U.S. Chamber of Commerce CEO Thomas Donohue told attendees at the U.S.-Mexico CEO Dialogue the “trilateral commercial relationship [of NAFTA] is far too valuable to American businesses, workers, and economic growth for us to retreat or turn inward.”
Despite recent political rhetoric from President Donald Trump and others, U.S. businesses understand the importance of the North American Free Trade Agreement (NAFTA) to their international import and export operations.
U.S. exports to Canada and Mexico, for example, generate about $37,000 in annual export revenue for each American factory worker, and in the first eight months of 2017, these U.S. exports to Mexico and Canada were worth four-times more than shipments to China, according to the U.S. Chamber of Commerce.
While most American executives agree the 23-year-old trilateral trade deal needs updating, they’re wholly against the United States walking away from NAFTA.
“We’re going to fight like hell to protect the agreement,” U.S. Chamber CEO Thomas Donohue said in a speech Tuesday at the U.S.-Mexico CEO Dialogue. “The trilateral commercial relationship is far too valuable to American businesses, workers, and economic growth for us to retreat or turn inward. And the U.S. private sector aims to ensure that it thrives through this negotiation and the many that we hope will follow.”
Although Trump had earlier in the process threatened to withdraw the United States from the agreement entirely, Donohue said the NAFTA renegotiations have proceeded relatively smoothly and that headway has been made to update a number of chapters involving customs, small business, competition and digital trade practices.
“Heading into the negotiations, you could say that our strategy has been to speak softly and give the administration every opportunity, all the support, and just enough pressure to do the right thing,” Donohue said. “We’ve been patient, cool-headed, and constructive.”
However, he warned “there are several poison pill proposals still on the table that could doom the entire deal.”
One of those proposals is to include a sunset clause under which NAFTA would be allowed to expire after five years unless all three countries agree it should continue. For many businesses, this could throw off long-term manufacturing and supply chain investments in each of the three countries.
Donohue also warned about adverse effects of tightening NAFTA’s origin rules.
“Under NAFTA, the rules of origin are already extremely tough,” he said. “For example, in the automotive sector, 62.5 percent of a car or truck must be produced within North America to qualify for duty-free treatment. This is the highest such rule of origin [threshold] in the world for this sector.
“If the administration’s proposal were to move forward, companies would cease trading under NAFTA and simply pay the generally low U.S. tariffs established under the rules of the WTO,” he explained. “So the impact would be the opposite of what’s intended. U.S. industry would source more inputs from Asia and less from the U.S. That’s right – this proposal would actually send business overseas.”
Other threats to NAFTA include the Trump administration’s proposal to eliminate the investor-state dispute settlement process, which has ensured that investors are treated fairly and compensated in the case of expropriation.
Donohue also called the administration’s proposal to eliminate existing procurement rules “troubling.”
“U.S. negotiators are proposing a ‘dollar-for-dollar’ opening of North American procurement markets. While this might appear to be a pro-‘Buy American’ move at first glance, it would have the opposite effect. It would lead directly to reduced sales of made-in-USA products and harm the American workers who make them,” he said.
“And since the U.S. procurement market is much larger, Canadians and Mexicans would wind up with greatly reduced access to the U.S. market relative to what they currently have,” he added. “Simply put, this is a bad idea that promises no benefit and risks considerable harm, and – by the way – no one’s asking for it!”
If the Trump administration pulled the United States out of NAFTA or pushed Canada or Mexico to the point that one or both walk away from the negotiating table, Donohue said the United States should expect “trade retaliation, higher tariffs, broken supply chains, and potentially less cooperation on other priorities like anti-terrorism and anti-narcotics efforts.”
Donohue, however, said there are opportunities within NAFTA to deepen and strengthen the economic relationship between the three trading partners, such as regional opportunities to expand on energy development, better integration of cross-border agricultural product supply chains, shared health care innovations, and improvements in information technology use and protections.
To spread the word on the benefits of the trade agreement for American businesses, the U.S. Chamber said a large group of NAFTA supporters will visit Capitol Hill today to meet with representatives and senators. On Tuesday, a letter signed by more than 300 state and local chamber of commerce executives was sent to the White House, insisting that U.S. negotiators “do no harm” to the U.S. economy when renegotiating NAFTA.
“As our country’s top export markets, trade with Canada and Mexico supports 14 million American jobs, including tens of thousands of jobs in every state and more than 100,000 in 35 U.S. states,” the letter said. “Each and every day, over $3.3 billion, or $1.2 trillion annually, is traded between the U.S., Canada, and Mexico. In fact, half of all Canadian and Mexican imports are ‘made-in-the-USA.’”
U.S. Chamber CEO: ‘We’re going to fight like hell’ for NAFTA
