Words You'll Hear: NAFTA Negotiations
Candidate Donald Trump promised to renegotiate NAFTA. Now, those talks are happening. Michel Martin talks with Chad Bown of the Peterson Institute for International Economics about Trump’s proposals.
MICHEL MARTIN, HOST:
And now it’s time for Words You’ll Hear. That’s where we dig into a story that will be in the news by focusing on a single word or phrase. Today, we’re going with an acronym, NAFTA, the North American Free Trade Agreement. It was signed during the Clinton administration, but President Trump vowed to renegotiate it during his presidential campaign. Now he’s making good on that promise. The U.S. has put forward a number of controversial changes, and negotiators from Canada, Mexico and the U.S. are meeting in Montreal to discuss the deal.
Their representatives are expected to make some kind of announcement about their progress tomorrow, so we thought this would be a good time to look at the State of the NAFTA talks. We called Chad Bown for that. He is a senior fellow at the Peterson Institute for International Economics. He previously served on President Obama’s Council of Economic Advisers, where he focused on international trade. He’s with us now in our Washington, D.C., studios. Sorry. I misspoke his name. It’s Chad Bown – like town. Thank you so much for being here.
CHAD BOWN: Thanks for having me.
MARTIN: A lot of people have heard President Trump, especially during the campaign, complaining about NAFTA. But what exactly is the U.S. trying to renegotiate and what are the major points of contention?
BOWN: Well, that is still a little bit unclear. President Trump’s primary concern seems to be with countries with which the United States has a bilateral trade deficit, so countries with which we export less to them than we import from them. But how it is that he’s going to try to rectify that imbalance through these negotiations is still a little bit up in the air. He has a number of controversial proposals that he’s put out there. I think…
MARTIN: What are they? I think people would like to know.
BOWN: So one of them is to introduce what’s called a sunset clause. And he’s proposed that after every five years, we should vote again as to whether the three countries – the U.S., Canada and Mexico – actually want to stay in the agreement or not. Now, most people would look at that and say the primary purpose of a trade agreement in the first place is to get rid of uncertainty, to lock in these low trade barriers. If I’m a company or I’m a worker trying to sell my goods and services into a foreign market, I want to know that that deal is going to be there five years from now. By introducing a sunset clause and having to go through this really contentious set of negotiations potentially every five years, that removes that. And so this is really kind of a nonstarter from Canada and Mexico’s perspective.
MARTIN: And what are the other two?
BOWN: The second really controversial one is for automobiles and what’s called rules of origin. So the concern from the Trump administration is too many cars are being produced in Mexico and not in the United States. And so they want to demand that more content of these cars that are getting zero tariffs when they cross the borders are actually American content. And so they’ve proposed that – a new rule that would demand that 50 percent of the value of any car that would be sold tariff-free within NAFTA should have to be American content.
MARTIN: What’s the final thing that’s particularly controversial?
BOWN: The third really big one is the Trump administration has proposed eliminating a lot of the legal enforcement protections that are in the agreement that are particularly important for Canada and Mexico especially because they’re smaller economies, smaller countries, much more reliant on the U.S. market. They can’t really bully their way around to getting things that they want when things don’t go their way, so they need to rely on the rule of law and courts to help enforce the provisions that are actually in these agreements. But the Trump administration – that’s not their general approach. They like to throw their weight around, and they’re proposing stripping out those courts from the agreement.
MARTIN: And President Trump has said that if he isn’t happy with the negotiations, he might pull the U.S. out of NAFTA. First of all, can he do that? Can he do that on his own authority without approval from Congress?
BOWN: So on the legal question, we don’t really know. There’s a big legal debate going on amongst the experts in this area. But there is a sense that President Trump likes to push the limits on executive authority. We have seen him do that on a number of occasions in his first year in office. And so we wouldn’t be surprised to see him try.
MARTIN: Chad Bown is senior fellow at the Peterson Institute for International Economics. He’s also cohost of a weekly podcast about international trade. It’s called “Trade Talks.” He was kind enough to join us here in our Washington, D.C., studios. Chad Brown, thanks so much for speaking with us.
BOWN: Thanks for having me.
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