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Modernized NAFTA means growth for Michigan

By Michael Alaimo

In the auto sector, it’s no secret that NAFTA has had a tremendous impact on American competitiveness. For more than two decades, NAFTA has not only reduced barriers to trade for Michigan companies, it has also helped cultivate the confidence and economic stability that automakers and suppliers need to drive innovation. As executive director of Clean Fuels Michigan, a group of more than 30 leading Michigan-based businesses and organizations focused on growing our state’s high-tech clean transportation industry, I see firsthand how NAFTA is benefiting the auto sector, including advancing the development of autonomous vehicles.

Toyota employees Pablo Venegas, left,  and Sergio Marquez install a windshield on a Tacoma pickup truck at a new Toyota assembly plant on the outskirts of the city on Tuesday, February 1, 2005 in Tijuana, Mexico. Last year, the plant had only assembled the pickup truck beds. (FILE)

Despite its vital role, NAFTA’s future remains unclear. Some have suggested that the U.S. might weaken parts of NAFTA, or abandon the agreement altogether, which would be an unfortunate mistake for our economy. All too often we lose sight of history and place ideology in front of economic sense, and while there have been some unintended consequences of NAFTA, the benefits far outweigh its costs.

The most recent round of negotiations that stalled — leading to a now-missed May 17 deadline — have revolved around U.S. demands for greater domestic production and parts supply. These disputes feel arbitrary and outdated in an industry that is more reliant than ever on the gig economy and facing unprecedented global competition from China and Europe. Instead of fighting our neighbors, we should be working with them to tackle bigger issues, like Chinese infringement on American intellectual property.

Manufacturing automobiles and advancing new technology requires not only innovation, but risk. With the various protections it provides, NAFTA helps create a safe and stable business environment for companies working across international borders in North America. Unpredictable economic policy and regulatory uncertainty can be as much a barrier to technological advancement as the most burdensome tariff regimens. That’s why the stabilizing power of NAFTA has become a powerful tool for growth for Michigan, linking companies in our state with those in Canada and Mexico in a way that is predictable and productive.

Michigan is home to the largest concentration of original equipment manufacturers, automotive suppliers and engineers in the country. We are also a leader in mobility innovations and research and development. Those investments and the potential they hold for Michigan’s economic future are buoyed by the free market principles contained in NAFTA.

Another critical part of NAFTA is the Investor State Dispute Settlement (ISDS) provision, which ensures that American businesses making investments overseas have legal recourse if they are wronged by foreign governments. While some, including U.S. Trade Representative Robert Lighthizer, have argued for the removal of this provision, it is crucial that this protection remain intact in any renegotiated NAFTA. This mechanism ensures fair checks and balances, and doing away with it is not in the interest of American businesses.

Michigan is a world leader of automotive research and development. If we want to keep it that way, we must preserve the integrated automotive production and supply networks within the North American region made possible by NAFTA. Every consideration ought to be given in providing regulatory certainty to an industry facing unprecedented change. Doing so advances clean fuel technologies and other high-tech efforts, and provides a strong platform for economic growth in Michigan.

Michael Alaimo is executive director of Clean Fuels Michigan.