NAFTA Renegotiation: Renewal or Expiration?
This is the first session of the "The United States and World Trade: Future Directions" symposium.
This symposium brings together distinguished trade leaders and innovative thinkers to address the trade policies of the United States and their international implications in North America and East Asia, as well as the possible effects on the global trade architecture and the World Trade Organization.
ALDEN: Great, thank you. Welcome, everybody. My name is Edward Alden. I’m a senior fellow here at the Council on Foreign Relations, and helped organize this symposium, along with my colleague, Miles Kahler. We have got a tremendously exciting day ahead of us, I think, including—you know, just a quick aside. As you know, these things are always scheduled far in advance. And you try to pick the best time when people might be interested. Well, we certainly had no way of knowing it was going to be the four round of NAFTA negotiations, and the one in which the administration was tabling all of its most contentious proposals. So our timing turned out to be far better or worse, I suppose, depending upon your perspective, than we could have hoped.
So we have a great day ahead of us looking at a range of topics that are very much on the agenda in world trade. The first one will look specifically at the NAFTA renegotiation which, as I said, fourth round underway just across the river in Arlington. The second panel is going to look at the critically important question of the U.S.-China trade relationship. The third is going to focus on the growing use of trade laws and trade remedies and what this means for the WTO dispute settlement in particular. And then, of course, our final discussion is going to be with the WTO Director-General Roberto—excuse me. I will try that again. WTO Director-General Roberto Azevedo. And I think, in fact, this is his first public event in Washington since the new administration took office in January. You were reminded that the event’s going to be livestreamed, so this will all be on the record.
We are really meeting here at an extraordinary juncture. I have followed trade negotiations for about 15 years as a reporter and then another 10 years here at a policy analyst at CFR. I covered the original NAFTA negotiations, in fact, as a reporter. And all of the trade negotiations I’ve ever paid attention to started from the same premise, which is how to expand mutual gains for the participating countries. To be sure, there were always lots of bitter fights over the distribution of those gains and which sectors would win and which would lose. But the agreed goal was always to find some mutually acceptable balance of concessions. The NAFTA negotiations started from a wholly different place—I should say, the NAFTA renegotiation.
If you believe, as President Trump does, that the United States has been a loser from its trade agreements, then the purpose of NAFTA renegotiation is not to achieve some new, mutually beneficial balance of concessions. The goal is to rebalance the agreement so it favors the United States more and Mexico and Canada less. And we’ve seen what that means in some of the U.S. proposals, including a 50 percent U.S. content requirement for automobiles that had been tabled over the last week. That approach, obviously, has implications for the U.S.-China relationship, when the Section 301 investigation on technology transfer and other issues start coming to the table. And it clearly has enormous implications for the U.S. relationship with the World Trade Organization which was, in many ways—again, the negotiation I covered was in many ways a U.S. creation.
And then finally, this is the Council on Foreign Relations, all of this may well have broader implications for U.S. foreign policy. I don’t know if anyone saw the Iranian foreign minister last night on “60 Minutes,” but he cited particularly the NAFTA talks and the U.S. withdrawal from the Trans-Pacific Partnership. He said that President Trump’s withdrawal doctrine—and I actually think our friend Richard Haass may have coined that term—but he said the withdrawal doctrine will have severe repercussions. He said, quote, “Now nobody is going to make any concessions to the United States because they know that the next U.S. president will come back and say it wasn’t enough.”
So as I said, we live in extraordinary and uncertain times. And I look forward to a very rich discussion today to help us make better sense of how all this is playing out on the trade front. So I’m going to turn it over to Miles or a few brief comments, and then we’ll launch into our first panel.
KAHLER: Thanks, Ted. When we—I’m Miles Kahler. I’m senior fellow for global governance here at the Council on Foreign Relations.
When we began joining these two trade symposiums at CFR, the first held last September in the middle of the presidential campaign and the second today, the architecture of world trade appeared to be imperfect, but stable. Trade had recovered from its precipitous fall following the Great Recession and the world economy had warded off waves of protectionism that had deepened the economic downturn during the Great Depression in the 1930s. Bilateral trade conflicts among the largest trading powers, the United States, the EU and China, seem to be moderated by a reduction in the mass of external imbalances that have proceeded the Great Recession, and by a perception that China had reduced its contentious management or manipulation—depending on your point of view—of its currency.
It’s hard to remember, but at that time, two years ago when we started this, regional trade initiatives on a large scale were underway. Indeed, many viewed those mega-regionals, the TPP, the Trans-Pacific Partnership, the TTIP, Transatlantic Trade and Investment Partnership, and RCEP in the Pacific as potential threats to the global trade order, centered on the World Trade Organization. At that time, it was the global level that was the most disappointing and—given the stalemate at the Doha development round. But even the WTO could claim a great deal of credit for a robust dispute settlement mechanism and for serving as a backstop against protectionism during the great recession. By the time of last fall’s symposium, these pillars of the trade architecture had been shaken by the vote to leave—in the U.K. to leave the European Union and by the surprising emphasis on trade—probably the greatest emphasis on trade in a presidential election since 1992 by both left and right in the presidential campaign.
And now I think it’s safe to say that each of these pillars of the international trade architecture are shaking. They’ve been called into question by American politics and policy. And as Ted has already pointed out, today’s symposium will examine those challenges and their effects on world trade. And we will go through each dimension of the trade architecture, beginning with the regional, as Ted has mentioned, NAFTA, which is harshly criticized at its start. Many of you will recall Ross Perot in 1992. Has been a target of those who were critical of these trade agreements throughout, but has also been a centerpiece of American regional trade agreements, as well as an anchor in U.S. relations with its neighbors.
Then we will turn to bilateral relations, U.S.-China relations—a bilateral relationship which, once again, is becoming more troubled as leaders on both sides appear to be turning in a more mercantilist direction, a turn that makes negotiating their trade differences much more difficult. And then finally a third panel that Ted will preside over on trade remedies—trade remedies that have been threatened recently by the United States, which have been deployed rarely if ever in recent memory, many of which if they are wielded against our trade partners will run counter to WTO rules governing world trade.
So regional, bilateral, global. Where is U.S. policy heading on these three dimensions? And most important or as important, what will be the response of its trading partners? It’s not all about U.S. trade policy. And what will be the outcome for world trade and the rules that govern it, given what happens in each of these dimensions?
I’d like to thank—many people have contributed to this symposium. I’d like to thank three individuals in particular. Sam Dunderdale, Kyle Evanoff, and Shelton Fitch—three of those very talented young individuals who have come to the CFR. We benefit from their hard work, their intelligence, and their effort. And they played a central role in planning this symposium. And we’d like to thank the International Institutions and Global Governance Program here at the Council, the Center for Geoeconomic Studies, and the Robina Foundation for its support of this symposium.
And now, let’s turn to the first panel on NAFTA renegotiation and our presider, Dolia Estevez.
ESTEVEZ: Well, good morning and thank you all for being here today. And I want to thank also the CFR, the Council on Foreign Relations, for this kind invitation to preside over this very, very timely subject, on NAFTA—this panel on NAFTA.
