Lawmakers, Businesses Weigh in on NAFTA Renegotiation at USTR Hearings

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Less than a week after the Department of Commerce’s hearing on the ongoing Section 232 aluminum investigation, the Office of the U.S. Trade Representative (USTR) kicked off three days of hearings Tuesday regarding renegotiation of the North American Free Trade Agreement (NAFTA).

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Renegotiation of NAFTA has picked up steam with Donald Trump’s ascension to the presidency. In fact, Trump reportedly was ready to remove the U.S. from the 23-year-old agreement in April, until calls from Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto convinced him otherwise. The episode came a few months after Trump signed an executive order to withdraw the U.S. out of the Trans-Pacific Partnership (TPP).

Lawmakers and business representatives had the chance to express their thoughts on renegotiating the trilateral trade agreement when the hearing began Tuesday. The hearing continued for a second day Wednesday and concludes Thursday.

Businesses represented included metals industries. Thomas J. Gibson, president and CEO of the American Iron and Steel Institute (AISI), spoke at Tuesday’s session. In a prepared AISI statement, Gibson said NAFTA has been largely successful, but could be modernized. He added that the agreement has “strengthened manufacturing supply chains, contributed to increases in intra-NAFTA trade and investment, and enabled a stronger relationship with Canada and Mexico.”

Gibson added NAFTA is the steel industry’s most important free-trade agreement, noting that 90% of steel mill product exports go to Canada or Mexico. In the time frame since the agreement went into effect in 1994, Gibson said exports to Canada and Mexico have increased threefold and the U.S. has moved from a steel trade deficit to a fairly even steel trade relationship.

However, like others in the industry, Gibson argued there is room for improvement, namely in the form of strengthening rules of origin, more effectively promoting trade enforcement cooperation and coordination, establishing disciplines on the conduct of state-owned enterprises (SOEs), establishing enforceable currency disciplines, and streamlining customs procedures and upgrading border infrastructure.

“While the Agreement has been beneficial, these approaches would improve it to make the American steel industry stronger, and create jobs in the process,” Gibson said.

In its submitted written comment, the Metals Service Center Institute (MSCI) agreed that while NAFTA has been successful, it can be improved.

“While we strongly agree with the Administration’s position that NAFTA can be modernized and improved, we also recognize that the Agreement has largely been successful,” the MSCI statement reads. “It has helped level the playing field and has created well-established, fully-integrated, market-driven trading mechanisms that allow for free and fair trade between the U.S., Canada and Mexico.

“The United States Trade Representative and the Trump Administration should take care not to upset the metal trade relationship between these countries.”

The Aluminum Association struck a similar tone in its submitted comment.

“It is vital, however, that the negotiations to modernize NAFTA strengthen and expand opportunities under the agreement, without diminishing its unquestionable benefits generated by the duty-free movement of aluminum and aluminum products throughout North America,” the statement, signed by Heidi Brock, president and CEO of The Aluminum Association, reads.

U.S. Rep. Daniel Lipinski, D-Ill., emphasized the importance of Buy America policies — particularly with respect to transportation — in his submitted comment.

“Any renegotiated NAFTA must not preclude Buy America policies from applying to Department of Transportation grants,” Lipinski wrote. “As our domestic manufacturing and steel sectors continue to be threatened, Buy America remains an important part of United States trade and manufacturing policy and should not be forsaken.”

What sorts of renegotiation proposals actually come forward remains to be seen. Trump mentioned NAFTA often on the campaign trail and his intent to renegotiate the deal, particularly citing U.S. trade deficits with Mexico. In 2016, the U.S. had a more than $64 billion trade deficit with its neighbor to the south, according to U.S. Census Bureau data. The U.S. last had a trade surplus with Mexico in 1994 ($1.3 billion) — the year NAFTA went into effect. The U.S. has had a trade deficit with Mexico every year since then.

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With its neighbor to the north, the U.S. had a trade deficit of $11 billion in 2016, according to the U.S. Census Bureau.

This year, from January to April, the U.S. had trade deficits with Mexico and Canada of $23 billion and $8.5 billion, respectively.

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