The biggest business organization in the U.S. is opposing key proposals by the Trump administration to overhaul the North American Free Trade Agreement, adding to growing tensions over the ongoing negotiations.
“We’re increasingly concerned about the state of play in negotiations,” John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce, told reporters Friday in Washington. U.S. businesses are unnerved by proposals by American negotiators to add a five-year termination clause to NAFTA, roll back the access of Canadian and Mexican firms to U.S. procurement contracts, and raise so-called rules of origin thresholds to “extreme” levels, Murphy said.
“We see these proposals as highly dangerous, and even one of them could be significant enough to move the business and agriculture community to oppose an agreement,” he said, adding that it’s possible talks with Canada and Mexico may collapse. The fourth round of negotiations takes place Oct. 11-15 near Washington.
The warning is the latest sign that negotiations are on the verge of derailing, less than two months after talks began. U.S. demands on issues such as procurement and textiles were opposed by Canadian and Mexican officials at the last round in Ottawa last month. The industry publication Inside Trade reported Thursday that the U.S. is proposing to raise the minimum for North American content in the auto sector to 85% from 62.5%, while adding a requirement for 50% U.S. content.
“The president’s objectives with the NAFTA renegotiation are to create great jobs for Americans and reduce an unconscionable trade deficit,” Emily Davis, a spokeswoman for the U.S. Trade Representative, said in an email. “The president has been clear that NAFTA has been a disaster for many Americans, and achieving his objectives requires substantial change.”
She said it’s natural that such changes “will be opposed by entrenched Washington lobbyists and trade associations.” “We have always understood that draining the swamp would be controversial in Washington,” said Davis, referring to President Donald Trump’s promise to “drain the swamp” of vested interests in the nation’s capital.
Former U.S. Trade Representative Robert Zoellick said Thursday there’s an increasing chance Trump will make good on his repeated threats to withdraw the U.S. from the 23-year-old accord because it will be difficult for his administration to deliver on promises to reduce the U.S. trade deficit, especially with Mexico. “There’s at least a 50% chance that Trump pulls out of this thing over the next year.”
The sides are aiming to secure a deal by year-end before the political calendar fills up in 2018 with Mexican presidential elections and U.S. Congressional mid-terms.
NAFTA watchers should take seriously the president’s threat to withdraw from the deal, said Dan DiMicco, a former steel executive who advised Trump during the election.
“The president is not making an idle threat,” he said. “If we can’t negotiate a deal to make trade more balanced, the only option is to walk away.”
The Chamber of Commerce should “get the hell out of” the way of U.S. negotiators trying to rebalance America’s trade relationships, he said. “Right now, it’s a win for the multinationals who moved production to Mexico, not American workers.”
An auto-industry official based in Canada suggested the tough U.S. proposal on rules of origin may be a negotiating tactic. “Sometimes someone will threaten a swarm of locusts, but that party will presumably know how vulnerable their own crops are before proceeding,” said Flavio Volpe, president of the Automotive Parts Manufacturers Association in Toronto.
By Andrew Mayeda