The fourth round of negotiations will end tomorrow. And it is expected that the three ministers, led by Ambassador Lighthizer, with his two counterparts from Canada and Mexico, will report on where these talks are heading. These talks—this round of talks, the fourth one, has been particularly very difficult. The United States introduced a series of very difficult, tough proposals that Mexico and Canada oppose. So what’s next? Will the negotiators be able to bridge the divides? Will the United States withdraw? And if they do withdraw, what would NAFTA’s future be?
And, well, to get answers, we have an extraordinary panel of experts. And I will make a brief presentation. And then you can find their full biographies in the material you have. So, Michael Froman. He’s a distinguished fellow of the CFR. And as U.S. Trade Representative under President Obama, he negotiated the TPP. Antonio Ortiz-Mena, he’s a senior advisor of the Albright Stonebridge Group and former head of economic affairs at the Embassy of Mexico in Washington. And John Weekes. He’s a senior business advisor at Bennett Jones and former Canadian chief negotiator of the NAFTA negotiator in the first round of negotiations—the real ones. (Laughter.) I’m sorry about that. Yeah. So I’d like to—as I said, the full biographies are in your material.
Now, I’d like to start by asking Michael if he can please assess where the negotiations are today, when the fourth round is about to conclude.
FROMAN: Well, thank you. And thanks for having me.
You know, I think first of all we should start from the position that NAFTA is 23 years old, 24 years old. It is ready for an update. There’s a lot of things that could be improved in it, whether it’s labor, or environment, or a digital economy, or state-owned enterprises, investment regimes. Of course, those are all things we did in TPP, that was put on the shelf the third day of this administration. So I think the question really is, what is it beyond those kinds of updates that the administration will insist on?
As you mentioned, the U.S. administration has now, I believe tabled text in various areas that they had been signaling were going to be priorities. Many of those texts, I imagine, are quite difficult for Mexico or Canada to accept. But this is a negotiation. And I think now the real conversation begins about where is their flexibility on these issues and what could be sold domestically in each of their economies, and how to make sure that the agreement is better at the end than where it started, that you’re not actually restricting trade or erecting new barriers, but dealing with the kinds of issues that the administration has flagged.
So I think it’s at a critical stage. It is ambitious, I think, to try and—given the issues that have just been tabled—to wrap this up very quickly, by the end of the year as was the original expectation. And I think it would be incumbent on Mexico and Canada to be quite clear about where their red lines are, what is worthy of discussion and what isn’t, to see what can be done. Because I think at the end of the day, being an outsider just looking at the administration, it appears they want to see how much they can possibly squeeze out of Mexico or Canada. And if they can’t squeeze enough, they’re quite ready to walk away.
ESTEVEZ: And on that, Antonio, how much can they squeeze out of Mexico? (Laughter.)
ORTIZ-MENA: I think they can try to squeeze a lot, Dolia, but I’m not sure they will be very successful. The Mexican government has stated that it will not accept any reversal. So no going back. No new tariffs. No new quotas. So the Mexican government will show flexibility and, I think, creativity to address, you know, legitimate concerns that have been expressed by the U.S. negotiators, but I don’t believe that they will accept NAFTA at any price. So it would be very dangerous to engage in this brinksmanship tactics.
ESTEVEZ: Will they withdraw? Will Mexico withdraw? Would Mexico withdraw?
ORTIZ-MENA: I don’t know if it would be Mexico to withdraw, but I’m sure that there are some lines that Mexico will draw and will say that we will just not accept this. And then the U.S. will have to decide whether to make its positions more flexible or to withdraw.
ESTEVEZ: John, and out of, I believe, four proposals that the U.S. has tabled, which is the most problematic for Canada, or are all four problematic?
WEEKES: Well, are there only four? (Laughter.) I think—no, they’re all very problematic. And you know, I think in sort of general terms I tell people that in these negotiations the modernization negotiations are really going quite well. Include some of the things Michael was talking about. It’s the renegotiation where the negotiations are in real trouble. And I think that the proposals from the United States are—that I’ve read about; I haven’t seen them because, of course, they’re confidential—seem to me to be so extreme that one really has to ask the question whether President Trump wants to have a NAFTA or is looking for an excuse to get out of it.
ESTEVEZ: And what’s your answer to that?
WEEKES: I don’t know. I have real difficulty getting inside the head of the president and telling you what he—what he thinks. (Laughter.) But I think it’s very clear from a Canadian point of view that Canadians are going to look at these negotiations from the point of view of what—is the outcome better than what we went in with, or worse? And, you know, we don’t—you know, the NAFTA’s been a very valuable agreement. But it wouldn’t be the end of the world if it—if it disappeared. Or maybe it would only disappear for a while. You know, we’re—I’m not sure how far Canada and Mexico should go in adapting our standards of what should be in a trade agreement to what the Trump administration is asking for. You know, how long do you expect Donald Trump to be president of the United States? Do you expect the next administration would have the same policy approach as this one? I think these are some—
ESTEVEZ: Would it be better—Michael, would it be better—
ESTEVEZ: I’m sorry—if they wait for a new administration?
FROMAN: Well, I don’t think that is really an option, because I think certainly the renegotiation of NAFTA is the administration’s top trade priority right now. It’s been absolutely clear. And so there’ll be this effort between now and early next year, perhaps. We’ll see how long Mexico can negotiate given their upcoming election. And then there’ll be a judgment made about whether there is an agreement on the table to be had, or whether it makes more sense—from the administration’s point of view, to withdraw.
I mean, I think John’s point is a very good one. I mean, certainly both Canada and Mexico are highly dependent on the U.S. market in general terms. But their economies have also changed significantly in the last 24 years. And there needs to be real analysis over what the costs of the U.S. withdrawal would be, which—I’m not saying it’ll inconsequential, but it may not—it may not—there may not be as much leverage there as some people think. And I think everyone on all sides of this need to be pretty clear-eyed about what the pros and cons of moving ahead with an agreement that is being laid out now by the administration versus a withdrawal.
ESTEVEZ: And if the U.S. is to withdraw—were to withdraw, do Canada and Mexico, would continue being in NAFTA under—negotiating, trading under the same codes—NAFTA codes?
ORTIZ-MENA: I would say that, you know, Mexico-Canadian relations are at a very high point. That was not the case under the previous Canadian prime minister, Prime Minister Harper. Things were not great because of a visa issue related to Mexico. So Mexico and Canada are at a great point. And I’m sure that they would continue engaging. So that’s not an issue. And both Canada and Mexico are looking to having a trilateral agreement. That’s the basic aim. If that can’t be had, I’m sure that Mexico and Canada would continue to engage.
