The American Apparel & Footwear Association and the National Retail Federation are still hoping for a trilateral agreement between the U.S., Canada and Mexico.
AAFA’s executive vice president Steve Lamar said, “We welcome progress with Mexico, and urge Canada to be brought in quickly to keep the agreement trilateral. We look forward to reviewing details with members.”
Lamar made the comment following the news Monday morning that the U.S. has reached a preliminary bilateral understanding with Mexico on trade and President Trump tweeting that he’ll be “terminating” the North American Free Trade Agreement once a deal is reached with Canada.
Rick Helfenbein, president and chief executive officer of the AAFA, emphasized the need for Canada to be part of any final agreement. He also encouraged the administration to share the details of the agreement so the business community can see what the impact will be on North American supply chains and share feedback with the administration and Congress.
“It is important to remember that the existing NAFTA works well for the apparel and footwear industry and its nearly 4 million U.S. workers, while at the same time providing real value to our U.S. consumers. Any update to the agreement must continue to support these American jobs, promote trade linkages, and be seamlessly implemented to be considered a success. It is with this in mind that we are deeply concerned to hear any mention of withdrawal or termination of the existing agreement at this late stage,” Helfenbein said.
Few details were provided, except that the new preliminary trade deal is being called the United States-Mexico Trade Agreement and seems to be narrowly focused on automobile manufacturing. The agreement is expected to be the first step toward scrapping NAFTA.
Matthew Shay, NRF’s president and ceo, said pulling out of the trade deal could be a major blow to retailers. A study by A.T. Kearney earlier this year found that such a move could result in American businesses and consumers facing $16 billion annually in higher costs.
“Coming to terms with Mexico is an encouraging sign, but threatening to pull out of the existing agreement is not,” Shay said. “NAFTA supports millions of U.S. jobs and provides hardworking American families access to more products at lower prices. To preserve these benefits and protect complex, sophisticated and efficient supply chains, the administration must bring Canada, an essential trading partner, back to the bargaining table and deliver a trilateral deal. We hope all parties will resolve their remaining differences, and we will assess any final agreement based on whether it promotes U.S. economic growth and continues to improve the lives of American workers and consumers.”
Trump said he expects “one way or the other” to reach a deal with Canada, too. The president also said that Canada may or may not join the trade agreement with Mexico. That leaves the door open for a possible separate bilateral agreement with Canada. And if that were to occur where there are separate bilateral agreements each with Mexico and Canada, that would represent a change in trade policy for the U.S., at least under President Trump’s administration. It’s a move that also could cause new headaches for several industries that rely upon supply chains across all three countries.
Trump made the Oval Office announcement Monday morning, stating, “It’s a big day for trade.” He also spoke by telephone with Mexican President Enrique Peña Nieto, who was heard on speakerphone stating that the development is a “positive” for both countries. The Mexican president also tweeted that he has spoken with Canadian Prime Minister Justin Trudeau about taking part in the process. He said he was working on getting a trilateral agreement in place with the U.S. and Canada.
Whether Trump can really “terminate” NAFTA remains to be seen. Any revisions to the trade deal requires congressional approval. Another open question is whether any U.S.-Mexico agreement can be finalized in time for ratification by the Mexican government before December. The timing is a key point because that’s when Mexican President-elect Andrés Manuel López Obrador takes office. If the process should drag into December, the president-elect is likely to want revisions to the preliminary agreement negotiated by Peña Nieto’s administration, which could mean another round of negotiations between the two countries.