Wilbur Ross: These NAFTA rules are killing our jobs

[Mittens]

Wilbur Ross explaining why the US wants to change the rule of origin in the NAFTA renegotiation.

As the North American Free Trade Agreement negotiations unfold, there is a lot of loose talk being exchanged about automobile parts going back and forth among the United States, Canada and Mexico. NAFTA supporters assert that the U.S. content in cars assembled in Canada and Mexico is particularly high and that therefore our $70 billion-plus trade deficits with our NAFTA partners are not worrisome.

That would be a great argument if it were correct. But it isn’t. That argument is neither true of motor vehicles nor of manufactured goods in general.

A study to be released Friday by Anne Flatness and Chris Rasmussen of the Office of Trade and Economic Analysis within the Commerce Department proves its falsity. The study, based on Trade in Value Added data recently released by the Organization for Economic Cooperation and Development, shows that between 1995, the year after NAFTA went into effect, and 2011, U.S. content of manufactured goods imported from Canada dropped significantly — from 21 percent to 15 percent. U.S. content in goods imported from Mexico fell even more — from 26 percent to 16 percent. The data is available only until 2011, but there is no reason to think that the situation has improved since then.

The numbers for the automobile industry specifically are similar — not surprising because automobiles account for 27 percent of total imports from Canada and Mexico. Indeed, automobiles drive the U.S. trade deficit with those countries; the United States would enjoy a trade surplus with its NAFTA partners were it not for the trade deficit in autos and auto parts.

These data debunk the claim that U.S. content in the form of parts is so high that we shouldn’t worry about headline gross-deficit figures. Nor is this a trivial concern: Canada and Mexico combined are the largest source of manufactured products imported into the United States, accounting for nearly a quarter of our imports.

This problem is particularly troubling because the previous U.S. share of the content found in imports from Canada and Mexico is largely being absorbed by non-NAFTA trading partners, not by Canada and Mexico themselves. The share of content from foreign countries other than Canada and Mexico has almost doubled in our imports from Mexico, from 14 percent to 27 percent. The non-NAFTA content of our imports from Canada likewise rose, from 12 percent to 21 percent.

We cannot forget that the point of a free-trade agreement is to advantage those within the agreement — not to help outsiders. Instead, NAFTA has provided entry into a bigger market for outside countries, and the United States is paying the price. While NAFTA has achieved its goal of increasing three-way trade in absolute terms, American workers and businesses are not benefiting in a way that is fair and reciprocal.

What does this mean for U.S. jobs?

Hundreds of thousands of Americans go to work every day in the automobile manufacturing industry. The declining U.S. share of content in imports from Canada and Mexico puts those jobs at risk. The United States accounts for an overwhelming share of the total NAFTA auto market today — 83 percent, in fact — yet American workers are not reaping the benefits of that purchasing power.

So, why is this happening?

NAFTA included “rules of origin” provisions that were intended to restrict the non-NAFTA content in final goods. Yet the numbers above show that the opposite has, in fact, happened.

Unfortunately, NAFTA rules of origin on automobiles listed the exact parts to which the rules of origin applied, and many of those parts are no longer used. Another reason is that the rules include a concept called substantial transformation, which means that if further processing of a non-NAFTA item is done by a NAFTA partner, the non-NAFTA items are “transformed” and are deemed to have been produced in the United States, Canada or Mexico.

These facts are why U.S. Trade Representative Robert E. Lighthizer announced that two major objectives for NAFTA are raising the total NAFTA content requirement and raising the U.S. share of that requirement, especially in autos and auto parts.

Autos and auto parts are particularly important because our combined trade deficit in autos and auto parts from Canada and Mexico is $84.6 billion annually, which is the vast majority of our total trade in goods deficit with our neighbors. Only $14.6 billion of that deficit is offset by surpluses in other product categories. That is why we have a NAFTA net trade deficit in goods of $70 billion.

If we don’t fix the rules of origin, negotiations on the rest of the agreement will fail to meaningfully shift the trade imbalance. Our nation’s ballooning trade deficit has gutted American manufacturing, killed jobs and sapped our wealth. That is going to change under President Trump, and rules of origin are just the beginning.

https://www.washingtonpost.com/opini...=.2969f8859da7

[Slant]

I don't see how the changes are supposed to help the US market.