And to follow up on Michael’s point, I think it would—it is really dangerous that the U.S. has played with such hard tactics against Canada and especially against Mexico, because Mexico does have some options that were not available in 1994. We didn’t have the WTO. Came into existence in 1995. Mexico’s revamping agreements with the European Union, with AFTA, the Pacific Alliance is negotiating with New Zealand and Australia, which as you know are very important ag exporters. So, you know, the whole trade panorama is changing. And I just hope that the U.S. doesn’t push Mexico too far—
ESTEVEZ: What do you mean with—
ORTIZ-MENA: —because that would be a lose-lose proposition for everyone.
ESTEVEZ: Yeah. But what do you mean with very dangerous?
ORTIZ-MENA: That if the U.S. insists on sort of my way or the highway in terms of a number of issues like, you know, restricting trade, depending on the trade balance or the sunset clause, from watering down dispute settlement, then I think Mexico would be better off without the NAFTA. So they should not call Mexico’s bluff. We would all lose.
WEEKES: Well, I think—because we’re on this question—I think, you know, it’s already been talked about a bit, would Canada withdraw, or would Mexico withdraw? Well, I think—you know, I put it the other way. I would strongly recommend that Canada not withdraw from the NAFTA. I think that, you know, Canada should say no to certain proposals and come up constructively with other proposals. We have put a number of proposals on the table in this negotiation. But I think it’s—you know, if we say no and the United States decides there’s not enough in it for them and they walk away, then that’s quite a different situation.
One way it’s different is that the NAFTA would still be there as between Canada and Mexico. And I think—I don’t see any reason why Canada or Mexico would want to walk away from the NAFTA. So it would—it would still be there. We might even take a rather friendly approach as to whether, you know, the United States wanted to join again at some point. We might not insist on too high an entry price. (Laughter.)
FROMAN: I think—I think it’s going to be an interesting dynamic between Canada and Mexico, because at least by one theory if the U.S. were to withdraw from NAFTA, Canada would retain the benefits of the Canadian Free Trade Agreement. They would go back to the CFTA, unless the administration pulls out of both. So Canada has less to lose by a failure of negotiation than Mexico. By now, there—at least in some level—is an appearance of solidarity between Canada and Mexico. There’s, I think, not a trivial chance that that solidarity breaks down at some point and Canada puts itself in a somewhat different position than Mexico.
ESTEVEZ: So, are you saying that if the United States were to withdraw, the big loser would be the United States?
FROMAN: Well, it would be Mexico more than Canada, because Canada would still get the access to the United States through the CFTA.
ESTEVEZ: Mmm hmm. And what about the U.S.?
FROMAN: I think—to Antonio’s point—I think everybody potentially loses. And I don’t—you know, there’s been some recent analysis I just read in the last 24 hours or so about the impact of withdrawal from NAFTA on the United States, losing a quarter of a million jobs in various sectors. And that assumes a gain of some jobs in certain sectors, but a loss, particularly in the service sector, of about a quarter-million jobs. So, you know, there is estimate—I think there probably is more work to be done to estimate exactly what the impact will be, because our economy has changed so dramatically over the last 24 years. Our North American economy has changed so much in terms of its integration.
ESTEVEZ: Now, what can you tell us about this particular fourth round of negotiations? I mean, everybody is saying that they’re the hardest, the toughest, more aggressive proposals. Is this in preparation for Donald Trump to give notice the sixth—the mandatory sixth notice that he is withdrawing? I mean, why is there—why is the U.S. delegation taking such a strong stand on issues that are no-go for Mexico and Canada?
FROMAN: Well, look, I guess I view it slightly differently. I think it’s been useful that finally at this round the U.S. has tabled text in, as I understand it, all the major areas that had been talked about before, because now we can see in concrete terms what it is that the administration seeks. It is a negotiation. I don’t think—I don’t think one should look at the strength of the proposals themselves and draw any particular conclusions. It’s the beginning of a negotiation over these issues. And these things now need to be probed as to how strongly the administration feels about them, where there’s flexibility. What are the priorities? You know, maybe take a step back. What does—what do we think President Trump cares about?
You know, for example, we know he cares about manufacturing above everything else. And within manufacturing, probably autos. There are probably a lot of other proposals on the table that don’t touch manufacturing or autos. Are those priorities for the president or not? How should the parties view those other proposals? And can they focus on trying to give the president the kind of political wins he needs to be able to say yes to an agreement in areas of priority?
ESTEVEZ: Now, these proposals that the U.S. has made, do you think, Antonio, they are negotiation positions? Is there a chance they would become more flexible as the U.S.—as Canada and Mexico say no way, this is not acceptable to us? Or do they really mean it?
ORTIZ-MENA: Yeah, first let me address the cost for the U.S. that you asked Michael. I think that it’s important to focus, yes, on the costs in terms of the auto sector. The Ag sector I think could be adversely affected because Mexico can impose pretty high tariffs on U.S. exports to Mexico for Ag products under the WTO. So the Ag sector I think could be very badly hit.
But two things that I think are even more important. First one, the foregone gains, not only actual losses. So if the U.S. does not engage with Canada and Mexico, I don’t think you can have a competitive economy to export more to reduce its global trade deficit. For example, this proposal in autos I think would be absolutely counterproductive. A more, you know, constructive, realistic approach to autos would make the North American auto industry more productive and the U.S. would be able to export more and deal with the trade deficit, which it is concerned.
And lastly, I think we should not lose the sight that this is a foreign policy issue, especially regarding Mexico. And, yes, there’s trade and tariffs and supply chains. But should, you know, the negotiations fail, I think that could be a big backlash in terms of bilateral Mexico-U.S. cooperation across—
ESTEVEZ: Security cooperation would be affected.
ORTIZ-MENA: —yes, across the board. And I don’t think this is a quid pro quo, like, oh, I’m upset at you. I think this is just a political reality. Mexican public opinion has turned, you know, very radically against, you know, trust in the U.S. or, you know, trust in the U.S. president. So it’s just a political reality regardless of who wins in the next election. So let’s just look at the big picture, foreign policy, and not only trade. A lot is at stake, Dolia.
ESTEVEZ: But on foreign policy, what areas do you think that we would experience a setback bilaterally?
ORTIZ-MENA: I think it would be difficult to maintain, you know, business as usual and intelligence sharing. We have to work together to combat transnational organized crime. Mexico shares a lot of information with the U.S. on AML, anti-money laundering. The U.S. is concerned about, you know, undocumented migrants coming from Central America through Mexico to the U.S., just to use a few examples. Sorry to answer a difference question than the one you asked. Just had to get those points across.
ESTEVEZ: OK. No, that’s good.
You didn’t answer what if—you thought that these proposals that the U.S. has made, there’s room for flexibility.
ORTIZ-MENA: I think that the U.S. is conflating ends and means. I think that the objective is to create more jobs in the U.S., to export more, and to reduce the global trade deficit. And that’s fine and well, and I think NAFTA can help in this regard. But the way they’re going about it I think is counterproductive. I mentioned the rules of origin in autos, including a U.S. content requirement, which is basically unheard of in trade agreements, trying to somehow restrict trade depending on the trade balance. I mean, those should be strategies, not ends. And if the U.S. does not show flexibility, I do not see how an agreement can be reached. And I’m concerned because the U.S.—if somehow Mexico accepts that—and I don’t see how—the U.S. could say we were really tough and renegotiated a great agreement. And if Mexico does not accept, then, you know, the U.S. could say, look, Mexico is very rigid and I’ve been, you know, telling you this is the worst agreement ever for the U.S., and we would—we’ll withdraw and Mexico will be blamed. And I think that’s just not good.
