NAFTA talks put Trump’s deal-making to the test
Time is running out for President Donald Trump to close the deal to revise the North American Free Trade Agreement, and the pressure is on.
The stakes are exceptionally high for Texans. Half of Texas’ exports go to Mexico or Canada, generating $112 billion in export revenue, according to the Hunt Institute for Global Competitiveness at the University of Texas at El Paso.
“A withdrawal from NAFTA would certainly reduce exports revenues for Texas companies, put at risk approximately 950,000 jobs in Texas alone that are linked to commerce with NAFTA, and disrupt well-rooted and valuable North American supply chains which would take years to rebuild,” Mayra Maldonado, the institute’s associate director, told Texas lawmakers recently.
The conservative Texas Public Policy Foundation also supports NAFTA.
“Although NAFTA has been politically controversial since conceived and is certainly not perfect, the results overwhelmingly show net benefits for people, especially those in Texas,” Vance Ginn, TPPF’s senior economist and director of the Center for Economic Prosperity, reports. “Renegotiating NAFTA could serve as a valuable opportunity to promote prosperity, but only by reducing trade barriers and government privilege so individuals in different countries can mutually benefit.”
Unfortunately, negotiations have bogged down as two critical deadlines approach.
U.S. Trade Representative Robert Lighthizer says the administration wants to pass the new treaty using fast-track authority during the lame-duck session of Congress, after the election but before a new Congress takes over and the authority expires.
Counting backward from
“The results overwhelmingly show net benefits for people.” Vance Ginn, economist
December through a 90-day notice period, a 105-day International Trade Commission review and a 30-day congressional approval process, the White House needs to announce an agreement soon.
“We’re going to see something between now and May 22, either a failure, and we’re done for the time being, or an agreement in principle,” Richard Miles, director of the U.S.Mexico Futures Initiative at the Center for Strategic and International Studies, told the University of Houston North American Environment, Energy, and Natural Resources Conference.
If Congress could agree, they might be able to extend that deadline to July 1, but that is a hard stop.
Mexico’s federal election is that day, and the leading candidate to replace term-limited President Enrique Peña Nieto is an avowed anti-globalization leftist, Andres Manuel Lopez Obrador.
Rather than attack NAFTA from the right, as Trump does, Lopez Obrador condemns it from the left. Both populist politicians promise jobs and prosperity for their most hardhit citizens at the expense of multinational corporations, but Lopez Obrador would insist on resetting talks to the very beginning.
Holding up a deal are U.S. demands to increase the North American content for duty-free vehicles to 75 percent, a requirement that 40 percent of a vehicle’s value is added in factories that pay $16 an hour, a new dispute resolution system and a sunset provision that requires review of the deal every five years.
All of these proposals would hurt Canadian and Mexican workers and potentially support U.S. jobs. But there is something decidedly socialist about a government dictating how much private companies should pay in wages, where they should buy their parts and then rewriting a deal every five years to guarantee who gets what benefits.
None of that qualifies as free market capitalism, which is why Mexico and Canada object.
In any high-stakes negotiation, a deal dies a thousand deaths before there is a breakthrough. Mexican and Canadian negotiators are making counteroffers, and Lighthizer will appear intransigent until the very last second to win concessions.
Support for NAFTA, though, is strong among most Republicans and the business community, so Trump is unlikely to withdraw from NAFTA, and the other side knows it. Mexico’s economy minister, Ildefonso Guajardo, rightly worries about what he calls a “Zombie NAFTA” that is neither dead nor updated.
The treaty is showing its age. President Ronald Reagan first proposed the idea in 1979, the negotiations concluded in 1992, and NAFTA became law in 1994.
The treaty predates the internet and desperately needs updating to reflect modern business practices.
The coming week or so will reveal the Trump administration’s true negotiating prowess. If the president can deliver a modernized treaty that makes reasonable improvements to the balance of trade without violating basic free market principles, he will score a huge success.
If the talks fall apart with all sides pointing fingers at each other, Trump will need to surrender his crown as king of the dealmakers. And Texans will need to rethink business plans.
Chris Tomlinson is the Chronicle’s business columnist. chris.tomlinson@chron.com twitter.com/cltomlinson