip attending the talks for this round and leave discussions up to their negotiating teams. Formal talks with chief negotiators begin in Mexico City on Friday, hopefully progressing positively through November 21st.
Robbie on Nov 16, 2017
No mainstream Economist would agree with the protectionist sentiments in this thread. Trade happens because one country is more efficient, in relative terms, at producing a certain good. This is called comparative advantage. Free trade has brought the world prosperity. There is no economic merit for America in producing cars domestically. There are some downsides to free trade. When we buy T-shirts made in China, we rob an unskilled worker in the US somewhere of the chance to produce a T-shirt domestically - at a multiple of the price. Nevertheless, we probably prefer a world in which the US produces the stuff with high value added. We designs iPhones, sell them for $700 all over the world, and China produces the physical product. The net result is that for every top of the line iPhone nearly $500 stays with Apple in the US, and a few dollars stay in China. We charge young Chinese nice six digit amounts to get an American Master's degree. We get the better part of the trade deal here.
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