The U.S. dealmaker who negotiated the North American Free Trade Agreement said Donald Trump shouldn’t destroy the pact, but expand it to embrace more industries.
Trump can score a victory for America by opening up opportunities in the energy industry, which was largely kept out of NAFTA talks in the 1990s, said Carla Hills, who led negotiations for then-President George H. W. Bush. The Mexican constitution, which at that time limited oil exploration and production to state-owned Petroleos Mexicanos, was changed in 2013 to attract U.S. firms like Exxon Mobil Corp. and Chevron Corp.
Digital commerce is another area where Trump probably can make a deal with Mexican and Canadian negotiators, Hills said. Online retailers like Amazon Inc. weren’t contemplated when NAFTA was negotiated, let alone companies like Google and Uber.
"There are a lot of things that would enhance and build upon the NAFTA," said Hills, who served in Republican administrations but backed Hillary Clinton’s presidential campaign in 2016. "We have to be balanced -- I give you something, you give me something. North America if they did the right thing could be the most competitive region in the entire world."
Whether Trump will follow Hills’s advice is an open question. In recent weeks, he threatened to slap U.S. automakers like Ford Motor Co. and General Motors Co. with 35% import tariffs on vehicles made in Mexico. That’s a hardening from his tone in August, when he met with Mexican President Enrique Pena Nieto and said NAFTA needed to be modernized so the U.S. and Mexico can work "beautifully together."
Renegotiating NAFTA will be a priority for Trump’s administration, Wilbur Ross, his nominee for commerce secretary, said during a confirmation hearing on January 18, signaling new talks with Canada and Mexico will begin swiftly after the inauguration.
Canada and Mexico are the top two export markets for U.S. goods, with sales of about $500 billion annually. Hills said that NAFTA is often misunderstood, and that she doubts many Americans know that the integration of supply chains across the U.S.-Mexico border means that every dollar of Mexican exports has about 40 cents of American content.
"I think we’ve been horribly deficient in educating Americans about the benefits of NAFTA," said Hills, 83, who runs a firm that she founded after leaving government in 1993 to help U.S. companies expand trade and investment opportunities overseas.
Mexico realizes NAFTA is outdated and wants to start talks to update it as soon as possible, Economy Minister Ildefonso Guajardo said in a TV interview with Televisa last week. Canada’s Globe and Mail newspaper reported on January 18 that Trump plans to pursue changes to independent dispute tribunals and rules-of-origin regulations, and that formal notification letters will be sent to Canada and Mexico within days of the inauguration.
Hills expects groups like the U.S. Chamber of Commerce and The Business Roundtable to help explain the benefits of NAFTA to the Trump administration, Congress and the American people.
NAFTA makes the U.S. $127 billion richer each year, or about $400 per person, Gary Hufbauer, an analyst at the Peterson Institute for International Economics, estimated in a 2014 report. That’s due to the boost to American exporters, export-supported jobs and benefits to U.S. consumers from buying cheaper imported products.
While some jobs are lost to trade, the answer is to retrain those workers with support from the government and companies -- not to trade less or end free-agreements, Hills said.
"I hope everybody gets out and tries to say why this is of value," Hills said. "It’s kind of like you have an antique, and people don’t realize how valuable it is. That isn’t to say it can’t be improved."
By Eric Martin