ESTEVEZ: John, the same question for you. Do you think that the United States—there’s room for flexibility in these negotiations, particularly the four proposals that they have just tabled?
WEEKES: Well, I guess we’re going to find out. I find it very hard to read the minds of the people at the other side of the table and say what they’re thinking or not thinking. But if there’s no flexibility, then clearly there isn’t going to be an agreement, so I’ll go that far, and then that puts it back.
And something else that might be useful to say. You know, this is sort in a way dismantling the North American integration experiment if the United States walks away from the NAFTA. You know, one of the things that would happen if the U.S. withdraws from the NAFTA is there’s no longer any cover for the NAFTA duties in terms of the WTO. So those duties at free between the three North American countries would be illegal in WTO terms. So, you know, there’d be a requirement to bring them back up to the WTO rate or putting the Canada-U.S. free trade agreement to one side for a moment.
And, you know, we—I’ve read some interesting article in The Washington Post today about average duty rates. You know, but average—you know, if they had to go back up. But average duty rates only tell you part of the story. They don’t tell you where the high rates are. And I just looked this morning, I thought, for fun on my computer, and I saw that in the WTO bindings of Mexico, for instance, in the transportation equipment sector, the average applied rate is 34 percent and the bound rate is 100 percent. Now, it’s lower than that for automobiles but, you know, these are some of the things you’d be looking at.
If you take finished food products. Canada—this is things like things you can actually put on the table and eat. Canada imports $16 billion a year from the United States, Mexico 8 (billion dollars) of these finished food products. We’re the number one and two customers. In fact, Canada buys more from the United States of these products than all of Asia combined. So, you know, there’s—and when you start looking at putting duties back up in this, maybe it’d be quite good for Canada. You know, some of these factories would have to look at, well, OK, maybe we’ll go back and open a factory now in Canada again, and maybe we’ll benefit from the fact also that since Canada now has free entry to the European Union on the trade agreement that just came into force a couple of weeks ago, you know, maybe this is the changes that make it looks like a rather interesting business proposition, and can sell back into the United States on an MFN duty that is still pretty low, or maybe under free and rates of the old Canada-U.S. free trade agreement. So it’s not quite clear to me how Donald Trump portrays this as a victory for his cause of making it more fair, because if you actually look at the tariff rates that you’d go to under the WTO, it’s clearly less fair, in a sense, than under NAFTA, where the rates are free.
The other thing that would disappear under the WTO are the rules of origin. I mean, the rules of origin have ensured that a certain amount of the content in the North American automobile industry is made in North America. There’d no longer be any requirement for that. And the U.S. rate is only 2.5 percent. That’s not a big impediment compared with trying to require 50 percent of content in the United States or 85 percent in North America.
So I wonder where this strategy leaves, I mean—leads, because the next step—well, clearly we need to do something under the WTO. We’ll renegotiate our 2.5 percent tariff on automobiles under Article 28 of the GATT. That’d be rather expense. Or we withdraw from the WTO, would be another possibility.
ESTEVEZ: Let me go back to the withdrawal scenario, because it’s what’s out there as the fourth rung of the negotiations wind down. What would be the role of Congress? There’s a lot of—obviously—lawmakers who are strongly opposed to withdrawing, and they have expressed themselves. That’s the—does Congress have any role?
FROMAN: Well, that’s being debated right now, because, clearly, the executive has the capacity to trigger the notification and to withdraw from NAFTA. Then the question is, is there implementing legislation that would need to be put in place, I suppose, to go back to or to undo certain things that were done in the implementing legislation of NAFTA. I know there’s a debate right now about what happens if Congress opposes the withdrawal and could they actually stop it from—stop it from happening.
My sense is that a lot could be done by executive action, and Congress has—to be frank, Congress and the business community I think have been relatively quiet and acquiescent up until very recently as the Trump administration—
ESTEVEZ: Why? Why is that?
FROMAN: Well, I think the business community certainly prioritized tax cuts and regulatory relief, and were willing to hold their nose on trade and to a certain degree immigration. And now, only in the last month or so, businesses—the agricultural community got this earlier than anybody else, but only recently has the rest of the business community begun to express alarm about the path that the Trump administration’s on its trade policy, and it’s frankly a bit late. And same with Congress, where congressional leaders have yet to really draw lines and say this is not something that Congress would be willing to support in the president’s agenda.
ESTEVEZ: Can a bill be introduced to stop the withdrawal? Is that a possible scenario?
FROMAN: You know, anything is possible, but I think any executive has the ability in these agreements to withdraw, and that’s written into the agreement, and there’s a process for doing that. I don’t see Congress acting preemptively, necessarily, to do that.
ESTEVEZ: Yeah. So if Trump decides to withdraw, it’s going to be a really uphill battle to reverse that?
FROMAN: I think it would require a lot of action, a lot of consensus in Congress. And that may emerge. But so far, there haven’t been a lot of profiles in courage. (Laughter.)
ESTEVEZ: Mexico has said that they’re hopeful that Trump will not withdraw because there’s very strong—which is contrary, the opposite of what I just heard from Michael. There’s a very strong lobby of U.S. Chamber of Commerce, congressmen from Texas, from Arizona, all these states that would be badly hurt. Is that something that you see as possible, as a feasible scenario that they would stop the withdrawal if they put a lot of pressure, or lobbying? Apparently, there’s thousands now—well, not thousands, but hundreds of lobbyists in Congress.
ORTIZ-MENA: Yes. I’m not completely sure, and I think that the critical interest group will be the agricultural exporters. I was talking right before this meeting. That’s usually agricultural that manages to derail the trade negotiations over subsidies. They’ve become very complicated issues. I’m just thinking about, you know, sugar, tomatoes, and, you know, like, start shaking in terms of Mexico-U.S. relations. (Laughter.) But they could, you know, paradoxically be the saviors because they have a lot at stake in the Canadian and the Mexican market. And it really is a buyer’s market. You know, Mexico could really very easily start buying corn from Argentina, Brazil, with which it’s already updating its trade agreement. So it’s not an idle threat. So I think the ag sector will be critically important.
But in terms of, you know, broader support, I’m not so sure. If you recall during the presidential election, it was only John Kasich that, you know, had something constructive or positive to say about NAFTA. All the other candidates were trashing NAFTA. So I don’t see a lot of Democratic support. I wouldn’t count on it. So—
ESTEVEZ: And, John, do you foresee any political fallout if NAFTA fails the negotiations in Canada?
