Deadline looming for new NAFTA agreement
PRESIDENT Trump has been busy with international affairs, spiking the Iran nuclear deal agreed to by the previous administration and lining up negotiations with North Korea dictator Kim Jong Un. Looming is what will become of another major issue, the North American Free Trade Agreement.
NAFTA, the trilateral pact involving the United States, Canada and Mexico, has been in place since 1994 but Trump has had it in his sights for years. He has called it “the worst trade deal ever” and, during ongoing negotiations about NAFTA, has warned he might “terminate” the agreement.
We’re among those who believe that would be a mistake because, while it has adversely impacted parts of the U.S. industrial sector, NAFTA has provided considerable benefit as well. American farmers and ranchers export more product to Canada than any other country; Mexico is third on that list. Almost 5 million U.S. jobs are tied to trade with Mexico.
Oklahoma companies did $537 million worth of export business with Mexico in 2016, according to the state Commerce Department. Exports to Canada totaled $1.394 billion that year, meaning the two countries accounted for about 40 percent of Oklahoma’s $5 billion export market.
Thus, an open-minded approach to negotiations is advisable as talks, which began formally in August, continue and the time grows short to reach a deal. Recent reports offer cause for some concern.
CNBC recently said a framework for NAFTA deal may emerge in the coming weeks. However, just last week The Washington Post said negotiations had hit “a major snag” and that the three countries remain far apart on several issues.
One of those is the U.S. demand that a new treaty be renewed every five years. Another sticking point involves which automobiles would be given duty-free treatment. Currently, each duty-free vehicle consists of 62.5 percent North American parts; the administration wants to bump that to 75 percent.
The United States also wants 40 percent of cars and 45 percent of light trucks in North America to be built by people making at least $16 per hour, which is much higher than average factory pay in Mexico.
In an editorial, The Wall Street Journal noted the debates that occur in this country over mandated wages, and asked why U.S. Trade Secretary Robert Lighthizer, who is leading the negotiations, thinks “he can or should dictate wages in another country?”
These concerns are magnified by a pending deadline. Trump’s authority to negotiate trade deals that Congress must accept or reject without changes is July 1. But various timelines in this potential legislation have the administration aiming for congressional approval this month. In addition, the presidential election in Mexico on July 1 and the November midterms here could have repercussions if no deal is reached.
NAFTA can use improvement. Stephen Moore with the Heritage Foundation argues for better U.S. access to Canadian and Mexican markets for manufacturing goods, along with intellectual property protections for U.S. innovators. Other revisions have been recommended. But unplugging from NAFTA entirely would be costly, and the administration should take pains to avoid doing so.