Bridging the divide

U.S. Chamber chief extols virtues of bilateral partnership and predicts a 2018 revised NAFTA framework    U.S. Chamber of Commerce President Thomas J. Donahue told business leaders in Mexico City Monday that he has advised the Trump administration about the importance of preserving and strengthening the U.S.-Mexico trade relationship, and laid out the organization’s guiding principles for renegotiating the North American Free Trade Agreement.
   “We are open to change and improvement, but we must begin with a fundamental commitment to a thriving and interdependent U.S.-Mexico partnership,” he said in a speech to the American Chamber of Commerce in Mexico, according to a copy of his prepared remarks.
   The White House has made clear it intends to move ahead with negotiations to upgrade the 23-year-old trade pact with Mexico and Canada, after first consulting with Congress on the way forward. During the presidential campaign President Donald Trump called NAFTA the worst trade deal ever and has fulminated about withdrawing from it if better terms can’t be negotiated.
   He also threatened to impose high tariffs on Mexican imports to stop the alleged drain of U.S. manufacturing jobs south of the border. However, the administration in recent weeks has signaled a softer approach, more in line with the consensus view in the business community, focused on upgrading the agreement to address changing economic, business and technological conditions during the past two decades.
   Donahue stressed that NAFTA has enabled joint manufacturing of products and the integration of the Mexican, Canadian and U.S. economies, making North America the most competitive economic region in the world.
   Mexico and Canada are the top two export markets for U.S. goods and support 14 million American jobs, so the overriding goal for NAFTA should be to “amend it, not end it,” the leader of the largest U.S. business group said. Using the amendment process, NAFTA negotiations can proceed quickly “while preserving the many parts of the agreement that are working well.”
   He also cautioned governments that “reverting to the high tariffs and other trade barriers that were in place before NAFTA could put at risk millions of jobs on both sides of the border.”
   Another key goal for the United States, Donahue said, should be to renegotiate NAFTA on a trilateral basis, rather than split up the agreement into separate bilateral trade deals – as some in the White House have generally suggested for multilateral agreements.

Donahue urged the three governments to move quickly because uncertainty about future of open trade would suppress economic growth and allow the rise of political opposition that could make it more difficult for the sides to compromise.

   “Such a transition could interrupt commerce and cost jobs,” he said. “In addition, introducing divergent rules – one set for trade with Canada and another for trade with Mexico – would only raise costs. That could destroy jobs and hobble our industries. That’s why it’s critical to maintain a single agreement.”
   Finally, Donahue urged the three governments to move quickly because uncertainty about future of open trade would suppress economic growth and allow the rise of political opposition that could make it more difficult for the sides to compromise.
   And there is more the governments can do outside of NAFTA to strengthen competitiveness in North America, the Chamber president said.
   Reducing bureaucratic and security friction at ports of entry, a longstanding goal of businesses, is important for reducing the cost of cross-border cargo shipments and travel, Donahue said.
   “Any chokepoints – whether they’re excessive customs mandates, ineffective security measures, or burdensome or redundant regulations—can have the same detrimental impact as tariffs,” he said.
   The United States and Mexico should go beyond the World Trade Organization’s recently ratified Trade Facilitation Agreement, he added, and set a “new gold standard for trade facilitation” by expanding cargo pre-inspection stations away from the congested border and joint inspection facilities, as well as deploying information technology for capturing and sharing information between customs administrations.
   Regulatory coordination to create efficiencies and remove unintentional trade barriers, energy cooperation, and enhanced access to capital and financial services will also strengthen the economies of each nation, Donahue added.
   “Shared economic growth is the key to our bilateral future,” Donahue said. “Poor economic conditions only breed discontent and the desire to lay blame, often where it doesn’t belong.”
   In an interview with Reuters, Donahue predicted that the three governments would finalize a framework deal by mid-2018.