WEEKES: No, I don’t think so because—
ESTEVEZ: But there’s been mention in Quebec of something about—
WEEKES: Well, I think—you know, I think NAFTA actually is more popular in Canada, according to public opinion polls, than in either of the other two countries. And there’s been—while the opposition in Canada has taken issue with some of the specific positions the government has taken in the negotiations, they’re broadly supportive of the effort to enter a negotiation to modernize NAFTA. So—and I think even the unions and the Socialist Party, our new Democratic Party, are recognizing that while they sort of thought, you know, NAFTA was a very bad thing, when they think about what the alternative is, they’re supporting that. So I think, you know, the only—and yet nobody’s suggesting the government should cave in to all the American demands. So I don’t foresee a lot of political fallout in Canada if the negotiations did not succeed and the United States were to walk away. There’d be fallout, but not political fallout.
FROMAN: You know, it’s interesting. The politics around NAFTA in the U.S. are really quite interesting to watch. And if you look at the polls—and the Pew Foundation, probably the most recent polls, because they’ve been asking this question for some time: President Trump has done something rather remarkable, which is he has brought Democratic support for NAFTA up from 48 percent to 71 percent. (Laughter.)
FROMAN: Something that neither President Obama nor President Clinton were able to do.
ORTIZ-MENA: Do the people in Congress know this yet?
FROMAN: Now that—it doesn’t necessarily translate into, unfortunately, congressional support among Democratic members. Now—and by the way, in the same period of time, support among Republicans declined by about 9 points. So we have been watching this change over some time: trade generally, NAFTA specifically, for some time. It doesn’t necessarily translate into votes in Congress because even if 71 percent of Democrats support NAFTA, the parts of the stakeholders who are most active, most organized, most vociferously against carry a disproportionate amount of weight. And I raise that because it’s unclear to me what the political strategy is for bringing a revised NAFTA back to Congress for approval.
ESTEVEZ: Do you think the Trump administration is negotiating in good faith?
FROMAN: I think—yes, I think they want to see if they can fundamentally reorient NAFTA along the ways that they’ve laid out, that that would be the first, best outcome. If they can’t do that, that then perhaps they withdraw from it. But I think if they succeed in reaching an agreement, if the three countries succeed in reaching an agreement, they’ve committed to bringing it back to Congress for approval. There aren’t a lot of members of Congress who are looking forward to having another vote on NAFTA. (Laughter.) And these trade agreements are extraordinarily difficult—as I see Charlene in the audience here and others. Yeah, trade agreements are extraordinarily difficult to get through Congress. They’re always very close votes. They have traditionally taken the vast majority of Republicans and then a critical mass of Democrats. And they tend to pass by very few votes. This administration has demonstrated a somewhat unique approach to congressional relations and stakeholder management. (Laughter.) And some of the—and we may learn a lot through this administration in terms of how they’re approaching this. But if you’re going to alienate key sectors of the economy and their supporters in Congress, it’s hard to see how you put together the 218 votes in the House and the 51 in the Senate for approval. I hope somebody in the administration is thinking through, if they eliminate the dispute settlements, if they change the rules of origin in a way that Detroit can’t live with, if they make all these various changes, exactly how they’re going to cobble together the votes.
ESTEVEZ: How about the Mexican Congress—or the Senate, actually, no?
ORTIZ-MENA: Yes. You know, we do have a democracy, very noisy, very complicated, and we have Congress. So it’s not only that, you know, negotiators have to agree. The Mexican—in the case of Mexico, it’s only the Senate.
ESTEVEZ: The Senate, yeah.
ORTIZ-MENA: We don’t have to go through both houses, OK? But it’s still difficult. And I would say that it would be very difficult for the Mexican Senate to approve a new NAFTA, especially during a highly politicized environment, which is the Mexican presidential campaign that will be starting in earnest, you know, early next year and take place on July 1st, to explain why they would ratify something that, you know, just for the sake of argument would say has weakened dispute settlement mechanisms, has restricted trade, you know, going back.
ESTEVEZ: Yes, yeah.
ORTIZ-MENA: I don’t think they would be able to sell that.
ESTEVEZ: Would NAFTA favor the current candidate or pre-candidate ahead on the elections—on the polls—better to say—López Obrador?
ORTIZ-MENA: You know, I think there would not be a big political fallout, similarly to what was mentioned about Canada, because if Mexico is seen as caving to U.S. demands, then there would be a big political fallout. If there is a NAFTA sort of derailment of negotiations, I don’t think there would be a political fallout and that any candidate would benefit. That would be an economic disjuncture, but that’s completely different, Dolia.
ESTEVEZ: OK. Let me ask the last question to John before we open it up for our questions from the audience.
If the U.S. is to withdrawal—were to withdraw from NAFTA—in the six-month period, would Canada stay negotiating? Because that’s one of the scenarios that they’ve been mentioning. OK, we’re going to withdraw, but it’s going—we’re going to continue negotiating and—
FROMAN: Give notice of withdrawal.
ESTEVEZ: Yeah, give notice of withdrawal—I’m sorry—give notice of withdrawal and then use the six months to continue negotiating, and this way they send a message that they’re serious about it and U.S. and Canada and Mexico would feel the pressure?
WEEKES: Well, I don’t represent the Canadian government, but I mean, I think it would make sense to continue negotiating because—
ESTEVEZ: With a notice of withdrawal.
WEEKES: Yeah, I mean, but making it clear that certain things were unacceptable. I don’t want to see a situation in which tactically the United States sort of forces Canada to walk away from the table and walk away from the NAFTA. I think it anybody’s going to walk away from the NAFTA, it should be the United States because they’re the ones who are trying to distort what the purpose of the trade agreement was in the first place, or at least that would seem to be the import of their proposal.
ESTEVEZ: How about Mexico. Would they stay after a withdrawal notice?
ORTIZ-MENA: Well, again, I don’t speak for the Mexican government.
WEEKES: Go for it. (Laughter.)
ORTIZ-MENA: But I think it would be very difficult for the Mexican government to keep negotiating, to say with a gun to its head under a threat, especially in a highly politicalized environment. My sense is that the Mexican government will try not to walk away from the negotiations and to, you know, continue through the, you know, seven rounds. There’s talk about extending the time each round lasts. So Mexico will try to stick with it until the end. But I find it hard—
ESTEVEZ: As long as there’s not a withdrawal notice.
ORTIZ-MENA: Yes, as long as there’s not a withdrawal notice. I think it would be politically very difficult to stay at the table with a withdrawal notice.
ESTEVEZ: Michael, what do you think?
FROMAN: Well, I think Antonio is right about that. But given the practice we’ve seen of the administration in other areas, including the Iran agreement, other things, you can see him—them taking a step, whether or not they intend to pull out at the end, but a—the kind of step designed to ratchet up pressure.
OK. The gentleman over there. Please introduce yourself. Thank you.
Q: My name is Larry Bridwell, and I teach MBA students at Pace University in New York.
