In the work of supporting global companies that manufacture and maneuver their supply chain systems over a global footprint, our firm understands the tangible day-to-day realities of the importance of trade policy between countries and blocks of countries. The impacts of trade policy are vitally meaningful and can define corporate success or failure.
In the big picture, it is ludicrous that the US largest trading partners (Canada and Mexico) could be seen as trade adversaries or in some regard, economic foes to the nation. Smart policy might redefine bits of NAFTA and modernize to support “mutual trade benefit” but it is hard to understand how for example, a growing country of 130 million people that is growing its prosperity should be seen as anything but an economic ally. Yes, production costs are lower in Mexico than in the US, but frankly in the big picture the US just should not try or intend to compete with less sophisticated and low-cost production environments.
The American workforce has made great strides in skills level advancements, but this success is extraordinarily uneven across the country, with some places literally leading the world in tech-fueled production, but frankly not in most parts of the country. With a wealthy indigenous market, extraordinary high-education, and perhaps the best research and development in the world – the US and its leaders simply must set its sights much higher and not allow 3/4 of the nation to remain stuck in wishing back for what was in 1950. If the US doesn’t make substantial progress in the next 10 years, it will devolve to a few small enclaves of economic success and the rest of the country left behind as a second-world environment. In fact, many think that this is the case today. It probably is, but it will get much worse – and that is sad because the US has all of the tools at its disposal to advance to a new level of economic greatness. Most countries can only imagine the tools that this US has. But advancement won’t happen if the country’s policy is built around whining and blaming others.
A colleague of mine and I spent most of this week in Silicon Valley working on what is literally a globally-important automotive technology project with a range of some of the most impressive and creative minds and companies on the planet. Companies from over the world are there, seeking to be part of an unbelievable base of creative energy, entrepreneurship and capital availability. The future of human mobility is actually being redefined there. But somehow, this unbelievable capacity to research and create is completely disconnected from economic strategy elsewhere in the country. In fact, even in the State of California, there is frightfully little economic strategy – and yes, it itself is a places of haves and have nots. The US objective has to be how it can master not only the technology but also the systems integration and production of these kinds of products.
Advancing an economy and its people needs leadership. The US is well under-served in that regard right now in Washington, but also in most state capitols.
See this article from Roll Call this week about the status of NAFTA.
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As NAFTA Talks Resume, New Business Poll Backs Staying in Pact
President meets with key lawmaker over future of pact
House Ways and Means Chairman Kevin Brady, whose committee oversees trade matters, will meet with President Donald Trump at the White House to discuss trade matters. (Tom Williams/CQ Roll Call)
Feb 26, 2018
Amid the latest round of NAFTA talks and a White House meeting with a key lawmaker on trade, a poll released by a business group Monday found that a majority of its members believe that the U.S. economy would be adversely affected if President Donald Trump follows through on his threats to withdraw from the trade agreement. The policy poll conducted by the National Association for Business Economics comes a day after the United States, Canada and Mexico met in Mexico City for the seventh round of talks to revamp the North American Free Trade Agreement. The session ends March 5. “Panelists overwhelmingly (61%) feel that U.S. withdrawal from NAFTA would have a consequential and unfavorable impact on the U.S. economy,″ said the business group, which based its conclusions on 211 members who
responded to the query. Another 30 percent said withdrawal from NAFTA would have consequential effects on the economy. Just 1 percent viewed leaving NAFTA favorably and 3 percent thought such an action would be inconsequential. The survey is just the latest indication that NAFTA continues to enjoy the support of businesses despite Trump’s threats to withdraw if negotiations prove unfavorable to the United States.
The pact generates more than $1 trillion a year in trade among the three countries and key industries such as autos have integrated supply chains that move components and finished products across the borders of the three countries.
Trump and House Ways and Means Chairman Kevin Brady R–Texas, are expected to meet Monday afternoon to discuss a number of trade-related issues, including NAFTA, according to a White House official. “Rep. Brady is a key ally in on-going and upcoming trade discussions and negotiations and the Administration will continue to work closely with Chairman Brady on trade initiatives,” the official said. In prior NAFTA talks, negotiators reached consensus on non-contentious areas such as the anticorruption chapter in January. However, they are still grappling with thornier issues such as significantly increasing the percentage of NAFTA-made components from 62.5 percent to 85 percent in vehicles for them to receive duty-free treatment. The United States also wants to create a mandate that auto components contain at least 50 percent of U.S.-made materials. The three countries also have not reached agreement on a U.S. proposal that could end the investor-state dispute resolution process, which the Trump administration says undermines national sovereignty because companies can bypass the U.S. court system to challenge laws and policies before arbitration panels of private attorneys.
Another issue looming for top negotiators is how long to continue renegotiating. Trump’s original goal was to strike a deal by late 2017 but the United States agreed to extend talks until March 2018 and wrap up updating the pact before Mexico’s July presidential elections. Mexico’s President Enrique Pena Nieto can’t run for reelection, but his party hopes to hold the office against a challenge by front-runner Andres Manuel Lopez Obrador, who has sent mixed messages about how he would address NAFTA. The midterm congressional elections in November could add another complication.
Trump grumbled during earlier rounds that Canada and Mexico were dragging their feet in negotiations and periodically said he was considering giving the two countries the required six months notice required under NAFTA for withdrawal. His threats prompted Senate Finance Republicans to meet with him and House Ways and Means Republicans and Democrats to meet with U.S. Trade Representative Robert Lighthizer. In the meetings, the lawmakers discussed the financial impact a withdrawal would have on businesses and jobs in their states and across the nation. At a Feb. 13 press briefing with the president and members of Congress, Lighthizer said he was more upbeat about making significant progress in the latest NAFTA round. “There was a lot of anxiety at one point as to whether or not we’d be in a position where we would have to withdraw in order to get a good agreement,” Lighthizer said.
NAFTA “has served some people very well, but other people and overall it has not done a good job. I think we’re making real headway,” Lighthizer added. The National Association for Business Economics, which is holding its annual policy conference through Tuesday, also used the survey to get members’ assessments of the tax overhaul law, the Federal Reserve Bank’s monetary policy, whether economic policy should address climate change and economic inequality, potential progress on a major infrastructure package and other issues. .
