Senator John Cornyn, R-Texas, held a congressional hearing Monday morning on the North American Free Trade Agreement within yards of where the historic deal was signed by the presidents of Mexico, Canada, and the U.S. in 1992.
“Unbalanced” and “outdated” are the words that Office of the U.S. Trade Representative Stephen Vaughn used to describe NAFTA. He highlighted the $600 billion trade deficit between the U.S. and its trade partners the past 10 years.
His boss, OTR Head Robert Lighthizer is in step with President Trump.
“Ambassador Lighthizer agrees strongly with the president’s view that the current version of NAFTA is a bad deal for America,” he said.
The Office of the Trade Representative released new objectives for the negotiations last week.
Some objectives have been a sunset provision that would terminate NAFTA after five years if congress didn’t reapprove; allowing countries to opt out of the investor-state dispute settlement system; and increasing how much of a product is made in NAFTA countries to qualify for tariff relief.
U.S. negotiators want that requirement to go up. In car manufacturing, which has a requirement of 62.5 percent, they are considering raising it as high as 85 percent.
“This is an area, first of all, where the trade is particularly unbalanced,” said Office of the Trade Representative general counsel Stephen Vaughn. The administration wants to make sure the country is seeing enough benefit on a production that has no tariffs.
“Some of the San Antonio employment could suffer,” said Mitch Bainwol, president of the Alliance of Automobile Manufacturers of the nearby Toyota plant.
Any of these changes will be complex, burdensome and costly, he said.
“The bottom line is it makes the U.S. product less competitive,” he said.
The Trump administration kicked off the fifth round of trade talks in Mexico City last week. Several outlets have reported the inflexibility of U.S. negotiators over changes they want has caused friction. President Trump threatened to pull out of the deal numerous times, calling the deal a “disaster.”
Cornyn told reporters he didn’t know if the threats were a negotiating tactic.
“Some of the negotiations have been kind of raucous,” he said. “The threats of withdrawal, I think, have created a lot of anxiety and questions.”
Cornyn said multiple times any changes to NAFTA would have to be approved by Congress, but it was unclear if Trump could unilaterally remove the U.S. from the deal.
“Most certainly, if he did there would most certainly be litigation — a lawsuit to decide it,” Cornyn said.
The panel’s industry experts from automotive, agricultural and commerce painted a positive picture of the embattled trade deal and a gloomy one of withdrawal.
“There is little doubt that Texas will be a major loser,” said Texas Association of Business CEO Jeff Moseley, who pointed out Texas has an $11 billion surplus with Mexico.
Moseley added one million jobs come from U.S. trade with Mexico, and NAFTA has created 190,000 jobs in the state.
The benefits extend well past the border, said Paola Avila, head of the Border Trade Alliance. Avila said Michigan’s top two export markets are Canada and Mexico, and half of all exports from Rust Belt states go the same place.
“NAFTA isn’t a ‘nice to have.’ It’s a ‘must have,’ ” Avila said.
For farmers, who have seen the largest four year income drop since the great depression, this isn’t the right time to close markets, said Russell Boening of the Texas Farm Bureau.
“A full withdrawal of the U.S. from NAFTA would devastate the entire agricultural community and would cause severe economic harm,” he said.
Many on the panel agreed that NAFTA can be modernized. Some wanted to see the North American Development Bank freed up to invest in gas projects. Others want money to improve ports of entry, and cut down time and waste on the nation's borders.
For Cornyn, the hearing was about telling a positive story about NAFTA.
“I just think that trade gets a bad rap very often, but NAFTA is not a dirty word,” he said.