USMCA supporters look to protect NAFTA amid Mexico tariff fight

USMCA supporters look to protect NAFTA amid Mexico tariff fight
USMCA supporters look to protect NAFTA amid Mexico tariff fight  

This story was published as part of a POLITICO Journalism Institute special section. PJI is a journalism training program in partnership with American University and the Maynard Institute, that allows student participants to report and produce news stories.

Business lobbyists, facing an uphill battle to get a North American trade agreement approved, are formulating a backup plan: press President Donald Trump to keep the North American Free Trade Agreement if his revised deal falls apart amid a tariff fight with Mexico.

Trade groups such as the U.S. Chamber of Commerce and National Foreign Trade Council have been pushing Congress to approve the revised NAFTA deal, known as the U.S.-Mexico-Canada Agreement, while at the same time urging Trump to back off tariff threats against U.S. trade partners.

But the president's plan to impose new tariffs on Mexico next week over immigration concerns is threatening to scuttle the so-called USMCA. And if that happens, some business lobbyists say they'll pivot to protecting the deal that's already in place in hopes of avoiding major trade disruptions with the U.S.'s two closest neighbors.

"We would fight very hard to keep NAFTA in force and also to get the administration to withdraw these most recent threats of increasing the tariffs," said National Foreign Trade Council president Rufus Yerxa, referring to the Plan B if the USMCA fails.

"We've been managing with NAFTA for more than 25 years and we're pretty comfortable with the arrangement of NAFTA," said Vanessa Sciarra, vice president for legal affairs and trade and investment policy at the NFTC.

"It's not very modern, admittedly," she said. "But it's certainly been working for our companies."

Trump threatened to blow up NAFTA during his 2016 campaign and began negotiating with Mexico and Canada to revamp it after he took office. The resulting agreement, USMCA, is awaiting congressional approval.

Businesses thought they'd made progress last month when the U.S. lifted the steel and aluminum tariffs against Canada and Mexico, only to see Trump make new threats against Mexico less than two weeks later on Twitter.

The Mexican delegation is in D.C. this week to speak with top administration officials in an effort to avoid the immigration tariffs, but Trump is so far showing no signs of backing down.

Business groups now worry that Trump's unrelenting tariff threats could derail the USMCA.

"It's clear that these tariffs present a new obstacle to USMCA," said John Murphy, senior vice president of international affairs at the Chamber of Commerce.

Lobbying and business groups facing this multi-pronged battle of criticizing tariffs, supporting USMCA and protecting NAFTA say the Trump administration's policies are creating uncertainty that could wind up hurting the U.S. economy.

"Businesses right now don't know how to invest," said Chad Bown, a senior fellow at the Peterson Institute for International Economics. He said businesses would not know which countries to work with as the administration puts forth unpredictable tariffs.

Linda Dempsey, vice president for international economic affairs at the National Association of Manufacturers, said Mexico and Canada are key trading partners for U.S. manufacturers.

"There are 42 different manufacturing types of products that we do," she said. "For 36 out of those 42 categories, Canada and Mexico are our number one and number two partner. For 46 of our 50 states, Canada and Mexico are our number one or number two partner."

If tariff threats persist, NAM's member companies, and the states where they're located, could face a hard hit, she said.

That could be particularly difficult for small businesses.

"Uncertainty alone imposes substantial costs on firms in the form of increased risk premiums, frozen investments, frontloading of imports and exports to beat potential tariffs, and administrative costs associated with mapping new supply chains and adapting to a chaotic business environment," said Jack Caporal, an assistant fellow at the Center for Strategic and International Studies.

Small firms, Caporal said, have "less capacity to deal with those issues."

At this point, "having some sort of agreement" in place in North America would prevent such uncertainty, whether that deal is USMCA or NAFTA, said Dan Ikenson, a trade policy expert at the libertarian think thank Cato Institute.

"Worst case scenario is nothing; second worst case scenario would be the status quo, NAFTA," Ikenson said. "USMCA passing would be preferable."

With that in mind, trade groups continue to urge lawmakers to approve the USMCA.

"We're focused on creating a favorable political environment outside of Washington to help pass USMCA," said Phil Cox, co-chair of the bipartisan coalition Trade Works for America. "We've activated over 200,000 people to contact members of Congress in about 50 congressional districts over the last month. We're in the middle of a multi-million dollar paid advertising campaign to educate people to the benefits of USMCA."

He said Trump has made clear that he'll scrap NAFTA if that deal isn't approved.

"No North American trade agreement would be disastrous," Cox said.


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