Automakers' CEO Praises USMCA for Addressing Currency, Criticizes Steel Tariffs on Neighbors
Autos and auto parts make up 25 percent of the NAFTA trade, and the head of the trade group that represents Detroit's Big 3 auto firms says they will push aggressively to get the NAFTA rewrite through Congress next year. Matt Blunt, CEO of the American Automotive Policy Council, said, "If party control changes in one of the chambers, that does make it more difficult to gain approval of USMCA, but I still think it's highly doable." Blunt is the former governor of Missouri, and his father Roy Blunt is in the Republican leadership in the U.S. Senate.
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Blunt, one of four panelists talking Oct. 18 about how the U.S.-Mexico-Canada Agreement is better or worse than the current NAFTA, said the greatest improvements to the deal are those that could be used as a template in future FTAs. Trading partners are required to accept U.S. safety standards for vehicles, he noted, and, "of course the currency provisions, which has been a longstanding objective of AAPC." For the first time, currency manipulation is addressed in a trade treaty. "We would've preferred a stronger agreement," Blunt said, with manipulation clearly defined, but getting the provision in at all is significant.
He said while the multilayered rules of origin standards for autos will be challenging for companies to comply with, they do believe it's manageable, and will not make North American cars too expensive to compete outside the region.
What is making American cars less competitive, he said, is 25 percent tariffs on steel and 10 percent tariffs on aluminum. The fact that Section 232 tariffs were not waived for Canada and Mexico was Detroit's "biggest disappointment," he said. "It's perhaps our highest priority right now." He said the higher metal prices -- even for domestic supplies -- have added $400 to the cost of making a car.
An official from the Meat Institute asked Blunt during the Q&A at the Washington International Trade Association event when those tariffs might be lifted, as retaliatory tariffs are hurting his pork producing members' exports into Mexico. Blunt said he didn't know, but that his members are pushing to get it done before the deal is signed by the three countries' leaders at the end of November. "Our goal would be a complete exclusion for Canada and Mexico," Blunt said, not quotas reducing those countries' exports to the U.S. But he said he thinks the administration is looking to cap Mexican and Canadian imports with quotas, though they could be willing to admit metal in over the quotas if those imports were subject to tariffs.
A tariff rate quota system was what President Donald Trump attacked repeatedly in Canada's dairy regime. Joe Glauber, a senior research fellow at the International Food Policy Research Institute, said the new trade deal has very small improvements in market access for American dairy producers. "If you look at overall dairy exports these are pretty small," he said. "This is not like it's going to be dramatically changing the dairy industry."
However, Glauber noted, aside from dairy, peanuts and sugar in the U.S., and dairy, poultry and eggs in Canada, agricultural trade was duty-free and unfettered under NAFTA, and that will continue in USMCA. He said that most growers were relieved that the antidumping seasonality proposal did not make it into the treaty. "I think a lot of people were caught off-guard when they saw those provisions in the asks," Glauber said. He said that California growers opposed it, and that if it had made it into the treaty, U.S. fruit and vegetable growers could have faced antidumping duties from, for instance, the greenhouse industry in British Columbia. It could have opened up all sorts of mischief, he said.
Glauber said he believes the bill (see 1809270037) introduced by the Florida delegation to create a seasonality antidumping option is unlikely to become law. "I hope it doesn't have much chance, and I suspect it won't," he said.
Panelists also included executives from the services industries. Kimberley Claman, director of international government affairs for Citi, said financial services interests will be telling Congress they want the implementing bill to be clearer on state-state dispute panels, with language saying no country can block the appointment of a panel (see 1807230029). "We saw this happen when Mexico tried to bring a sugar case," she said. "We want to make sure there's an effective enforcement mechanism."