Hearings and Complexity Regarding NAFTA

This past week, at the request of the Office of the United States Trade Representative, the first hearings on NAFTA were held in Washington, D.C, at which all types of groups with an interest in the treaty came together. This exercise provides catharsis to many groups, since they have a limited capacity for lobbying. It also gives us an idea of the conflicting interests within the same industry and the complexity represented by renegotiation, which leads me to caution that it will be a very complex renegotiation that probably will not be reconcilable with the pressures of election seasons in the United States and Mexico. Here are some examples of the reactions that I was able to gather from the marathon sessions, which give some idea of the diversity of positions on key issues.

Energy

The same day on which Donald Trump announced that he will construct an oil pipeline to Mexico, Paul Cicio, president of the Industrial Energy Consumers of America, declared his opposition to the exportation of natural gas to Mexico or Canada because it increases prices for the American industrial consumer, and in addition, because these countries are rivals in manufacturing. In his opinion, with cheap energy, this situation will become worse. Meanwhile, Kyle Pitsor, vice president of the National Electrical Manufacturers Association, spoke in favor of NAFTA, saying only that attention should be paid to the issue of sharing standards for the manufacture of equipment among the three countries.

Manufacturing

Michael Stumo, CEO of the Coalition for a Prosperous America, said that the United States must rethink whether NAFTA is in the nation’s best interest, and argues that low salaries in Mexico affect the automotive, electronics and machinery manufacturing sectors. In addition, he complained about the valuation of the euro, the yen and the renminbi, valuation that generates artificial advantages for countries that he believes are rivals. As for the automotive sector, the unions’ stance also rests on the wage differential with Mexico. Josh Nassar, legislative director of the International Union of United Automobile, Aerospace and Agricultural Implement Workers of America, also pointed to low wages in Mexico and the lack of independent unions. A constant complaint of those who oppose the revision of NAFTA was the issue of wages.

In contrast, Paul D. Ryan, vice president of Trade and Competitiveness at the Association of Global Automakers, was strongly in favor of the treaty. The Association of Global Automakers was of the opinion that NAFTA should not be converted into two bilateral agreements, and that the rules of origin for the manufacture of automobiles, which is the highest, at 62 percent, should be maintained.* As for the interdependence of the chains of value, Jennifer Thomas, vice president of government affairs for the Alliance of Automobile Manufacturers Association, quoted a Boston Consulting Group study projecting that the imposition of tariffs on Mexico could result in an additional cost of $20 billion for the market in automobiles.

Agribusiness and Food

Opinions on the subject of agribusinesses, which have been a pillar of Mexican exports, are equally contradictory. Michael Stuart, president of the Florida Fruit and Vegetable Association, noted that Mexican producers have gained market share at the expense of the United States, thanks to subsidies from the Mexican government. In addition, he also mentioned that Mexican workers earn 10 percent of the wages of American workers. In that same vein, Reggie Brown, vice president of the Tomato Exchange, says that several Florida tomato growers have gone bankrupt because of Mexican producers. In contrast, Richard Owen, vice president of Global Business Development, referred to exports from the United States to Mexico that have grown more than 400 percent since NAFTA came into effect.

As can be seen, this will be an issue where there are many voices that carry weight in Congress.

*Editor’s note: The rule of origin percentage is the percent of a product that must be manufactured in the country where it is sold.