Business groups, organized by the U.S. Chamber of Commerce, are combing Capitol Hill to warn of the economic harm that could result from changes proposed by the Trump administration to the North American Free Trade Agreement (NAFTA). They call many of the provisions “dangerous.”
The groups, which range from automakers to retailers to agricultural interests, say the negative effects of NAFTA changes could offset any economic benefits corporations might receive through tax reform. “It doesn’t matter what your tax rate is if you’re not competitive,” Bill Lane, chairman of the Trade Leadership Coalition, told The New York Times. “NAFTA makes North American manufacturing competitive.”
US trade officials are following up on President Trump’s persistent condemnation of NAFTA, including a threat to pull out of the trade deal. Negotiators from the United States, Mexico and Canada have begun working on revisions, raising a concern that Trump is following through on his campaign promise.
Lane said business groups have largely remained silent about NAFTA because they assumed Trump’s threat to withdraw was “bluster.” That view has changed as business groups review the proposals Trump’s team is pushing. In particular, they dislike the idea of putting a 5-year sunset on the trade pact, which would require a new round of negotiations and remove the relative certainty businesses now have with NAFTA.
Business groups also dislike Trump proposals to require higher domestic content standards for imported goods sold in the United States, a move intended to increase US manufacturing jobs, but which could upend tariff-free North American supply chains. They point to the analysis of economists, such as Mark Zandi of Moody’s Analytics, who say Trump NAFTA proposals would have negligible impact on US job levels and potentially devastating impacts on the overall economy. Recasting NAFTA with Trump changes, Zandi’s research indicates, could stunt the US economy at the same level of a $150 billion tax increase.
US Trade Representative Robert Lighthizer concedes corporate interests would take a hit if Trump gets his way with NAFTA, but he minimized the impact. In comments to The New York Times, Lighthizer said, “I think it’s possible to take a little bit of sugar away and have them [businesses] say, ‘Yeah, we’re still doing pretty well.’”
Business groups swarming Capitol Hill disagree. They say imposing cross-border restrictions and introducing uncertainty into trade policy could push manufacturing out of North America and wind up increasing prices paid by consumers. The negative impacts could be disproportionately high for states such as Oregon and Washington with economies that rely heavily on foreign trade.
U.S. Chamber officials report their lobby barrage has received a sympathetic ear on Capitol Hill, especially among Republicans. However, few lawmakers offered much hope that they can influence Trump on this issue. It probably wasn’t coincidental that Arizona Senator Jeff Flake, in his speech last week announcing his decision not to seek re-election, lamented GOP desertion of its long-time free trade positions.
Democratic lawmakers, especially from Rust Belt states that have suffered losses in traditional manufacturing sectors, are generally on board with Trump’s NAFTA agenda. “Any trade proposal that makes multinational corporations nervous is a good sign that it’s moving in the right direction for workers,” said Ohio Democratic Senator Sherrod Brown.
If talks falter to revise NAFTA, tariffs on exports to Mexico and Canada could be re-imposed. Many tariffs would be relatively low, but tariffs on US exports could be substantial – 25 percent on beef, 45 percent on turkeys and 75 percent for chicken, potatoes and high-fructose corn syrup.