Column: Detroit wins with NAFTA
As the U.S. continues to renegotiate the North American Free Trade Agreement with our neighbors in Canada and Mexico, it is important to understand how much of a win NAFTA has been for Detroit, and the potential consequences of adding tariffs and other trade barriers.
That’s why it was troubling to read that Robert Lighthizer, the U.S. trade representative and chief U.S. negotiator in the NAFTA talks, aims to require Mexico to mandate a huge pay hike for automotive employees — from around $3-$6 per hour to $16 per hour. His message to Mexico: push through higher wages or get slapped with tariffs.
President Trump and Lighthizer have both talked at length about how NAFTA is bad for America, insisting that we need to implement measures like this in order to level the playing field. While it is true that America could benefit from measures to modernize NAFTA, if tariffs and wage requirements are implemented the auto industry and Detroit will suffer as a result.
NAFTA has been a very good deal for Michigan, and the state continues to reap benefits. In 2016, trade with Canada and Mexico supported 311,500 Michigan jobs and bought $37 billion in goods produced in the state. Since 2007, Michigan exports to countries where free trade agreements (like NAFTA) exist have grown by 24 percent.
As a whole, international companies employ 238,100 Michiganians, 155,700 of them in the manufacturing sector. For Detroit, foreign direct investment (an investment in Detroit made by a business in a foreign country) in 2016 reached its highest level in a decade — more than $2 billion plowed into 76 projects in that year alone.
Auto industry leaders have extolled the benefits of NAFTA at length, urging President Trump to not do anything that would impair their ability to grow. But the administration continues to threaten to withdraw from the pact unless our trading partners implement these harmful measures.
Maybe the administration doesn’t realize how much Detroit business relies on NAFTA. Maybe it’s an attempt to curry favor with the labor unions. Or maybe it’s a brilliant negotiating tactic. One thing is certain, if Mexico is forced to pay workers more money by anything other than market forces, Detroit will pay more for their cars, and consumers will look for better deals elsewhere. And that means Detroit loses.
Trump may assume that if Mexico is forced to pay its employees more, U.S. automakers will not expand operations in Mexico, and will keep jobs in the U.S. However, what if automakers scrap expansion entirely because it’s too expensive? Detroit loses.
When I moved to downtown Detroit for law school in 2009, I signed a lease in the Millender Center Apartments for a one-bedroom unit, on the 10th floor, with a view of the Detroit River, paying $750 per month. Since I moved out in 2012, Millender Center Apartments no longer exist. They were rebranded and redone, and now a one-bedroom apartment on the 10th floor, with a view of the river, runs close to $1,500 per month. Detroit wins.
Every time I come back home to Detroit, friends take me to a new bar, restaurant or market. Such meaningful economic investments spark hope for the future and fuel the pride Detroiters have always felt in their city. Detroit wins.
NAFTA has been a crucial part of Detroit’s resurgence.
While Detroit has diversified, the city remains heavily reliant on the auto industry. NAFTA allows our automakers to remain competitive through allowing a free-flow of goods and services across our borders. The goal should be to remove trade barriers, not create new ones by mandating wage hikes or tariffs.
The U.S. should be doubling down on pro-growth policies. In upgrading NAFTA, let’s take wage mandates and tariffs off the table and truly put America first. Detroit wins.
Timothy Doescher is the associate director of coalition relations for The Heritage Foundation.