For America’s automotive industry, the most important gathering taking place this week may actually be in Montreal, not the Motor City.
On Sunday, some 500 miles away from the lights of the Detroit Auto Show, negotiators for the U.S., Canada and Mexico began the latest and arguably most critical round of negotiations over the North American Free Trade Agreement, more commonly known as NAFTA. With the fate of one of our nation’s most important trade deals hanging in the balance, few American industries have more at stake than America’s storied automotive sector.
The U.S. auto industry is our nation’s largest exporter, shipping $137 billion in vehicles and parts to Mexico, Canada, and the rest of the world. In 2016, the last year for which data is available, carmakers manufactured more than 12 million vehicles in the United States, up more than a million vehicles since NAFTA took effect. Thanks in part to NAFTA, the U.S. auto industry currently supports more than 7 million American jobs.
However, a 2016 study by the Center for Automotive Research estimated that a withdrawal from NAFTA or the implementation of punitive tariffs could result in the loss of tens of thousands of U.S. automotive and parts jobs.
“Any move by the United States to withdraw from NAFTA or to otherwise restrict automotive vehicle, parts and components trade within North America will result in higher costs to producers, lower returns for investors, fewer choices for consumers, and a less competitive U.S. automotive and supplier industry,” the authors of the research concluded.
Meanwhile, they noted, “China would become a more dominant player in automotive parts, components, and intermediate goods if the U.S. withdraws from NAFTA.”
During and leading up to the Detroit Auto Show, top executives from the some of the leading carmakers have echoed the importance of strengthening and modernizing — not nixing — the agreement, including the CEOs of GM, Ford and Fiat Chrysler. GM’s Mary Barra, for instance, said during an event last week that “there could be unintended consequences, changes made, that would directly impact jobs in the United States” before rejecting the notion that “we need to walk away” from NAFTA.
During his recent State of America Business address, U.S. Chamber of Commerce President and CEO Tom Donohue noted — in no uncertain terms — that “withdrawing from NAFTA would be a grave mistake,” not only for our nation’s automotive businesses and workers, but for the entire U.S. economy.
“Mexico and Canada are America’s largest trading partners, supporting 14 million U.S. jobs and $1.3 trillion in annual trade,” Donohue said. “The American economy has taken several big steps forward with regulatory relief and tax reform, and the administration deserves lots of credit. But a wrong move on NAFTA would send us five steps back.”
Speaking at the Detroit Auto Show last week, Michigan Governor Rick Snyder (R) voiced similar concerns. He said that efforts to modernize NAFTA should continue but added, “We wouldn't want to see NAFTA collapse or go away. I think that would be a negative for all three countries.” He reportedly shared his views with the White House last month, pressing for solutions even as he expressed opposition to the extreme “rule of origin” content requirements under discussion.
So while the spotlight shines on new cars and new technologies at Detroit Auto Show, rest assured industry leaders are keeping a close eye on the latest trade developments, too. Because a withdrawal from NAFTA would do more than simply zap the energy and excitement coming out of Detroit this week. It would puncture the tires of America’s auto sector, run out country’s manufacturing recovery right off the road, and stall one of our nation’s most important job creation engines.