The landmark North American Free Trade Agreement (NAFTA) went into effect 23 years ago — unsurprisingly, many in the metals industry are eyeing reforms to modernize the long-standing agreement signed by the U.S., Canada and Mexico.
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In late April, President Donald Trump signed an executive order focusing on trade-agreement violations and abuses, directing the Department of Commerce and the United States trade representative (USTR) to study the U.S.’s free-trade agreements. One month ago, the office of the USTR notified Congress of the administration’s intention to renegotiate NAFTA.
In recent months, Trump has indicated he is willing to terminate the agreement if renegotiation efforts don’t go anywhere. In April, the president said he was “psyched” to terminate the deal, but ultimately had a change of heart after speaking with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto, per media reports.
That came three months after Trump pulled the U.S. out of the Trans-Pacific Partnership (TPP), negotiated by his Democratic predecessor Barack Obama.
When will renegotiation actually happen? The timeline isn’t clear. On Monday, Secretary of Commerce Wilbur Ross told reporters renegotiation might not happen until next year.
As uncertainty clouds NAFTA’s future, domestic metals organizations have weighed in on the ways in which they believe the 23-year-old agreement can be improved.
Metal Industry Hopes to Keep Positives, Target Problem Areas
Players in the metals industry have spoken out about how they want to see 23-year-old trilateral trade agreement modified for this new age.
In a filing June 12, The Aluminum Association, addressing U.S. Trade Representative Robert Lighthizer, urged that NAFTA should be renegotiated in a way that modernizes it without compromising the benefits of the original agreement.
In the letter to Lighthizer, The Aluminum Association underscored three ways to strengthen the agreement:
- Improving and strengthening customs procedures and cooperation to facilitate the movement of aluminum and aluminum products among the United States, Canada, and Mexico
- Working with the Canadian and Mexican governments to ensure that “NAFTA preferences are available only to aluminum articles that truly originate in the territory of a NAFTA party” and that “unscrupulous producers and exporters operating outside the NAFTA region are not improperly claiming preferential treatment under NAFTA by either making fraudulent country of origin claims or incorrectly classifying the article at issue”
- Negotiating common disciplines on the operations of State-Owned Enterprises (SOEs), which “often benefit from favorable government policies and subsidies that create significant market distortions”
Regarding the third point, the release specifically zeroed in on China, noting “massive overcapacity” encourages unfair trading practices.
In addition to the aluminum industry, steel groups are weighing in on a potential NAFTA face-lift.
The American Iron and Steel Institute (AISI), like The Aluminum Association, stressed in a letter to Edward Gresser, chair of the Trade Policy Staff Committee, that NAFTA has yielded “significant benefits” but could be modernized after nearly a quarter of a century since its passage.
NAFTA has been critical to the steel industry, as 90% of all U.S. steel mill product exports went to Canada or Mexico in 2016, according to the June 12 AISI letter.
U.S. steel exports to Canada and Mexico grew rapidly following the passage of NAFTA. Source: American Iron and Steel Institute
Like The Aluminum Association, the AISI cited rules-of-origin issues, global overcapacity and conduct of SOEs as issues needing assessment in a revamped agreement.
In addition, currency manipulation was a point of emphasis.
“Currency manipulation makes exports more expensive, imports cheaper, and can subsidize cheaper prices for exports to third-markets,” the AISI letter states. “The International Monetary Fund (IMF) has provisions against currency manipulation, but the lack of an enforcement mechanism has limited their effectiveness.”
The AISI also suggested possible improvements to “streamline” customs procedures and “to ensure that manufacturers can ship and receive steel in an efficient manner.” Part of that streamlining, AISI argues, includes updating border infrastructure.
So, in many ways, U.S. steel and aluminum seem to be on the same page with respect to NAFTA — that is, that there’s room for improvement.
NAFTA Renegotiation a Hot Topic
The USTR sent out a notice May 27 seeking public comments on the topic of NAFTA renegotiation. The period for public comments closed June 12, but not before 1,396 comments were submitted.
Clearly, NAFTA is a very important subject to many people and industry organizations. While the minutiae of free-trade agreements can sometimes make the subject seem opaque, the outcomes are decidedly human, as jobs and livelihoods are often at stake.
Leo Gerard, international president of United Steelworkers, submitted a public comment in support of renegotiating NAFTA, provided it is “along the lines identified in the comprehensive approach identified in the negotiating framework document submitted on behalf of the USW and other unions by the AFL-CIO.”
“We have felt the negative impact of the NAFTA first hand since it entered into force more than two decades ago,” Gerard wrote. “Tens of thousands of plants have shut down, millions of workers have lost their jobs and many other workers have seen their compensation stagnate or decline as a result of NAFTA.”
What’s next for the process? A public hearing will be held at 9 a.m. Tuesday, June 27, in the Main Hearing Room of the United States International Trade Commission, 500 E Street SW., Washington D.C.
As demonstrated by the volume of public comments, there is a wide range of suggestions being offered with respect to NAFTA renegotiations.
One thing, however, is clear: Many of the interested parties want change of some kind.
Free Download: The June 2017 MMI Report