Trump, NAFTA and the ‘Buy America’ Agenda

A looming December deadline for NAFTA negotiations was pushed back to March 2018, as the fourth round of talks stalled earlier this week.  President Trump has made his views clear on the 1994 Trade deal, famously describing it as ‘the worst trade deal in history’ whilst speaking as a Republican Nominee in Pennsylvania. The President’s hardball approach has infuriated Canadian and Mexican officials, with the Canadian Foreign Minister Chrystia Freeland accusing the U.S. as bringing a ‘winner-take-all-mindset’ to negotiations.

NAFTA transformed trading relations between the U.S., Canada and Mexico, tripling the amount of trade between the three countries, and cementing Mexico’s reliance on its northern neighbor, now accounting for over 80% of its export custom. But last week Trump re-iterated the prospect of simply walking away from the deal if he fails to make the changes he believes are crucial for U.S. jobs and manufacturing. Unsurprisingly, both the implications of Trump’s desired changes, and the alternate prospect of an all-out ratification, has sparked a wave of business concern and lobbying efforts. The U.S. Chambers of Commerce was estimated to bring together more than 100 representatives of various interest groups, in what President and CEO Thomas Donohue described as ‘an army’. Whilst the Chambers of Commerce has broadly stated its desire to end ‘the roller coaster ride of uncertainty’, many of its varying interest groups have specific bones to pick surrounding the President’s direction of travel. But the Trump administration has expressed cynicism towards such vocal critics, U.S. Trade Representative Spokeswomen Emily Davis played down concerns, stating that changes will ‘of course be opposed by entrenched Washington Lobbyists and trade Associations’.

The auto industry has been among the most vocal of critics, mobilized by Trump’s desire to increase the rule of origin to 85%, and limiting it to just U.S. manufacturing products. The proposal has seen The Association of Global Automakers, representing over-seas carmakers, descend on Capitol Hill in an effort to dissuade the Trump Administration from pursuing its line. If Mexico and Canada were to accept such proposals, the affects could be profound for both Mexican and American manufactures. With Mexico holding a $74 billion automobile deficit with the U.S., Trump believes U.S. jobs and manufacturing have suffered too greatly, but if industry is to see a steep rise in production costs, many voices are foreseeing a shift to Germany and Japan, the former importing cheaper parts from Eastern Europe, and the latter from across Asia. With agreement looking unlikely, many in the industry are instead anticipating the challenges an all-out ratification could pose.

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