The Cable

Trump’s Trade Proposals Are So Obviously Unpopular They Give Mexicans Hope

Mexico and U.S. trade groups find common ground in defending NAFTA.

Mexican Secretary of Economy Ildefonso Guajardo Villarreal looks on during a press conference at the conclusion of the fourth round of negotiations for a new North American Free Trade Agreement (NAFTA) at the General Services Administration headquarters in Washington, DC, on October 17. (Andrew Caballero-Reynolds/AFP/Getty Images)
Mexican Secretary of Economy Ildefonso Guajardo Villarreal looks on during a press conference at the conclusion of the fourth round of negotiations for a new North American Free Trade Agreement (NAFTA) at the General Services Administration headquarters in Washington, DC, on October 17. (Andrew Caballero-Reynolds/AFP/Getty Images)

As the Trump administration triples down on impossible-to-meet red lines on trade talks, pessimism about the fate of the North American Free Trade Agreement abounds seemingly everywhere.

But some Mexican economic officials are quietly, quixotically optimistic about the prospects of the beleaguered pact. That’s because they view U.S. President Donald Trump’s maximalist positions and threats to withdraw from NAFTA as an isolated and untenable stance that bucks the desires of business, agriculture, trade groups, lawmakers, and a majority of the American public. It’s clear to Mexico and to U.S. industry groups, if not to Trump, that unwinding NAFTA would be a lose-lose situation for everyone involved.

Trump has “a vision of zero-sum trade, where I fear the only winners will be our overseas competitors,” said Karen Antebi, an economic counselor at the Mexican Embassy’s trade office in Washington, in early October.

Trump administration trade officials have set a few starting conditions for NAFTA talks that both Canada and Mexico called unacceptable out of the gate. And they’re not trying to sweeten the deal; Commerce Secretary Wilbur Ross acknowledged on Wednesday that the United States is “not in a position to offer anything in return” for its demands.

Take the proposal on rules of origin for cars. The U.S. trade representative has laid out a demand that automobiles and parts traded in the three-country NAFTA zone contain at least 50 percent American-made components. That would require overhauling all the supply chains that have been built in the last quarter century for automobiles and auto components, the biggest part of U.S.-Mexico cross-border trade. Mexico and Canada have rejected rules of origin outright.

But so has the U.S. auto industry, the ostensible beneficiaries of the Trump team’s proposals.

“The domestic content requirement is an onerous proposal,” said Wade Newton, spokesperson for the Alliance of Automobile Manufacturers, in an interview with Foreign Policy. “It will lead to a decline in production and a decline in jobs.

“We certainly would support a modernization of NAFTA,” Newton said. “We wouldn’t want to see a withdrawal. We would have a lot of concerns.”

It’s not just the auto sector that is alarmed at the prospect of a U.S. withdrawal from the almost quarter-century-old agreement. On Oct. 24, more than 130 representatives from businesses and retailers descended on Washington determined to defend NAFTA to lawmakers, in a day of lobbying organized by the U.S. Chamber of Commerce, the biggest single voice for American businesses.

“The U.S. Chamber has been hearing a great deal of concern about the future of NAFTA all year from our members, which include companies and associations of every size, sector, and region,” the U.S. Chamber of Commerce told FP in a statement. “Our members want to modernize NAFTA but insist that withdrawal from the agreement would be a mistake.”

U.S. industry groups have also found themselves allying with their Mexican counterparts in support of NAFTA. Tom Sleight, CEO of the U.S. Grains Council, an agriculture lobby, said that his organization had been in “consistent conversations” with Mexican ministry of agriculture; the Consejo Nacional Agropecuario, an agricultural association; and brokers, farmers, and groups from other agricultural sectors in Mexico.

“I’m hopeful that there will be a good outcome that maintains trade access for agricultural products,” Sleight said. “But yeah, we’re concerned about how things are playing out.”

The Association of Automobile Manufacturers has also been huddling with its counterpart in Mexico, according to Newton, who said there is shared concern over the future of NAFTA. Likewise, the U.S. Chamber of Commerce told FP that they have engaged with both public and private stakeholders in Mexico “to ensure that the views of the U.S. business and agriculture community are heard in the NAFTA negotiation process.”

But Mexican economic officials and all those business groups are running into an inconvenient truth these days: Facts and economic logic only go so far in today’s Washington.

“The most important thing is not about facts,” said a representative from a Washington-based lobbying firm who works with several pro-NAFTA clients. Even though many industry groups have explained how a withdrawal would harm their businesses, their workers, and the economy, the White House seems driven to play to the base as Trump did on the campaign trail. “You have to look at the politics of this,” the lobbyist said.

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, initially believed that much of the fire and brimstone around NAFTA was campaign bombast that would fade after the election.

“I thought at the beginning he would negotiate but not really terminate, because of the ill effects within the United States and within states that supported him,” Hufbauer said. But after Trump continued to ramp up his rhetoric about termination, and after the U.S. trade representative presented a list of demands, Hufbauer became less optimistic.

“It turns out that these forceful demands are not acceptable to Mexico and Canada. And that’s the position that we are in now. There may not be a resolution,” he said.

The ultimate outcome — if talks break down and all three countries end up tearing up the 23-year-old pact — is that a president who ran on an “America First” platform, with the support of many farmers, industry groups, and rural voters, now threatens to put their livelihoods and big chunks of the U.S. economy at risk.

As the Alliance of Automobile Manufacturers spokesman put it, “With no NAFTA, China would win.”

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