Mexico trade agreement heartens Ohio officials
Ohio Republicans and Democrats reacted with cautious optimism to a tentative agreement to update a trade pact between the United States and Mexico, an agreement that could trigger more auto production in both countries.
Although Ohio lawmakers and White House officials expressed hope that Canada will join Mexico and the U.S. to form an updated North American Free Trade Agreement, state lawmakers seemed hopeful the deal announced Monday will avert what could have been a disastrous trade war.
The new preliminary accord is designed to modernize the 2-decade-old pact that swept away scores of tariffs among the United States, Canada and Mexico and integrated a North America automotive market that helps automakers such as Honda keep the prices down on cars and trucks.
The tentative pact calls for 75 percent of auto content to be produced in the United States and Mexico if the automakers hope to avoid tariffs on cars sold in those countries. Under NAFTA, manufacturers only needed 62.5 percent of auto content to avoid tariffs sold throughout the U.S., Mexico and Canada.
In a call with reporters, U.S. Trade Representative Robert Lighthizer said, “We hope that Canada can join in now and expect them to begin that process very soon,” adding: “We have an agreement that is absolutely terrific.”
“I think it’s going to lead to more jobs for American workers and farmers, but also more jobs for workers and farmers from Mexico,” Lighthizer said.
Sen. Sherrod Brown, D-Ohio, who was told Sunday by Lighthizer that a preliminary pact had been reached, called the announcement an “important step forward.”
“We still need to review the text of the tentative agreement with Mexico, but this is an important step forward,” said Brown, adding he has “been working closely with” Lighthizer.
“We still have a lot of work to do to bring Canada on board and write the legislation needed to make any deal a reality, and I will keep working with Lighthizer to make sure every detail is right for Ohio workers,” said Brown, a longtime critic of NAFTA.
Sen. Rob Portman, R-Ohio, who was U.S. Trade Representative under President George W. Bush, said he was looking “forward to reviewing the details, but I am pleased there has been a breakthrough.”
President Donald Trump, who throughout his 2016 campaign denounced NAFTA as a disastrous agreement, called the tentative pact with Mexico “a big day for trade, a big day for our country.”
In a phone call with Mexican President Enrique Peña Nieto, Trump said he would call Canadian Prime Minister Justin Trudeau and “we’ll start negotiation, and if they’d like to negotiate fairly, we’ll do that. You know, they have tariffs of almost 300 percent on some of our dairy products, and we can’t have that.”
Critics complained NAFTA encouraged U.S. companies to transfer production to Mexico. But many major companies said the trade pact led to lower prices for American consumers and created new jobs.
The new agreement will not be called NAFTA because Trump said the name “has a bad connotation.” The tentative pact is called the United States-Mexico Trade Agreement, a name which likely will change if Canada joins.
The new deal will last for 16 years, but Mexico and the U.S. can review it after six years.
Stocks reacted enthusiastically to the news, with the Dow Jones industrials leaping 259 points, while the NASDAQ zoomed past the 8,000point barrier.
Mexico is the second-largest trading partner for Ohio, with $6.5 billion in Ohio goods exported to Mexico in 2017.
While Mexico is a big market for Ohio, Canada is almost three times as big. Any deal that doesn’t include Canada leaves a lot on the table, according to Ian Sheldon, a professor of international trade at Ohio State University.
“I’m not really sure if we gained anything yet,” Sheldon said, as details of the tentative agreement remain to be seen. “Canada is such a more important trading partner.”
Ohio’s largest exports to Mexico include aircraft engines, electrical machinery, car parts and plastics. Honda has a plant in Mexico that produces the HR-V crossover for the U.S. market. Mexico also buys a lot of agricultural products from Ohio, including corn and soybeans, importing more than $350 million in agricultural goods from Ohio in 2017.
The agricultural market in Mexico has also been a solid source of growth for Ohio farmers, with exports rising 44 percent from 2015 to 2017.
If NAFTA is scrapped, U.S. consumers will feel some pain, Sheldon said. Smaller trade deals are less efficient than bigger, regional pacts, and NAFTA has helped make North America very competitive with Asia and Europe, he said.