Washington ~ The Coalition for a Prosperous America (CPA) expressed support for several Trump administration proposals changing NAFTA. Those proposals include:
1.Increased reciprocity in government procurement;
2.Stronger rules of origin;
3.Automatic sunsetting of NAFTA after five years.
“The multinational offshoring lobby and foreign governments want to continue the unbalanced NAFTA relationship,” said Dan DiMicco, CPA Chairman. “However, the administration’s proposals include several necessary adjustments that have been requested by domestic producers for several years.”
In 2013, CPA released its 21st Century Trade Agreement Principles as a guide for future trade negotiators. Hundreds of US manufacturing, agriculture and labor organizations were signatories to those principles.
As to domestic procurement, the Principals state:
Trade agreements must preserve the ability of federal, state and local governments to favor domestic producers in government, or government funded, procurement.
Comments: Domestic taxpayers, globally, expect their tax dollars to be spent on domestic production. Government procurement is, in large part, a policy tool rather than true free market commerce. The federal, state and local governments of the United States are, collectively, the biggest consumers in the world. True reciprocity cannot exist because there is a mismatch in the size of – and transparency of – government procurement markets.
As to rules of origin, the Principles state:
Trade agreements must include rules of origin to maximize benefits for U.S. based supply chains and minimize free ridership by third parties. Further, all products must be labeled or marked as to country(s) of origin as a condition of entry.
Comments: Rules of origin determine whether a product or its components “originate” within a contracting country(s) and thus qualifies for favorable tariff treatment. Without rules of origin, any product could be trans-shipped from third countries without restriction, causing free ridership problems where third countries benefit without negotiation-extracted concessions. Stronger origin rules will tend to benefit supply chains within the U.S. while disincentivizing the utilization or trans-shipment of third country products. Rules may vary by product; however, the preservation and/or expansion of the U.S. supply chain should be a substantial governing principle.
As to sunsetting trade agreements, the Principles state:
Trade agreements must be sunsetted, subject to renegotiation and renewal. Renewal must not occur if the balance of benefits cannot be restored.
Comments: Trade negotiators agree to language based upon expectations and judgment in pursuit of national goals. However, goals may not be achieved or expectations may not be met. Just as business contracts do not last forever, neither should agreements between countries. Therefore, it is prudent to make such agreements time-limited to ensure that they continue to provide balanced benefits as circumstances change. If a balance does not materialize, the agreement should be renegotiated or discontinued.
“We encourage the administration to continue its boldness in renegotiating NAFTA so it is no longer a US trade disarmament agreement,” continued Stumo. “Unless NAFTA is substantially changed, the administration should walk away.”
About CPA: The Coalition for a Prosperous America is the nation’s premier organization working on the intersection of trade, jobs, tax and economic growth. We represent the interests of 4.1 million households through our agricultural, manufacturing and labor members.
Contact Paola Masman