Panelists at the American Boating Congress (ABC) in Washington, DC, spoke about the uncertainties ahead for the North American Free Trade Agreement (NAFTA) as negotiations continue next week. Audience members at the update also voiced concerns about how the renegotiated NAFTA may impact their businesses.
“We find ourselves at a moment when the economy is really ticking along,” said John Murphy, senior vice president of international policy for the U.S. Chamber of Commerce. “But our trade policies are causing quite a lot of uncertainty, both among our manufacturers and with partners abroad. The way this administration thinks about trade is different from every other post-war president. Trade is viewed as a zero-sum game. The only way to win is by someone else losing.”
Murphy said that NAFTA negotiations are “coming to a head” as negotiators from the U.S., Canada and Mexico meet in Washington. The Trump administration is facing pressure to wrap up the negotiations by the end of next week for the U.S. Congress to hold a vote before it convenes.
Canada and Mexico remain particularly concerned about U.S. proposals for auto manufacturers. One proposal is to only give cars tariff-free treatments if 40 percent are built in a high-wage country like the United States or Canada. “On automobiles, the most difficult part will be getting the Mexicans and Canadians to agree to a labor component equaling $16 per hour for 40% of the car,” said Kellie Meiman Hock, manager partner of McLarty Associates. “Bringing labor costs into the equation is highly unusual. Mexicans are saying that you can’t mandate these wages and the Detroit automakers are saying they can’t compete with those stipulations. I’m rather pessimistic they can come to an agreement on autos.”
Meiman Hock said that other provisions like a five-year sunset clause that forces another NAFTA renegotiation will not give U.S. manufacturers enough of an investment horizon to decide whether to manufacture in Mexico or not. If the negotiations fall apart, both Canada and Mexico would be subject to prejudicial tariffs. “If they cannot come to an agreement, President Trump could withdraw from NAFTA and that might then force the parties to renegotiate,” she said.
For U.S. boat and equipment manufacturers with operations in Mexico, the negotiations are proving to be a nail-biter. Matt Peat of Transhield, an Elkhart, Indiana manufacturer of custom covers for the boating and other industries, said that 15 percent of its products are made in the U.S., and the remainder in Mexico. “We have a local unemployment rate of 1.8 percent,” he said. “There are just not enough people in our area to do the manufacturing we need. That shortage of labor is now epidemic. It’d be a tailspin for us if NAFTA falls apart.”
Peat told Trade Only Today that when the company started in 1994, it had six employees in Elkhart and four in Mexico. “Now we have 60 people in the US and 300 in Mexico,” he said. “We’re building our future down there.” Transhield remains “very concerned,” says Peat, about what is happening with NAFTA, especially the five-year sunset proposal. “It doesn’t give us enough clarity to develop a long-term outlook,” he said.
The panelists said the current negotiations should wrap up by May 17.