Ohio officials reacted with cautious optimism to a White House announcement of a tentative agreement with Mexico to revise the North American Free Trade Agreement, with longtime NAFTA critic Sen. Sherrod Brown calling an “important step forward.”
The new accord, which does not yet include Canada, is designed to modernize the two-decade old pact which swept away scores of tariffs among the United States, Canada and Mexico and integrated a North America automotive market that helps automakers such as Honda keep the prices down on cars and trucks.
President Donald Trump, who throughout his 2016 presidential campaign denounced NAFTA as a disastrous agreement, called the tentative agreement with Mexico “a big day for trade, a big day for our country.”
In a phone call with Mexican President Pena Nieto, Trump said he would call Canadian Prime Minister Justin Trudeau and “we’ll start negotiation, and if they’d like to negotiate fairly, we’ll do that. You know, they have tariffs of almost 300 percent on some of our dairy products, and we can’t have that. We’re not going to stand for that.”
U.S. Trade Representative Robert Lighthizer, who told reporters “we hope that Canada can join in,” telephoned Brown Sunday night with news of the announcement.
“We still need to review the text of the tentative agreement with Mexico, but this is an important step forward,” said Brown, adding he has “been working closely with” Lighthizer on the tentative agreement.
“We still have a lot of work to do to bring Canada on board and write the legislation needed to make any deal a reality, and I will keep working with Lighthizer to make sure every detail is right for Ohio workers,” Brown said.
Sen. Rob Portman, R-Ohio, who was the U.S. trade representative under President George W. Bush, said he was looking “forward to reviewing the details, but I am pleased there has been a breakthrough.”
Critics complained NAFTA encouraged U.S. companies to transfer production to Mexico. Many major companies, however, said the trade pact led to lower prices for American consumers and created new jobs.
The trade agreement will not be called NAFTA because as Trump said the name “has a bad connotation.” The tentative agreement is being called the United States-Mexico Trade Agreement, a name which presumably will change if Canada joins.
Stocks reacted enthusiastically to the news with the Dow Jones industrials leaping 266 points by 2 p.m. and the NASDAQ zooming past the 8,000-point barrier.
On a conference call with reporters, White House officials were vague on many details of the new pact compared to NAFTA. But one White House official insisted “it’s better in all respects,” saying “the rules of origin for automobiles are much more detailed.”
“This is great for business,” the official said. “It is great for labor. It has stronger and more enforceable labor provisions by a mile. Not even close.”
Ohio lawmakers generally appeared happy that a potential trade war with Mexico may be averted. Rep. Bob Gibbs, R-Lakeville, said “breaking down trade barriers and making sure other countries play by the rules will make it easier to export American-made products.”
Mexico is the second-largest trading partner for Ohio, with $6.5 billion in Ohio goods exported to Mexico in 2017. While Mexico is a big market for Ohio, Canada is almost three times as big. Any deal that doesn’t include Canada leaves a lot on the table, according to Ian Sheldon, a professor of international trade at Ohio State University.
“I’m not really sure if we gained anything yet,” Sheldon said as details of the tentative agreement remain to be seen. “Canada is such a more important trading partner.”
Ohio’s largest exports to Mexico include aircraft engines, electrical machinery, car parts and plastics. Honda has a plant in Mexico that produces the HR-V crossover for the U.S. market. Mexico also buys a lot of agricultural products from Ohio, including corn and soybeans, importing more than $350 million in agricultural goods from Ohio in 2017.
The agricultural market in Mexico has also been a solid source of growth for Ohio farmers, with exports rising 44 percent from 2015 to 2017.
If NAFTA is scrapped, U.S. consumers will feel some pain, Sheldon said. Smaller trade deals are less efficient than bigger, regional pacts, and NAFTA has helped make North America very competitive with Asia and Europe, he added.
“Reaching a deal on NAFTA is what we need,” Sheldon said. “You are better off with a larger deal.”
The agreement with Mexico might also be something of a lever for talks with Canada, Sheldon said. The administration has used unconventional tactics to try to renegotiate trade agreements, such as the tit-for-tat tariffs with China, and getting something on the table with Mexico will create pressure on Canada to start talks.
The agreement would provide Ohio farmers with a major boost. Last year, Ohio farmers sold $351 million worth of soybeans and grains to Mexico.
If a new agreement emerges among the U.S., Canada and Mexico, it will be a major boost to Ohio companies and farmers. Last year, Ohio farmers and companies exported $18.9 billion worth of goods to Canada and $6.5 billion to Mexico, with Ohio farmers selling $351 million worth of soybeans and grains to Mexico.
(Jessica Wehrman of the Dispatch Washington bureau and J.D. Malone of the Columbus Dispatch contributed to this story.)