NAFTA AND AMERICAN MANUFACTURING

"[M]ore than 2 million manufacturing workers at over 43 thousand manufacturing firms across America currently depend directly on exports to Canada and Mexico for their jobs ... ."

Linda Dempsey

April 26, 2017

[A]ccording to the Department of Agriculture's Economic Research Service, 341 rural counties were manufacturing dependent, accounting for nearly 18 percent of rural counties, second only after farming.

The topic of the Forum was "The Future of the North American Free Trade Agreement." And so, after setting the stage with some general comments on American manufacturing and the manufacturing-agriculture connection, Ms. Dempsey turned to NAFTA. Today's featured quote is one of the points she made on NAFTA. Here are three more.

What we've all heard from the new administration is that a NAFTA renegotiation will be the first major trade policy endeavor. That is fitting given that NAFTA was the first of the modern free trade agreements negotiated globally and put into place 23 years ago.

It was completed before we could hold access to the internet in our hands or on our wrists. Before major technological and energy innovations helped change what and how we manufacture here, and around the world.

On the Partners' Suppliers:

Both countries purchase more from the US than anywhere else in the world--by far. Indeed, 84 percent of Mexico's imports and 73 percent of Canada's imports of manufactured goods come from the United States.

And on the Relative Barriers:

It is worth noting that NAFTA gives the United States much more preferential access to Mexico than it gives Mexico to the United States.

In the absence of NAFTA, manufacturers in the United States would face an average industrial tariff in Mexico (5.7 percent), which is nearly twice as large as the tariff that manufacturers in Mexico would face on their exports to the United States (3.2 percent).

Today, there are more than 350,000 manufacturing jobs UNFILLED across the nation. Within 10 years, manufacturing is forecast to have more than 2 million positions open and unfilled. And these are jobs of all types from electrical engineers to electricians, from research scientists to machinists and welders.

In talking about jobs, Ms. Dempsey made the important point that "It's not just about 'bringing jobs back' ... It's about connecting more people with jobs needed now and in the future."

My biggest priority is getting NAFTA on the right foot, because a lot of the anxiety that people in America have about what will happen under the new trade regime will go away if we can bring NAFTA to a satisfactory conclusion, without a trade war, without recriminations, without reprisals. So that's my near term objective.

That was at the end of the interview, earlier on he commented on what he expects the processes will be. This is that the Administration will pursue "two bilaterals that match and are symmetrical," in other words, separate agreements with Canada and with Mexico. He also took note of some of the concerns, particularly the concerns being expressed by America's farmers.  He put it this way:

[N]aturally, the people who are beneficiaries of [NAFTA], like the agriculture people, are worried that maybe somehow we'll lose ground or maybe somehow there will be retaliation against them. Fear of the unknown is the worst fear, and that is what has people a little bit concerned.

As for us, we cannot shake the view that this renegotiation upon which we are embarked is a very risky business. It may now be unavoidable, but it is very risky. Alan Wolff of Dentons LLP highlighted the risk in his recent Fortune article, which concluded with this comment on the Trump Administration and the WTO. "A threat to terminate WTO agreements," he wrote, "takes on 163 other sovereign countries. There is a more than a small risk that they would unite in not backing down."