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A rush to negotiate NAFTA

Apr 26, 2018

One of the many promises Donald Trump made when running for President was to pull the country out of NAFTA, the North American Free Trade Agreement between Canada, Mexico and the United States. Once in office, Trump decided to try to first renegotiate it instead.

That was months ago, and we’ve heard little about NAFTA since, apart from occasional stories that the negotiators are shuttling between the three capitals. News about it has been largely blotted out by the Russia investigation and a threatened trade war with China.

But the NAFTA negotiations have gone on, and yesterday, I went to see Douglas George, Canada’s consul general in Detroit, himself a highly experienced trade negotiator. The consulate in Detroit is almost a second embassy, because of its importance as a trade and border crossing.

And indeed, George was Canada’s ambassador to Kuwait before being posted to Detroit four years ago. He told me that NAFTA negotiations are now in an extremely intense phase, and that the goal is to announce an “agreement in principle” by April 30.

An agreement in principle would still mean months more of work to be done and details to be sorted out. But getting something established by the end of this month is important to all three countries.

Mexico has presidential and other national elections July 1st, and the U.S. wants to have NAFTA settled before our congressional elections this fall. Diplomats are cautious by nature and training, and George wouldn’t hazard a guess as to whether the April 30 deadline would be met.

But he does know that NAFTA is critically important. The agreement has never been popular in this part of the world, largely because of the conviction on the part of many that it has caused many auto jobs to be lost to Mexico. There is some truth in that.

Daniel Ujczo, a lawyer in Columbus who specializes in international trade, told me he seldom hears NAFTA mentioned in Michigan “without another word starting with F” in front of it. But while manufacturing jobs have been lost in the 24 years since NAFTA was signed, economists say most would have disappeared anyway, because of automation and global competition.

And a recent analysis by the Council of Foreign Relations concluded that NAFTA had a “modest but positive effect” on the entire U.S. economy.

NAFTA likely wouldn’t have been renegotiated had Trump not been elected, but some parts of it badly needed to be. The treaty talks about rules for cassette tape decks in cars, and has absolutely nothing about the digital economy. Negotiators divided into separate teams to consider 30 different parts of the treaty, and agreement has been reached on half a dozen or more.

But some very difficult issues are still to be resolved, including the Trump administration’s demand to increase the percentage of auto parts that originate in America.

Washington also wants the agreement to have to be renewed every five years; Mexico and Canada think it would make far more sense just to agree to “review” the agreement instead.

“Business craves stability,” the consul general told me. What everyone who understands trade knows, is that just pulling out of NAFTA would be disastrous for the economies of all three nations – Michigan more than most places. The next few days may be nail-biters, indeed.

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.