Controversial even then, the North Atlantic Free Trade Agreement (NAFTA) was signed in 1992 and went into effect in 1994, gradually eliminating most tariffs and other trade barriers on products and services circulating between Mexico, Canada and the U.S. NAFTA’s purpose was, on the one hand, to reduce trading costs and increase business investments in an effort to make North America – specifically the U.S and Canada – more competitive globally.[1] After all, Mexico’s promising market meant a cheaper investment location. On the other hand, it sought to boost Mexico’s economic growth, which in turn would grow the job market, and discourage illegal immigration.
At the time of its signing, NAFTA benefited from bi-partisan support under the Bush administration, which negotiated the treaty, and the Clinton administration, which enacted it into law.[2] Currently, however, and against the backdrop of rising tensions surrounding illegal immigration, President Trump has demanded NAFTA be renegotiated and threatened to pull the U.S out of the treaty. According to Trump, the U.S. has lost jobs to the Mexican workers who get paid much less to do jobs that were previously done by U.S. workers.[3] But proponents of NAFTA argue the opposite; that the agreement has produced more U.S. jobs than have been lost due to the rise in exports from the U.S. to Mexico. The car industry, in particular is concerned. After all, cars are by far the biggest import from Mexico to the U.S. They worry that new changes and tariffs may ultimately result in less jobs for the auto industry, which in turn will affect consumers by raising prices and limiting choices.[4]
It is no surprise that President Trump is a wild card in terms of policy – so NAFTA may or may not survive this administration. Certainly, renegotiating the terms of the act may prove to be fruitful for all three members. In fact, renegotiating the terms has found support in the Senate, but a complete withdrawl is proving to be controversial. Texas Senator Cornyn voiced his concern recently, albeit expressing his support for a renegotiation, warning that pulling out may negatively affect the U.S. economy and that of Texas in particular.[5] The challenge, however, will be in setting terms that they all can agree on. One thing is certain, if the U.S. pulls out of NAFTA, the auto industry is likely to be one of the largest sectors potentially affected by Trump's trade policies. Until then, domestic and international industry players alike watch closely as we see the approach of what may develop into a trade war.
References:
[1] Mcbride, J., & Sergie, M. A. (2017, January 24). NAFTA's Economic Impact. Retrieved March 10, 2017, from http://www.cfr.org/trade/naftas-economic-impact/p15790
[2] III, T. F. (2015, May 05). Thomas F. McLarty III: Those negotiating Pacific trade deal could learn from NAFTA. Retrieved March 10, 2017, from http://www.mcall.com/opinion/mc-nafta-trans-pacific-partnership-mclarty-...
[3] Gillespie, P. (2017, January 25). A new NAFTA deal could bring jobs back. Retrieved March 9, 2017, from http://money.cnn.com/2017/01/25/news/economy/nafta-what-a-better-deals-l...
[4] Tuttle, B. (2017, January 23). Donald Trump Trade Policy Threatens NAFTA, TPP, Auto Jobs | Money. Retrieved March 11, 2017, from http://time.com/money/4643682/donald-trump-nafta-trade-policy-auto-manuf...
[5] Schneider, A. (2017, March 03). Cornyn Signals Opposition To Trump's Threat To Exit NAFTA. Retrieved March 10, 2017, from https://www.houstonpublicmedia.org/articles/news/2017/03/03/190465/corny...
