INDIANAPOLIS, Ind. — The U.S. economy isn’t as independent many politicians describe. Instead, it is knotted tightly at key points with those of its North American neighbors.
The April 10 Indy Chamber-JPMorgan Chase & Co. World Trade Day conference in Indianapolis was predictably dominated by talk of the latest U.S.-Chinese tariffs and renegotiation of the North American Free Trade Agreement (NAFTA). One may not seem to bear on the other, but they do – at least to Canada and Mexico.
“You sell us $2 billion more in steel than we sell you,” Canada Consul General Douglas George noted about the United States at the end of the day, during a joint panel with Mexico Consul Luis Franco.
George, whose consulate is based in Detroit, Mich., was referring to President Donald Trump’s assertion that new tariffs on imported steel and aluminum were in part a homeland security measure. George said Canada is far from being a security threat, and has protected the continent as part of NORAD (North American Aerospace Defense Command). He said the temporary exemption Trump granted Canada (and Mexico) from these tariffs should be made permanent.
He’s heard Canada could import steel from China and “sneak” it into the United States. George said doing that would disrupt the North American market and harm Canada, too. “We do not want to add to the complications,” he said.
George said Canada is Indiana’s biggest export customer, too. The state’s supply chain is woven with Canada’s. He cited Gov. Eric Holcomb’s March trade mission as a link in an interdependent economy in which 14 million U.S. jobs directly rely on trade with it and Mexico.
Five million of those jobs are as a result of trade with Mexico, said Franco, who moved to the consulate office in Indianapolis last fall. He said the North American economy is a $20 trillion annual gross domestic product with $1 trillion in cross-border trade. Indiana alone, he said, has seen a jump of more than 1,200 percent in exports to Mexico since NAFTA took effect 24 years ago.
“We are one of the most economically efficient regions (in the world), which is also one of the largest,” George said of the continent.
Both said their countries are committed to a “win-win-win” in NAFTA renegotiations, in which all three nations’ leaders can go to their people to show advantages they are gaining. “What is evident is the U.S. and its two largest trading partners must continue to build relationships,” Franco said. “I don’t talk about the wall; I talk about bridges, which is important.”
Earlier in the day, Angel Ramirez with ProMexico Trade and Investment Detroit noted his country has been a manufacturing center for much longer than NAFTA has existed – in fact, he said General Motors just marked 80 years of having facilities there. According to data from The Offshore Group of Arizona, Buick began assembling autos in Mexico in 1921, followed shortly by Ford in 1925.
It is not a new industry there, nor, Ramirez asserted, is Mexico to blame for the sharp loss of U.S. manufacturing jobs in the past two decades – he said that can be traced to automation and other technological changes that downsized need for human workers, not a shift of jobs across the border as is often cited.
Trade deals in flux
Since Trump called for a redo of NAFTA last year, the three countries have completed seven rounds of negotiations and expect an eighth. These are not a few people at a table trying to hammer out details; George explained each round consists of about 1,000 people who are negotiators and their advisors, working in many smaller groups on different parts of the pact.
Also taking place last week was the Summit of the Americas in Peru, at which Vice President Mike Pence met with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto to discuss trying to finish a new NAFTA deal before Mexico’s presidential election in July.
Reuters reported this is because Pena Nieto is not eligible for re-election, and “there are concerns” the incoming president could take a tougher tack against Trump and complicate the negotiations.
In other trade news last week, Trump indicated he might pursue getting the U.S. back into the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the newly signed 11-member trade pact that evolved from the TPP Trump pulled out of upon taking office in January 2017.
Trump tweeted this last Thursday; coincidentally, two days earlier at the Indianapolis forum, Franco talked briefly about all the trade agreements Mexico is part of, including the CPTPP, under which he said his nation expects to gain more favorable business deals. He also said Mexico is in the process of modernizing trade with the European Union.
In the United States, the populace is divided on its view of free trade agreements (FTAs), but less so than just a couple years ago. According to a February Gallup poll, 70 percent of U.S. adults see foreign trade “as an opportunity for the nation’s economic growth through increased exports rather than a threat to the economy from foreign imports;” 25 percent view it the other way around. Gallup noted before 2017, that first number had not gone above 58 percent.
When asked how people in their countries view FTAs, Franco said the Mexican government tries to make it clear how these benefit the nation. He said the FTAs are negotiated to provide chances for Mexican businesses to prosper, but those businesspeople are responsible for taking advantage of the opportunity.
In Canada, George said FTAs are generally seen as positive for the economy. He admitted, though, when NAFTA was first signed it caused arguments within the country that jobs would head south because of the ability of companies to pay lower wages in Mexico or to take advantage of less stringent “right-to-work” employee protections in some U.S. states.
He said Americans worried about losing NAFTA should make that clear to their elected leaders. “If you’re concerned about NAFTA, let your representatives know,” he explained. “If you’re worried about the 35,000 Hoosier jobs that would disappear, let your representatives know.”