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Gutting NAFTA will gut Michigan

Oct 10, 2017

My guess is that virtually everyone who even half-heartedly follows the news knows that a Republican senator from Tennessee called the White House an “adult day care center” after the President called him a coward, et cetera, et cetera.

But I’d guess not one person in a hundred knows that marathon talks are underway in an attempt to renegotiate NAFTA, the North American Free Trade Agreement. There are supposed to be seven rounds of these meetings before Christmas, shuttling between Mexico City, Ottawa, and Washington, where they are meeting this week.

President Trump has been insisting that NAFTA be reworked on terms much more favorable to the United States. His administration wants tougher “rules of origin” that would require vehicles to have a higher percentage of U.S. made parts.

Few in any of the three member nations doubt that NAFTA needs tweaking. When these talks started six weeks ago, Chrystia Freeland, Canada’s foreign affairs minister said, “The agreement is 23 years old. The global, North American and Canadian economies have been transformed in that time by the technology revolution,” and that of course changes are needed.

But in general, Canada and Mexico merely want to fix NAFTA. President Trump campaigned on a promise to repeal it, which has evolved into demands for drastic revision.

There is a chance the American side may make demands so outrageous they actually destroy the treaty. Last week, Douglas George, a skilled trade negotiator who is now Canada’s consul general in Detroit, told me this could have huge and potentially disastrous consequences for Michigan.

“Of all the states that could be affected by NAFTA, Michigan is at the top of the list,” he said, because we do more trade with Canada, primarily automotive, than any other state.

Daniel Ujczo is an international trade and customs lawyer in Columbus, Ohio, who specializes in U.S.-Canada matters. He knows NAFTA isn’t all that popular, especially among those who think it has cost automotive jobs in Michigan. “Usually when I hear NAFTA in Detroit, it is preceded by another adjective that starts with F,” he told me.

Ujczo isn’t thrilled with some Canadian positions on NAFTA. But he has been alarmed by what he calls the “aggressive rhetoric” of the Trump administration, and their negative comments at the talks’ outset.

He cautioned that things are more complex in the automotive sector than many may understand. “The automotive industry … wants negotiators to understand that billions of dollars have been spent to develop a highly efficient North American manufacturing supply chain and is fighting to block any changes to the percentage of parts made in the originating country to qualify for tariff free-trade,” he posted on his site.

But changes in those percentages is what the administration is demanding. Commerce Secretary Wilbur Ross complained that NAFTA has led to a trade deficit that “has gutted American manufacturing, killed jobs, and sapped our wealth.”

That rhetoric has alarmed the U.S. Chamber of Commerce, which called the administration’s “rules of origin” rhetoric “highly dangerous.” Now, of course, many trade talks start out with hostile speeches and end with grins and handshakes.

But if we were to withdraw from NAFTA, there would clearly be some big financial losers, and everything I know indicates Michigan would be first to feel the pain.

Jack Lessenberry is Michigan Radio’s Senior Political Analyst. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.