On the NAFTA, the big, big issue, in my opinion, is that the trade is balanced, generally speaking, except in automobiles, and there’s a $60 billion deficit in Mexico—in Mexico’s favor in the automobile sector. And of course, President Trump got a lot of votes in Ohio and Michigan. And so my question to Mr. Ortiz-Mena is: What is the Mexican government going to do to deal with that $60 billion deficit in automobiles?
ORTIZ-MENA: Should we take several or—
ESTEVEZ: No, no, just one at a time.
ORTIZ-MENA: OK. Well, you know, a couple of items. First, I strongly disagree that focusing on the trade balance is the correct way to assess trade agreements. I think that was tried a couple centuries ago with the mercantilists, and we’ve apparently moved on since. So, first of all, I don’t think that’s the right way to assess it.
Secondly, the auto sector is the most integrated sector in North America. So you have to look at the value added in terms of the trade, and how a lot of auto parts, imports coming to the United States from Mexico has a U.S. component. So, first, don’t agree with looking at it that way. And if you want to, you know, focus on trade flows, I think it’s important to look at intra-industry trade and intra-firm trade to get a clear picture of what the situation is.
Thirdly, the percentage of U.S. value-added in North American autos has been going up. It hasn’t been going down. And lastly—I believe I mentioned this briefly—if the rules of origin were to be increased in the auto sector and to have a U.S. content requirement, I think that most auto companies will simply ignore them and use WTO MFN rules. As it is, a large share of auto trade already takes place in North America under WTO rules, not under NAFTA rules.
And lastly, if for political pressure some auto companies, maybe U.S. auto companies felt compelled to source more in the U.S., this would make autos more expensive for consumers in North America. And North American auto exports, including those from the U.S., would lose share in third markets, which would not exactly help to reduce the U.S. trade deficit.
ORTIZ-MENA: So, you know, those are my thoughts on this issue.
ESTEVEZ: Do you want to say anything?
FROMAN: Well, I’d just say, one, I think every legitimate economist will state that measuring trade policy by the size of the goods deficits, which is all the administration focuses on, is probably not a passing grade in a basic economics class. You know, having said that, it is a widely, strongly held view of the president, his Cabinet.
ESTEVEZ: Where does it come from? I mean, who of his advisers or who—
FROMAN: I won’t pretend to know. Only that the view is—
ESTEVEZ: But someone is feeding him this line.
FROMAN: —only the view that, you know, deficits mean you lose and write a check to other countries, and surpluses mean you win. And they only look at goods. But it is a deeply held view, and I think they will be looking to see what can be done to improve those bilateral balances.
There’s a lot of things outside of trade agreements that affect that and can be used; for example, energy trade, which is not really affected by trade agreements at all. But as Mexico looks to see how it buys energy in the future, you could see—or Japan looks to how it buys energy in the future—you could see two countries like that, with large bilateral trade deficits with us, changing.
The last thing I’d say is, on the rules of origin, the NAFTA rules of origin is problematic on autos. There is a big loophole in it. The 62 ½ percent that is often talked about only apply to a specific list of parts, the tracing list. And it turns out cars have evolved since 1992, and those parts comprise a decrease in the—decreasing share of the value of a car. Now there are 80 million lines of code in certain cars. There were zero electronics in 1992.
So that’s one reason, again, in TPP we tried to fix that by redefining the rules of origin so that, however a car evolves in the future—who knows whether they will have tires in the future, whether there’ll be a flying car. Who knows, right? How every car evolves, it had to maintain a certain high rule of origin. So there is work that can be done to improve the rules of origin. But to Antonio’s point, if you raise it too high or in a counterproductive way, you may find that the companies simply ignore it and it actually has the obverse effect.
ORTIZ-MENA: On that specific point, I think trade in services is also highly disregarded. There’s a sense that if you can kick it, you know, it’s not relevant.
ORTIZ-MENA: And trade in services is very important for Mexico-U.S. trade.
WEEKES: And the U.S. has a very large surplus.
ORTIZ-MENA: And the U.S. has a very large surplus. That’s right.
FROMAN: And four out of five Americans are employed in services.
ORTIZ-MENA: There you go. (Laughs.)
Q: (Inaudible)—of Berkeley Research Group.
For the Canadian and Mexican speakers, if the U.S. withdraws—if the U.S. withdraws, would Canada and Mexico keep the old NAFTA or incorporate some of the significant progress that’s been made in chapters that update the NAFTA? Even with the U.S. participation, there’s quite a lot of progress that has been made underneath the surface of these big debates on rules of origin and agriculture.
WEEKES: Want me to start?
WEEKES: Well, I—again, I don’t speak for the Canadian government; maybe a little premature to be thinking of how we’ll manage our bilateral relationship in the old trilateral agreement if the United States were to withdraw. But, I mean, why not? I mean, you know, some of the modernization improvements that are being made in the negotiations are very useful.
They’re updating the agreement to take account of things that didn’t exist when it was originally negotiated. It would make sense to do that. But, you know, that would have to be weighed against, you know, the simplicity of doing it and how long it would take. It might also make the agreement somewhat more attractive for the United States to think of applying to join again under a different administration.
ORTIZ-MENA: Yes. I think, again—I love these disclaimers; I don’t speak for the Mexican government or the Canadian government either.
WEEKES: Yeah. (Laughs.)
ORTIZ-MENA: But I think it’s likely that Canada and Mexico could revamp it, because a lot of things they’re looking for are the same, like having stronger and more effective, you know, dispute settlement. They’re not looking to eliminating Chapter 19. They’re both speaking about including a gender perspective on a new NAFTA. So that’s significant.
And lastly, I think it’s important to have a flexible NAFTA. A lot of what I hear from the U.S. is about coal and steel, and that reminds me of the beginnings of European integration after World War II. I think they’d rather be thinking about new technological developments, you know, as Michael was saying.
Who knows what an auto would be, you know, 10 or 20 years from now? So the rules of origin that we craft now might be irrelevant. We have to think along those lines.
Q: Irving Williamson, U.S. International Trade Agreement.
Congressman Levin was here about a month ago, and I know it’s important for many other Democrats, the labor provisions in NAFTA, particularly having stronger independent unions and Mexico. And I was wondering if you all want to address this question of worker rights and how that might play out.
ESTEVEZ: Yeah, that’s a good question, particularly on the question of not only workers’ rights, but also the salary, the wages.
ORTIZ-MENA: I guess that’s addressed at me. (Laughter.)
ESTEVEZ: Well, I guess so.
WEEKES: I do want to speak to it as well. So you go first.
ESTEVEZ: OK, yes.
ESTEVEZ: Yeah, because Canada also—
WEEKES: We have a proposal on the table.
ESTEVEZ: Yes. Yes. That’s right.
ORTIZ-MENA: But the U.S. thinks about that proposal. But in terms of labor issues, I think they are very relevant, both politically—I think it’ll be necessary to pass any modernized NAFTA in the U.S.—and also substantively.
But I think that there are three specific issues that are being discussed under labor. The first regards, you know, Mexico and, you know, Canada-U.S. commitments in their own labor laws and international commitments. And that has to do with, you know, union rights, labor rights, et cetera. And I think that a lot of progress can be made in that regard. So I don’t see that as a deal breaker. And there’s something called the TPP where there was a lot of agreement on that issue.
