NAFTA and US Automakers
THE Mexican government is spending an estimated $30 million to lobby Congress to pass the North American Free Trade Agreement (NAFTA).Skip to next paragraph
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This agreement represents a net loss to America and American workers, particularly in key manufacturing sectors. NAFTA is a fatally flawed proposal and should be rejected or renegotiated. It is a failed US trade policy practiced by Democrats and Republicans alike over the past 12 years.
For instance, Mexico effectively now blocks United States autos from being sold to its own consumers through discriminatory provisions in its laws. Under the NAFTA proposal, these protectionist restrictions against US cars are only slowly phased out over a 10-year period. The US has no equivalent restriction.
Further, Mexico's current laws require Mexican auto manufacturers to purchase at least 36 percent of the parts from Mexican manufacturers, yet another protectionist policy that would not be eliminated for 10 years under NAFTA. Again, the US has no such protections.
These laws have helped Mexico's auto production at the expense of US workers and have done so in a dramatic fashion. If this is supposed to be a balanced agreement, why do we allow Mexico's discriminatory restrictions to exist? Why don't we put the same restrictions on cars assembled in Mexico that they place on ours and phase our restrictions out over 10 years? It's time to tell our trading partners that we're treating them no better than they treat us.
President Clinton was right when he stated last February that, in terms of international trade agreements, "We can no longer afford to wait for 10 years while someone does something to us that we do not respond to." Let's stick to that principle.
NAFTA will also encourage small-car production to relocate from the US to Mexico. The NAFTA text allows cars produced in Mexico to be counted as "domestic" after three years for purposes of corporate average fuel economy standards. This will give US automakers an incentive to shift small-car production to Mexico, since they no longer would need to make the most fuel-efficient cars in the US to help them meet overall fuel economy standards.
The auto tariff phase-out under NAFTA is even more unfairly skewed in Mexico's favor. The US tariff on imported autos of only 2.5 percent is immediately reduced to zero under NAFTA. Mexico's auto tariff stands at 20 percent and will be reduced only to 10 percent in the first year, and then only slowly phased out through the end of the century.
These are just some of the unfair auto provisions in NAFTA. And they should be considered in the broader context of Mexico's growing auto production. Mexico's auto sector employment has grown by 833 percent from 1982 to 1991.
Some proponents of NAFTA point out that jobs are already being lost even without NAFTA. That's true because we allowed discriminatory restrictions on cars without placing equivalent restrictions on cars made in Mexico coming here. The answer isn't to make Mexico's discriminatory provisions part of our law under NAFTA. The answer is to place the same restrictions on Mexican cars that they place on US cars and phase our restrictions out at the same rate they phase out theirs. It's tough enough to compete a gainst $1-an-hour labor and weak enforcement of environmental, safety, and child-labor laws.
The US has already lost 2.5 million manufacturing jobs since 1979. NAFTA will only add to that tragic number.
We should be looking for ways to create manufacturing jobs in the US, not ship them to low-wage countries.