[Mittens]

I don't see how the changes are supposed to help the US market.

Sorry for the very late response. But I didn't see your post. Under the current set up supply chains of autoparta are being moved out of the USA to other non-NAFTA countries, while taking advantage of the acces NAFTA provides. Ross is proposing fixing these loopholes so that supply chains would have to either come back or face the trade barriers.

[Rasulis]

Wilbur Ross explaining why the US wants to change the rule of origin in the NAFTA renegotiation.



https://www.washingtonpost.com/opini...=.2969f8859da7

That actually makes sense. Right now a lot of the electronics components for the vehicles are coming from Asia. Now they just have find other sources for those components and hopefully keep the consumer prices the same.

[Deletedaccount1]

I'll trade cheaper goods for less jobs any day. If you are worried about unemployment than slash the minimum wage. Are there no economists working in this administration besides Navarro (who is the most fringe protectionist in his profession)?

[Tijuana]

That actually makes sense. Right now a lot of the electronics components for the vehicles are coming from Asia. Now they just have find other sources for those components and hopefully keep the consumer prices the same.

The most American made car, the Corvette, is something like only 60% American. These companies are just putting the last screw on in the US, and calling it made in the USA.

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I'll trade cheaper goods for less jobs any day. If you are worried about unemployment than slash the minimum wage. Are there no economists working in this administration besides Navarro (who is the most fringe protectionist in his profession)?

Being for free markets is one thing, pretending like they are free now is just asinine. It's not pro free market to allow your competitor to take advantage of you. That's just being pro anal sex. Markets need to be free on both sides.

[Milchshake]

Poor Wilbur Ross, he's probably missing the days of when got to kill coal and steel jobs himself. Bankrupting mills and mines up and down the Ohio Valley.

Or get the miners killed outright in the Sago Disaster.

Nice to see Trump appointed the best job-killers to his administration.

[Slant]

Sorry for the very late response. But I didn't see your post. Under the current set up supply chains of autoparta are being moved out of the USA to other non-NAFTA countries, while taking advantage of the acces NAFTA provides. Ross is proposing fixing these loopholes so that supply chains would have to either come back or face the trade barriers.

It was my impression that autoparts would go back and forth several times anyway...

[Realitytrembles]

I'll trade cheaper goods for less jobs any day.

Until the middle and working classes are hollowed out to the point that few people can afford the goods being produced.

Then, either UBI or hello pitchforks.

[Lynarii]

While I mostly think that the chest thumping over 'trade deficit so unfair' is stupid, there are some credible points being raised here. NAFTA is supposed to benefit the US, Canada, and Mexico. It /is/ wrong that companies are trying to get goods from countries not among the three listed covered by NAFTA rules. It was also a mistake that the content rules were made and applied to specific parts and have not been updated to take into account the changes in parts being used in vehicles.

Just talking trade deficit is a shell game. If it's super unfair to the US for them to have a trade deficit with another country, then wouldn't it be super unfair to that country for the US to have a trade surplus with them? The reality is that a good trade deal should be a net benefit to both countries, it isn't a zero sum game. But benefits shouldn't be shifted out of the market in question entirely, if China wants to benefit from the US market it should be via a trade deal between China and the US. Not through a backdoor into NAFTA.

[Thoughtful Trolli]

Until the middle and working classes are hollowed out to the point that few people can afford the goods being produced.

Then, either UBI or hello pitchforks.

what's UBI?

Unibersal income?

[Delaios]

what's UBI?

Universal basic income?

there you go

[Mormolyce]

I'll trade cheaper goods for less jobs any day. If you are worried about unemployment than slash the minimum wage. Are there no economists working in this administration besides Navarro (who is the most fringe protectionist in his profession)?

Yes but see people in actual positions of power have to deal with unpleasant realities like their voters being less than thrilled about losing their jobs and you "helping" them by slashing the minimum wage and telling them the invisible hand of the market will fix it all.

They can't just sit in the Austrian school of economics' ivory tower sucking their own cocks to the rhythm of self-satisfying reality-free ideologies all day.