The president has long threatened to ditch Nafta, but businesses largely discounted that as more bluster than reality. That has changed in recent weeks as negotiations with Canada and Mexico have become rockier, prompting industry leaders to organize and speak out. The next round of trade talks were postponed until mid-November to give the parties more time to resolve their differences.
Bill Lane of the Trade Leadership Coalition, which advocates preserving Nafta, said that until recently businesses had been largely silent on Nafta because they did not want to undercut other policy priorities, such as rewriting the tax code to secure a lower corporate tax rate.
“But they also realize it doesn’t matter what the tax rate is if you’re not competitive, and Nafta makes North American manufacturing competitive,” Mr. Lane said.
Businesses argue that the administration’s proposed changes to Nafta would reduce the certainty the agreement gives them over their future operating environment — a key consideration when investing long term. They say other proposals the United States seeks would increase their regulatory burden and costs. In an age where capital is mobile and businesses move around the world to increase their profits by a few percentage points, they argue that tighter restrictions could push manufacturing out of North America altogether.
The administration’s proposals for reforming Nafta including adding a clause that would terminate the agreement after five years unless the three countries voted to continue it, as well as setting a higher threshold for the proportion of automobiles and other goods that must be made in North America and the United States to benefit from favorable tariffs. Other provisions would make it easier for American businesses to levy punitive tariffs on Canadian and Mexican products, helping to wall off the United States’ market from what the administration describes as unfair competition.
In remarks to the press after the fourth round of Nafta talks, Robert Lighthizer, the United States trade representative in charge of the talks, acknowledged that the administration’s current strategy involves rolling back some of the advantages enjoyed by businesses under the pact, with the aim of redistributing those benefits elsewhere.
Mr. Lighthizer described his objective as getting “back to the days where there was a substantial majority of people in both parties that voted for these trade agreements.” But in order to get to that point, he said, “everybody has to give up a little bit of candy.”
“I think it’s possible to take a little bit of the sugar away, and have them say yeah, we’re still doing pretty well,” Mr. Lighthizer said of American businesses. “I understand that everybody that’s making money likes the rules where they are, that’s how it works. They can make a little less money or make more money in a different way, and we can get the trade deficit down.”
In the final analysis, Mr. Lighthizer said, he believed businesses would support the revised agreement.
So far, however, many businesses have expressed firm opposition to the proposals. Speaking in Mexico City earlier this month, Thomas J. Donohue, the president of the U.S. Chamber of Commerce, said that several proposals on the table could “doom the entire deal” and that the chamber would send an “army” of lobbyists to Capitol Hill to try to stop them.
Among the biggest opponents of the administration’s changes is the automobile industry. Under the administration’s proposed changes, 85 percent of the value of an automobile would need to be manufactured in North America to benefit from Nafta’s zero tariffs, up from 62.5 percent currently. The proposals would also require half of the value of cars manufactured in Canada or Mexico to be sourced from the United States.
According to Matt Blunt, the president of the American Automotive Policy Council, which represents Ford, General Motors and Fiat-Chrysler, these restrictions would probably encourage companies to ignore Nafta altogether, prompting them to make automobiles outside of the United States and pay a tariff to import them. That would essentially create a tax on the auto industry and harm its competitiveness, Mr. Blunt argued.
On Wednesday, the American auto manufacturers, parts suppliers and dealers announced they would form a coalition called Driving American Jobs to fight to preserve Nafta.
Hun Quach, a lobbyist for the retail industry who planned to visit the Senate on Tuesday, said retailers saw opportunities to update and improve Nafta in a number of areas. But her group, the Retail Industry Leaders Association, was concerned about tighter regulations for apparel and textiles, the introduction of more uncertainty into the deal through a sunset clause, and more protectionist trade cases by the United States that would block imports from Canada and Mexico, she said.
“Anyone doing business within the Nafta region would like to have certainty to know that their supply chains they build over decades will remain in place,” Ms. Quach said.