Manufacturing CEOs Greet NAFTA Developments With Hope, Caution

A tentative new trade deal between the United States and Mexico — with the possibility of Canada joining in — has American manufacturing CEOs cheering on, many who believe a Trumpian agreement will boost their position in a global automotive market that remains robust despite recent cooling.

But manufacturing leaders also sounded notes of caution pending the shape of a final agreement, about whether it will include Canada, over what President Trump might do about America’s trade relationship with China and regarding likely cost increases.

Manufacturing CEOs like the fact that a new North American Free Trade Agreement (NAFTA) appears near. And many support the pact that was shaping up with Mexico, which would boost requirements for vehicles sold in the United States to have domestic, high-cost-labor content; investment protections for some industries; stronger intellectual-property protections; and an absence of language that would “sunset” the agreement every five years.

“As we modify the prior agreement and make it more fair and just, it’s going to be good for the United States for the long term,” says John Haas, president of Cadillac Casting, an iron foundry in Cadillac, Michigan.

“We are optimistic that the new agreement will maintain and encourage the ongoing competitiveness of the United States and North American auto industries,” said Matt Blunt, president of the American Automotive Policy Council, which represents the Big Three U.S. auto makers.

Yet CEOs are keen on ensuring that any new trade alliance also include Canada and that a single agreement among all three countries would replace the existing North American Free Trade Agreement.

“It is imperative that a trilateral agreement be inked,” said the National Association of Manufacturers. The Business Roundtable said that the structure “must remain trilateral. Replacing NAFTA with one or two bilateral agreement would create more regulatory burdens, disrupt North American supply chains and hurt U.S. workers and businesses.”

Haas says that new trade agreements with Mexico and Canada likely would contribute to upward cost pressures that already are working their way through the industry thanks to U.S. tariffs on imported steel and aluminum.

“We’ll see some cost increases, but that’s because Mexico had a financial advantage over the years,” says Haas, who previously was an executive of competitor Grede Foundries and an industry consultant.

And while new-car sales in the U.S. market have leveled off over the last year, the easing came after a decade-long boom. “There’s some inflection [in trade agreements] that can happen without adverse effects on the marketplace,” Haas says. “Every manufacturer right now is running full-out.”

Besides, says Haas and other auto-industry CEOs, the U.S. trade imbalance with China, and Chinese trade practices, remain a much bigger problem overall than any inequities that exist in NAFTA. “I’m not sure we are going to fix that very quickly,” he says, “but in the long term it’s necessary.”

Read more: National Association of Manufacturers’ David Farr: Industry Is In A Trump-Boom Renaissance