Auto parts suppliers' group warns of unintended consequences of killing NAFTA

Vehicle equipment suppliers have warned the Trump administration to take great care when negotiating changes to the North American Free Trade Agreement (NAFTA).

The Motor and Equipment Manufacturers Association (MEMA), the trade group for manufacturers that directly employ nearly 900,000 workers, said "abruptly ending NAFTA could create a string of unintended consequences" that would negatively impact jobs in the United States.

Formal negotiations over reforming the more than two decade old agreement involving the U.S., Canada and Mexico began earlier this month, but President Donald Trump recently said he believed NAFTA will be terminated.

"Personally, I don't think we can make a deal ... I think we'll end up probably terminating NAFTA at some point," Trump said at the end of a speech at a rally in Phoenix, Arizona. "I personally don't think you can make a deal without a termination but we're going to see what happens, OK? You're in good hands, I can tell you."

Ann Wilson, MEMA senior vice president of government relations, cautioned the Trump administration to be careful.

"The Motor & Equipment Manufacturers Association urges the Trump administration to take great care in renegotiating or modernizing NAFTA," Wilson told Mega Dealer News.

"MEMA’s 1,000 company members operate in a global industry with suppliers, customers, and facilities worldwide," Wilson said. "Free and fair trade, open markets, and an integrated supply chain are imperative for a strong domestic supplier industry – which has seen a 19 percent growth in U.S. jobs in the last 4 years."

"NAFTA has served our industry, the American worker, and the U.S. economy well by helping the U.S. remain competitive," Wilson said.

Those unintended consequences need to be carefully considered, Wilson argued.

"Mexico and Canada are trusted trade partners to the U.S., and as a result, we are strong national security partners. We should not take that for granted," Wilson said. "Motor vehicles suppliers are part of a global industry and are dependent on a worldwide network of suppliers and customers for continued viability and growth."

NAFTA enabled “nearshoring” of an interconnected supply chain involving the U.S., Canada and Mexico that has provided the opportunity for U.S. manufacturers to compete with the rest of the world, MEMA argues.

"NAFTA fostered a 19 percent increase in motor vehicle parts manufacturing jobs in the U.S. over the last five years," Wilson said. "Free and fair trade is imperative for a strong domestic supplier industry."

MEMA also opposed the proposed imposition of a Border Adjustment Tax, which it claimed would lead to a "significant loss" of U.S. manufacturing jobs. It was originally part of a Republican tax reform plan but congressional leaders and the White House agreed last month to scrap the idea.

MEMA supports efforts to update NAFTA, but "in such a manner to create a more competitive U.S. manufacturing environment," MEMA CEO Steve Handschuh said after his organization submitted comments to the U.S. Trade Representative Robert Lighthizer, who is leading the NAFTA negotiations.

Motor vehicle component manufacturers are the largest employer of manufacturing jobs in the U.S., contributing nearly three percent of the U.S. gross domestic product, MEMA said.

Suppliers directly employ more than 871,000 Americans, up 19 percent since 2012, and generate a total direct and indirect employment impact of 4.26 million jobs, up nearly 18 percent since 2012.

This job growth is made possible by a highly-integrated North American supply chain that supports both the automotive makers and the companies that supply motor vehicle parts, MEMA said.

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