Secondly, there’s the issue of dispute-settlement provisions for labor. In the current NAFTA, that’s part of the labor cooperation agreement with what is frankly a pretty week dispute-settlement provision. And the idea is to bring labor into the thrust of the agreement, to use it under what was supposedly a very strong dispute-settlement mechanism. Now, the U.S. apparently wants to water that down, but let’s put that aside. It's supposed to have a stronger dispute-settlement provision to deal with labor disputes. And I think that can be addressed.
The third issue that I think is more problematic has to do with Mexican wages. Now, I think it is very—politically would be very difficult to have, say, a regional body or someone else that Mexicans themselves address what the right level of wages are. Now, that being said, I think a lot can be done through transparency; for example, by making public how productivity has increased in Mexico and assessing whether wage increases keep pace with productivity increases. This is not sort of something that will, you know, make for a good bumper-sticker thing, but I think that’s a constructive way to deal with the wage issue.
ESTEVEZ: OK. Next question.
WEEKES: Well, I was going to say—
WEEKES: —you know, we put forward a fairly ambitious proposal in the labor chapter. I suspect it was partly because we realized it might embarrass the United States a bit. One of the things we put in it was that there should be an obligation to adhere to the core labor standards in the ILO, of which the United States belongs to less than half; I forget exactly the numbers.
But Canada, on the other hand, has just recently finished ratifying them all. So we’re in a position to be able to say, well, come on, you know, you want strong labor provisions. Why don’t we get on board what the international norm is and put this into a trade agreement with teeth and, you know, force compliance? But that hasn’t gone down very well. (Laughter.)
FROMAN: Well, I think there’s no doubt that we—the U.S. believes that, in fact, we do apply all the ILO principles.
WEEKES: Well, put them in the agreement.
FROMAN: By the way, China has signed on to all the conventions too. So you and China are both key defenders—(laughter)—of workers’ rights. Congratulations. (Laughter.)
WEEKES: We’re negotiating with—we’re negotiating—we may be negotiating a free-trade agreement with China.
FROMAN: That’s perfect.
WEEKES: And we suggest putting that in. But—
FORMAN: It goes to the form-over-substance issue, which is there are the conventions that lots of countries sign onto and then do not implement whatsoever, and there are the principles that we believe that the U.S. does comply with.
But let me—just to go back to Irv’s question, I think having binding and enforceable labor provisions that frankly drop from the ILO—the ILO five labor principles—right to collective bargaining, right to organize, prohibitions on forced labor, child labor, et cetera, acceptable conditions of work, where you talk about wages, hours, workplace regulation—those are all things that, in fact, we got agreed to in TPP.
And I just want to mention that not because I’m a one-note Johnny—maybe I am—but because all this whole discussion about the renegotiation of NAFTA isn’t happening in a vacuum. The TPP 11 countries, the 12 minus the United States, are considering moving forward with TPP and to put in place a lot of those things that we have been talking about here, which could help update NAFTA among the parties that are—the two countries that are parties to NAFTA that are also party to the TPP—the TPP 11.
I think, you know, to go to Congressman Levin’s point, because he played a very critical role in encouraging us down that road, he also highlighted three critical reforms in Mexico that needed to take place having to do with protection contracts, the recuento process, and the conciliation arbitration boards, all of which Mexico on its own committed to and were in the process of implementing when the Trump administration pulled TPP.
So if folks really care about improving workers’ rights in Mexico as a way of leveling the playing field, having real independent unions with real recourse and having a structure that supports that, there is an off-the-shelf mechanism for doing that. And if you really cared about that, you would be supporting it rather than opposing it.
ESTEVEZ: The gentleman here and then you.
Q: Rick Gilmore, GIC Group.
I tend to—we’re an agribusiness company, so I tend to look at things through an agro lens. And my question is—no one’s addressed if we had this extreme—what I would call this extreme scenario of withdrawal notification. No one’s mentioned the bi-elections and the fact that the Midwest is said to have delivered the victory of President Trump.
So what kind of a constraint do you think, in the final analysis, that may be? Because there is uniform—in my view, uniform consensus among the agro groups that withdrawing from NAFTA is a disaster. This is an opportunity for Mike to have another joke, but—(laughter)—I’d be interested in the answer.
ESTEVEZ: Oh, yeah. That’s—
FROMAN: Well, I don’t have a license to practice politics, Rick. (Laughter.) But I think—I think it’s been—I remember seeing—going to see a farm-state senator right after the election. And he said to me 100 percent of my constituents are in favor of TPP—I’m sure he would have said the same thing about NAFTA—and 100 percent of them are in favor of Trump.
And I think the question is, how do the people who supported him, how important is this to their support for him or for others going forward and whether this is the critical factor that they will turn their vote on or turn their support on. And we haven’t seen that yet, I don’t think. And maybe the midterm election will be an opportunity to test that proposition.
ESTEVEZ: The lady here.
Q: Thank you. I’m Mitzi Wertheim with the Naval Postgraduate School, and I never studied economics.
I wonder if, collectively or individually, you could write the equivalent of “Astrophysics for People in a Hurry,” which has been a number one bestseller on the New York Times list. And I could understand it. Is there a way—I mean, you’ve done some wonderful explanations here, but they’re not all tied together. And I think you owe it to the general public to give them an understanding. I mean, your statistics were very enlightening. And a lot of these things are numbers and how people feel about them. So I give you all a challenge, because I think we have a responsibility—
ESTEVEZ: Do you have a specific question?
Q: Well, will you write something that the general public—
Q: —can understand?
ESTEVEZ: I see.
FROMAN: Ted Alden will. (Laughter.)
WEEKES: Michael’s a terrific communicator. (Laughter.)
FROMAN: I think—by the way, I think your point’s a very good one. And it’s so hard—it’s easy to criticize trade on a bumper sticker, and it takes a paragraph to defend it.
FROMAN: And we need to do a better job, all of us who care about this, in not just explaining—it’s not just a communications issue, but there is a communications issue—making it real for people.
Q: Well, and you have to have illustrations.
FROMAN: You know, we can—we can build walls around our economy and make all of the iPhones here in the United States, but they’ll cost two and a half thousand dollars. And your single mother who is using the iPhone between jobs to FaceTime with her kids at home won’t be able to do that. And, you know, that’s just one of several examples.
You know, the way—we are so—we have taken for granted the benefits of trade, the fact that you can clothe your family and buy them their back-to-school supplies on a relatively modest budget, or the fact that we eat grapes 12 months a year. We didn’t when I was a kid, right? You got seasonal food. But now we have international trade in agriculture in a way that gives us much more choice and affordability of the things that we consume every day.
The successive tariff cuts of the various trade agreements over the last 50 years has added about $13,000 to each American family’s income—$13,000. So, you know, there are ways—we have to do a better job of making it relevant to people, because what we saw, I think, in the last election, when you’re trying to sell hope, you know, and the possibility of hope, fear almost always wins.
