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U.S. automakers warn Trump’s ‘extreme’ demands threaten NAFTA talks: Dale

The auto industry is vehemently opposed to a Trump plan to require 50 per cent U.S. content in cars, saying it would likely cause automakers to do more of their manufacturing outside the NAFTA zone.

New Ford Edges sit on a production line at a plant in Oakville, Ont., in a Feb. 26, 2015, file photo.

THE CANADIAN PRESS/CHRIS YOUNG

New Ford Edges sit on a production line at a plant in Oakville, Ont., in a Feb. 26, 2015, file photo.

WASHINGTON—NAFTA has helped fuel the comeback of the big American automakers, and those three companies are “very concerned” that the renegotiation will collapse because of President Donald Trump’s “extreme” demands, a representative said Thursday.

Matt Blunt, president of the American Automotive Policy Council, which represents the policy interests of General Motors, Ford and Fiat Chrysler, said the North American Free Trade Agreement has been important to the companies’ transition from dire straits to booming sales.

Killing the deal would impose a $10-billion (U.S.) tariff cost on them, he said, “equal to, essentially, the capital investment we’re making on an annual basis.” He did not detail how he arrived the figure.

Blunt said he retains some optimism. But he made clear that the automakers believe the negotiations are going poorly because of Trump’s proposals — think there is a real risk Trump will follow through on his frequent threat to terminate NAFTA entirely.

“Given the U.S. demands, and the Mexican and Canadian response, we’re very concerned that the negotiations could break down, collapse. We think other people ought to be concerned about that. Because the ramifications for not having a NAFTA are severe,” he said at a Washington International Trade Association panel discussion.

The U.S. auto industry is vehemently opposed to the Trump auto proposal that Canada and Mexico consider a non-starter. Though the U.S. government usually enters trade negotiations bearing auto proposals that are favoured by the powerful domestic industry, the Trump administration has so far dismissed the industry outcry and pursued the protectionist agenda on which the president campaigned.

Trump’s team has proposed that a car should not qualify for tariff-free treatment unless 50 per cent of it is made in the U.S. itself — there is no U.S. content requirement at all in the current agreement — and that the requirement for North American content be raised from 62.5 per cent to 85 per cent.

Blunt, former Republican governor of Missouri, called this “an extreme proposal” and “totally counter to the objectives of the Trump administration.” As independent industry experts have explained, Blunt said it would likely cause automakers to do more of their manufacturing outside the NAFTA zone rather than prompt them to hire more U.S. workers — simply paying the tariff rather than eating the larger cost of complying with the requirement.

“The business decision here is not very difficult,” he said.

Blunt’s words add to the gloom surrounding the state of the negotiations as the fifth round of talks approaches. The fourth round ended in public acrimony between Canada and the U.S., with Foreign Affairs Minister Chrystia Freeland accusing the U.S. of trying to undermine the agreement and U.S. Trade Representative Robert Lighthizer calling Canada and Mexico overly resistant to change.

Lighthizer also railed against trade deficits, one of Trump’s main focuses even though economists say they are a poor way to measure the health of a trading relationship. Blunt predicted that killing NAFTA would actually cause U.S. trade deficits to increase.

Kevin Dempsey, senior vice-president of the American Iron and Steel Institute, said the same, and he called NAFTA “a success” for the steel industry Trump campaigned on championing. Dennis Darby, chief executive of the Canadian Manufacturers and Exporters, said the death of NAFTA is “probably our worst nightmare.”

The fifth round is scheduled to officially begin next Friday, Nov. 17, in Mexico City, with some additional talks in the two days prior.

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