Industry reaction to U.S.-Mexico trade deal generally positive

WASHINGTON — President Trump's announcement of a preliminary trade deal with Mexico is for the most part earning praise from the tire industry and other auto industry sectors.

The Aug. 27 announcement is prompting some to wonder whether the third wheel in the North American Free Trade Agreement (NAFTA) — Canada — will play any part in the agreement, called the United States-Mexico Trade Agreement.

Calling it "one of the biggest trade deals ever," Mr. Trump said the new agreement would replace NAFTA, which he has disparaged since starting his 2016 presidential campaign in 2015.

"NAFTA has a lot of bad connotations, because it was a ripoff," Mr. Trump said during the Aug. 27 press conference.

He was noncommittal as to whether Canada would be a part of the new pact, or whether there would be a separate agreement with Canada. However, he did say he would speak to Canadian Prime Minister Justin Trudeau about trade "very soon."

The press conference left most commentators with many questions, although they were encouraged by the president's plan to have some form of North American trade agreement.

"While we appreciate the progress made by the Trump administration and the Mexican government, we encourage a renewed focus on a three-party agreement that includes Canada," the Motor & Equipment Manufacturers Association said in a statement.

MEMA also expressed concern over a proposed cap of Mexican motor vehicle parts into the U.S.

"This may serve to decrease American manufacturing jobs and exports and put U.S. businesses at a global disadvantage — all while increasing costs to consumers," it said.

Although Mr. Trump did not give a detailed description of the agreement during the press conference, several details were released afterward. Among other things, the proposed deal:

• Would be revisited by the U.S. and Mexico after six years, with a possible 16-year extension at that time.
• Would require 75-percent U.S. or Mexican content for every vehicle assembled in both countries, up from the current North American minimum content of 62.5 percent.
• Would stipulate that 40 to 45 percent of vehicle content must be made by workers making $16 or more per hour.

A White House statement on the agreement also said it would have "strong and effective intellectual property protections," "the strongest disciplines on digital trade of any international agreement," and "the most robust transparency obligations of any United States trade agreement."

The White House statement also expressed the Trump administration's disgust with NAFTA, describing it as "outdated and unbalanced."

Thanks to the 24-year-old agreement, it said, the U.S. trade deficit ballooned to nearly $800 billion in 2017 from $115 billion in 1993. The trade deficit with Mexico alone grew to $70 billion from $1.6 billion during the same time period, the White House claimed.

Ironically, the U.S. holds a trade surplus with Mexico in tires, exporting $1.2 billion worth of tires to Mexico last year and importing $839.6 million, resulting in a trade surplus of $360.2 million, according to U.S. Department of Commerce figures.

During the press conference, the president was also critical of Canada.

"Canada has placed tariffs of about 300 percent on our dairy products, and there is no way we will put up with that," he said. "The easiest thing would be to put tariffs on their cars coming in."

Technically speaking, Canada has in place a 270-percent tariff on some U.S. dairy products, but only on imports above a proscribed limit, according to various fact-checking news services. In reality, the U.S. holds a comfortable trade surplus with Canada in dairy products.

Among other commenters, the U.S. Tire Manufacturers Association (USTMA) expressed hope for a U.S.-Mexico agreement.

"USTMA is very interested in trade policies that support free and fair trade and promote the competitiveness of U.S. tire manufacturing," the association said.

"We will be closely following developments in these negotiations with Mexico, their implications for the broader North American market, including Canada, and the congressional consideration that will follow," it said.

Roy Littlefield IV, director of government relations for the Tire Industry Association (TIA), said TIA officials would talk to tire manufacturers before taking an official position on the agreement.

Mr. Littlefield said TIA agreed with the statement from the American Petroleum Institute (API), which said it was "encouraged" by the preliminary agreement.

"America's natural gas and oil industry depends on trade to continue to grow U.S. jobs and our economy, and deliver our consumers," the API said.

The natural gas and oil industry supports 10.3 million jobs in the U.S. and represents nearly 8 percent of the U.S. economy, it said.

The National Association of Manufacturers called the preliminary agreement "a step in the right direction."

"It is a positive signal that some form of NAFTA will survive," the NAM said. "Our hope — for the sake of our workers and a successful manufacturing industry here in America — is that the final agreement will include all three of the original signatories: the United States, Mexico and Canada."

Mexican President Enrique Pena Nieto joined Trump via audio at the press conference. Mr. Trump also thanked incoming Mexican President Andres Lopez Obrador for his participation in negotiating the agreement.

Trump said he expected the trade pact to be completed by November.