And so we’ve got to sort of make it clear really what’s at stake in people’s day-to-day lives by moving backwards from where we are today.
ORTIZ-MENA: Can I make—can I make a comment about that?
ORTIZ-MENA: Well, first, you know, it’s become a custom that at every panel where I am I do a plug for the Peterson Institute, so here again. So Chad is there. And I think the Peterson Institute for International Economics does a wonderful job of laying out in simple terms a lot of very complex trade-policy issues. There’s also a wonderful podcast. So those are two sort of off-the-shelf resources.
But a more important point I want to make is that when I was at the head of economic affairs at the Mexican embassy, I tried many times and failed many times to get U.S. companies to explain how their producing in Mexico and Canada and the U.S. benefited their workers in the U.S. and their shareholders in their company, which doesn’t have to be just Wall Street. A lot of 401Ks are, you know, in Fortune 500 companies.
And all these companies said, you know, I can’t do it. I’ll be accused of, you know, outsourcing. My legal counsel won’t do it, and a lot of other very creative excuses. And now we are where we are. And I think that it’s time for a lot of companies to explain, using examples, not statistics, how their supply chain works and why it is in the benefit for U.S. workers for their supply chain to work the way it does.
WEEKES: Let me just add. I mean, I completely agree with, you know, the conversation that your question has stimulated. And I think we haven’t done a good enough job explaining the benefits of trade. That’s true, I think, in all three countries. And it’s been politically uninteresting to do so too.
I mean, if you look, as Michael was saying earlier, you know, Trump wasn’t the first one to run on an anti-free-trade platform. It’s been kind of fashionable to do so, because it’s easier to use the bumper-sticker approach than the paragraph of explaining why it’s good. But there are a lot of really good explanations as to why trade is beneficial, some of which you just heard from Michael. And I think we really need to look at how we get back to that. And this has been a wakeup call on that front.
Q: Thank you.
Q: It calls for a retail strategy—
ESTEVEZ: Who are you?
Q: My name is Wanda Felton. I was formerly with the Export-Import Bank in the Obama administration.
And what Michael just said is so on point. It calls for a retail strategy. And I’m just curious at who’s undertaking that in the DNC—(laughter)—if anyone.
FROMAN: The DNC promoting trade? Is that—(laughter)—let me get back to you on that. (Laughter.) Now, look—
WEEKES: (Inaudible)—according to the polling.
FROMAN: But, you know, but let me take it one step further, because I think it is—it’s always easy to say, oh, we have a communications problem. And I think we do, and we need to take that more seriously. But we also have a substantive issue, which is the concerns that we saw expressed building up to the last election and through the last election about wage stagnation, about income inequality, about a big part of the country feeling like they’re being left behind, that the system isn’t working for them. Those are legitimate issues.
And as a country, as a government, Republican and Democratic, we have not dealt with those issues sufficiently well. We have not really taken on the challenge of how do you prepare people with the skills they need to succeed in a rapidly changing economy? And then how do you help people and communities who are adversely affected, whether it’s by technology or immigration or globalization? And we can’t—we have not yet—
ESTEVEZ: Job loss.
FROMAN: —had a serious conversation about that yet. And the reason why that’s important now is, if you think about the last election, if you saw all the anger expressed, that was in the context of 15 ½ million new jobs, 4 ½ percent unemployment, wages that had gone up 2 ½ percent a year for the previous couple of years.
If any of the estimates about the impact of artificial intelligence and robotics and autonomous vehicles, if they’re even 30 percent right, it’s going to have such a more significant impact on the workforce than anything that we’ve seen in the past related to globalization. And if we don’t get our arms around these other issues, it will have very significant political and social implications.
ESTEVEZ: Well, back there—the gentleman with the glasses.
FROMAN: You should read Ted Alden’s book about this, by the way.
Q: No, just a two-finger on that question. My name is Marty Weiss with the Congressional Research Service.
I think this—your point is well made, but it harkens back to the—kind of to the retail-strategy point, that what is going to drive that conversation if, you know, the money supporting candidates is not coming from the disaffected workers in, you know—in the middle U.S.
FROMAN: But, you know, I actually—this just shows my naivete on politics, but I actually thought, coming out of the last election, when there was such an upswell of concern from people who really felt like they were being left behind, that you would have seen more political action by Republicans, as well as Democrats. I mean, Democrats have always talked about President Obama putting in his budget free community college, all sorts of programs to try and address this, and they never went anywhere with the Congress.
I thought, for the first time perhaps, Republicans too would feel like this is a cohort that we need to address their concerns, and there would be more political impetus around dealing with the issues. But in the last year we have yet to see that.
Q: Thanks. Greg Ip of The Wall Street Journal.
If NAFTA goes away, what impact do you think this might have on bilateral disputes such as countervail, anti-dump, and safeguard?
ORTIZ-MENA: OK. Well, if it goes away—well, supposedly Chapter 19 provides for the establishment of panels to review determinations on those issues would go away. And that means that there would be greater discretion by U.S. authorities to impose AD/CVD duties. That would create a lot of uncertainty, and that would hamper, you know, regional trade and investment flows.
Now, that being said, the Canadian authorities and the Mexican authorities would have the same discretion that the U.S. authorities would have. So U.S. exporters might be having more of a challenge accessing their first- and second-most important markets worldwide.
Sort of astounding about why the U.S. is insisting on the enforcements of agreements—and that has been taking place for years, right? The U.S. has been talking about the enforcement of agreements and about securing access to other markets, and then watering down dispute-settlement provisions. I still can’t get my mind around that.
WEEKES: And, if I could just add to that a bit—and it’s not only in the NAFTA, because in the WTO the United States has been objecting or blocking the process for the appointment of new members to the WTO appellate body, apparently largely out of concern with the way the appellate body has interpreted American obligations under the WTO with respect to anti-dumping and countervailing duties and safeguards; so these same areas.
So it’s not just in the NAFTA that this is now a problem, but also in the WTO. I mean, I think it’s pretty clear that, you know, for quite a period of time people have begun to sort of wonder, is Chapter 19 really important any longer in the NAFTA? Because there hadn’t been much recourse to it for a number of years. Well, the reason there wasn’t much recourse to it was, in important part, because the United States wasn’t initiating many countervailing-duty and anti-dumping investigations or safeguard investigations against Canada, anyway, in the last 10 years.
That’s now changed, and we have a Commerce Department which has made clear they’re going to do a lot of self-initiation too, not just relying on industry to bring forward complaints. And I think you have to say, I mean, whatever you think the merits of the countervailing—Boeing’s complaint against Bombardier’s—the government support for Bombardier—it’s interesting that the—I think Boeing was asking for imposition of provisional duties of something like 60 or 80 percent, and the provisional duties are in the order of 220 percent, which I’m—without looking at any of the facts, suggests to me that there’s something going on here.
OK, on that note, I want to thank you, everybody here, for being here and for your contribution to this discussion. Thank you. (Applause.)