Pence Meets With Automakers Annoyed by NAFTA Changes

Matt Posky
by Matt Posky
pence meets with automakers annoyed by nafta changes

The automotive industry is wary of any changes that might be made in regard to the North American Free Trade Agreement. Fortunately for them, little progress has been made during the last few months of negotiations. But that doesn’t create an assurance that changes aren’t still en route. So, manufacturers and suppliers have banded together via various trade groups to voice their opinion on how to best handle NAFTA.

Meanwhile, the Trump administration has attempted to make itself appear friendly to the automotive business. Continuing these efforts, Vice President Mike Pence has met with General Motors CEO Mary Barra, Fiat Chrysler’s Sergio Marchionne, Ford North America President Joe Hinrichs, and a handful of other top-tier auto executives.

Here’s the problem: While the current administration has made strides to remove regulatory barriers, especially those regarding autonomous development and emissions caps, its plan for NAFTA hasn’t been looked upon quite so favorably within the industry. Shaking up North America’s trade arrangements and forcing the rules of origin more favorably to the U.S. isn’t what domestic automakers want right now.

“We view the modernization of NAFTA as an important opportunity to update the 23-year-old agreement and set the stage for an expansion of U.S. auto exports,” said Matt Blunt, president of the American Automotive Policy Council. “We believe achieving inclusion of strong and enforceable currency discipline and ensuring foreign markets accept products built to our standards are important components of a modern NAFTA agreement.”

The industry doesn’t seem to mind the government sorting out currency manipulation, but tariffs and regional component mandates could seriously complicate things for both manufacturers and suppliers. As a result, there has been some overt resistance coming from automotive trade groups focused squarely at Washington. In addition to lobbying for modest changes, groups have issued numerous letters to the White House and called for support from the general populace.

Monday’s meeting with Pence likely served as a way to alleviate some of that growing tension. According to Reuters, the gathering was officially intended to cover “trade, commerce and manufacturing policy and how it impacts business,” and was originally scheduled to include National Economic Council Director Gary Cohn and U.S. Trade Representative Robert Lighthizer.

How successful it was is unknown. However, it’s unlikely the industry will change its position anytime soon. In fact, the industry recently launched a new campaign called “Driving American Jobs,” which aims to do little more than leave NAFTA unmolested. But more established industry collectives, like the American Automotive Policy Council and Alliance of Automobile Manufacturers, appear to be marching to a similar beat.

“Our biggest concern is for American workers and customers,” Jennifer Thomas, vice president of federal affairs at the Alliance of Automobile Manufacturers, said in an official statement. “Pulling out of NAFTA would lead to a decrease in vehicle production, a decline in jobs and an increase in what our customers spend when buying a new vehicle. Not to mention this would also have an impact on our abilities to export vehicles to foreign markets.”

Ann Arbor’s Center for Automotive estimates Americans would buy or lease 450,000 fewer vehicles over a year if the U.S. were to enact the proposed 35-percent tariff on light vehicles imported from Mexico. That change is also believed to eliminate around 7,000 North American assembly jobs. While the majority of the layoffs would be in Mexico, industry experts claim those jobs won’t emigrate to the United States. Instead, everyone’s best guess is that production would eventually shift to Asia. That could easily cripple U.S. supplier chains and cost tens of thousands of domestic jobs, if the center’s estimates prove accurate.

[Image: Gage Skidmore/ Flickr ( CC BY-SA 2.0)]

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  • USAFMech USAFMech on Nov 28, 2017

    "Ann Arbor’s Center for Automotive" Research. Sorry for commenting with a correction - it was driving my OCD nuts. I don't understand everyone going nuts over re-negotiating a 23 year old international agreement. Has the world not changed enough that this is worth revisiting? Or are we just opposed because of who's leading the process? If it's the latter, I can't remember (100% willing to be proven wrong) partisan-based opposition, as opposed to principle or economic-based opposition, to the last administration's negotiated agreements.

    • Luke42 Luke42 on Nov 30, 2017

      "I don’t understand everyone going nuts over re-negotiating a 23 year old international agreement." The reason everyone's "going nuts" is that this isn't a good-faith effort to update an ageing treaty. Hundreds billions of dollars have been invested in an automotive supply chain hang in the balance, and a substantial fraction of that investment is in Mexico. Also, President Trump is in charge, and just about everything he's said in public suggests that he prizes bluster over substance. He seems willing to make it very difficult to trade with Mexico, which would cause those investments to lose a huge amount of their value overnight, thereby greatly hurting the Mexican economy (which will cause more Mexicans to come to the US for work), AND the American economy (most of us pay more for stuff and incurring opportunity costs) AND the American automotive industry (supply chain disruptions & lost investments). Even IF Trump thinks structural changes to the works economy to reduce trade are going to benefit Americans (this idea is generally not supported by economic evidence), then he must be aware of the consequences and budget for the time and cost of change (5-10 years and many billions of dollars). I don't see any evidence of awareness or understanding of these issues from The President, and so I conclude that he's likely to make a lot of very expensive mistakes which will greatly injure the US economy and ultimately cost us jobs. It's pretty easy to see why everyone is "going nuts" over this. It's likely to end very badly for everyone involved.

  • Asdf Asdf on Nov 29, 2017

    "Instead, everyone’s best guess is that production would eventually shift to Asia." Then slap a huge tariff on Chinese-made cars, problem solved. There's no reason American automakers should get away with the double-whammy of screwing the American worker even more than they already are, and imposing Chinese-made junk on the American market.

    • See 1 previous
    • Luke42 Luke42 on Nov 30, 2017

      If only it were that simple. First off, all cars are made out of components sourced from all over the world. Branding and final assembly (to a lesser extent) seem to determine an "American" car to most people. Once you succeed in taxing the vehicles and the vehicle components used in American-branded cars to that extent, people will buy fewer cars (because they'll cost more). That's what's known as a "recession", at least for automotive sector of the economy.

  • Jimbo1126 (Turning pencil to eraser end...) Really, it's just GM. Been disappointed by their products too many times.
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