President Donald Trump seeks to rejigger an agreement that most industries believe needs modernization, but not wholesale changes. | Ralph Freso/Getty Images
President Donald Trump has threatened to withdraw entirely from the North American Free Trade Agreement in recent days and repeatedly accused Mexico and Canada of being difficult in renegotiations.
But as the second round of NAFTA talks kicks off today in Mexico City, several U.S. industries are saying some of Trump’s own demands could be bad for American businesses.
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"It already costs many manufacturers millions of dollars to comply with the rules that we already have," said Linda Dempsey, vice president of international economic affairs policy at the National Association of Manufacturers. "The notion that we are going to improve American competitiveness and increase good-paying jobs by increasing complexity, increasing red tape and making it more expensive to manufacture in the United States is really something of significant concern."
The criticism underscores Trump's quandary as he seeks to rejigger an agreement that most industries believe needs modernization, but not wholesale changes: If he departs too far from the standard U.S. model for trade pacts, he risks not being able to win congressional approval because the organizations that usually round up votes will either sit on their hands or lobby against the pact.
Mexico, the U.S. and Canada have yet to present everything on their wish lists, and no major decisions are expected during the Sept. 1-5 negotiations in Mexico City, although three partner countries may make progress on some non-controversial areas of the agreement. U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland are expected to attend but not until the end of the round.
Meanwhile, as talks continue, the White House is starting to contend with discontent at home.
In particular, automakers and other manufacturers of complex goods are pushing back on the administration’s desire to establish a specific NAFTA requirement that a portion of each product be made in the United States.
Such a rule would be a significant departure from the current requirement that requires only a portion of each product be made within the three countries to qualify for trade benefits.
Both U.S. and foreign-brand automakers are opposed to the change, which would disrupt North American supply chains built up over that last two decades to comply with the current rules.
Business leaders also have signaled their displeasure with the Trump administration's waffling over whether a longtime protection for U.S., Canadian and Mexican investors would be included in the revised pact.
NAFTA, like many trade deals that followed it, allows a foreign investor to a sue host country government over an action that they believe has unfairly damaged their investment. Many Democrats believe that the provision has a "chilling effect" on government regulations and want it expunged from the new deal, but defenders say it reassures companies they will have some way of protecting their investment against discriminatory government actions or even expropriation.
In unusually blunt language, the heads of the National Association of Manufacturers, the Business Roundtable and the U.S. Chamber of Commerce warned that any attempt to eliminate or weaken the provision "will serve to undermine business community support for NAFTA modernization negotiations."
The criticism underscores Trump's quandary as he seeks to rejigger an agreement that most industries believe needs modernization, but not wholesale changes: If he departs too far from the standard U.S. model for trade pacts, he risks not being able to win congressional approval because the organizations that usually round up votes will either sit on their hands or lobby against the pact.
Some special sectors have already done their own back-channel lobbying. Growers in Southeastern states like Florida are looking to write in a provision that would make it easier for them to secure anti-dumping duties on fruit and vegetable imports from Mexico. That proposal has yet to be formally presented but could be introduced during a second round of talks this weekend.
The suggestion has already drawn a furious backlash, including from many heavy-hitters in the agriculture trade sector including the American Soybean Association, the National Pork Producers Council and the U.S. Rice Federation.
In a letter to top administration officials, those groups joined with two dozen agricultural organizations to argue that such a provision would set a dangerous precedent that would "be seized upon by trading partners across the globe" to protect their own interests with "a tit-for-tat cycle that could broadly limit agricultural trade."
The tough war of words from Trump is also starting to annoy the U.S.' largest trading partners. Mexican Foreign Minister Luis Videgaray Caso told reporters on Wednesday that Mexico would walk away from the negotiating table if Trump moves forward with threats to terminate the deal.
"It is a renegotiation that we take very seriously," Videgaray told reporters in Spanish after a meeting with Secretary of State Rex Tillerson. "It is a constructive renegotiation, and we believe that it would not be the correct route or a viable route to terminate the treaty."
Legal experts differ over whether Trump could unilaterally withdraw from NAFTA or would need congressional approval. But any move to pull the plug on pact would antagonize farmers and businesses that depend on trade with Canada and Mexico and put pressure on Congress to intervene.
Trump's talk of termination also worries powerful Republican lawmakers like Senate Finance Chairman Orrin Hatch, who will play a key role in congressional approval of any trade deal.
"Withdrawal from NAFTA is not an effort Chairman Hatch supports," a committee spokeswoman said. "He will continue to work with the administration to modernize the near two decade trilateral pact to help advance the nation’s trade goals and grow the economy here at home."
Megan Cassella and Catherine Boudreau contributed to this report.
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