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2017-04-27 20:46:04
Revisiting Nafta: The Stakes for Key Industries

President Trump may not be terminating the North American Free Trade Agreement, known as Nafta, but that doesn’t mean the deal is safe.

After telephone calls with President Enrique Peña Nieto of Mexico and Prime Minister Justin Trudeau of Canada on Wednesday, Mr. Trump said he would start the process of renegotiating Nafta, a treaty that he had scorned during his presidential campaign, calling it “the single worst trade deal” ever signed by the United States.

Whatever his criticisms, Nafta has had a major impact on the American economy in the decades since it was signed, and any renegotiation would affect certain industries.

Here are four potentially vulnerable sectors.

Perhaps no industry is more closely entwined with Nafta, or has more at stake in any shift in trade policy, than the automotive sector.

The sector is a major employer in all three member nations — Canada, Mexico and the United States. Hundreds of thousands of workers in the United States are tied to the industry, while Mexico and Canada each rely on automaking for tens of thousands of jobs.

The countries’ automotive sectors are also tightly linked, exporting and importing billions of dollars’ worth of auto parts from one another.

Last year, the United States imported 1.6 million vehicles — mainly small cars — from Mexico. But about 40 percent of the value of the components in those vehicles, such as engines and transmissions, came from plants in the United States.

And about 40 percent of the nearly two million vehicles the United States exports go to its Nafta partners, according to data compiled by the Center for Automotive Research in Ann Arbor, Mich.

A tug-of-war over revising Nafta could disrupt Mexican car-making, which has grown rapidly in the past decade, but there would be consequences for the United States, as well.

In a recent study, the research center concluded that withdrawing from Nafta, or restricting automotive trade, would increase costs for manufacturers in the United States, make its auto sector less competitive, and lower the returns for investors. Rather than shifting production to the United States, manufacturers would be more likely to move production to low-cost countries such as China or India.

A severe shock to Nafta could put as many as 31,000 automotive jobs in jeopardy in the United States, according to the research organization. And there are domestic politics to consider: Michigan, a state that helped Mr. Trump win the election, could be among those hit hardest if the current terms are upended, because of its concentration of vehicle production and engineering jobs. NEAL E. BOUDETTE

For textile, retail and apparel companies, Nafta is a vital part of the global supply chains that power businesses as varied as billion-dollar brands and small yarn manufacturers in Georgia.

American textile producers shipped more than $11 billion in goods to Canada and Mexico last year, according to Lloyd Wood, the director of public affairs for the National Council of Textile Organizations, an industry trade group.

“Obviously, that’s some pretty big numbers, and so Nafta is obviously extraordinarily important to the United States textile industry,” Mr. Wood said. “That being said, we agree with the Trump administration that Nafta is due for a comprehensive review to determine whether it can be improved.”

For decades, retailers and the brands they sell have relied on an established flow of goods built around the agreement. If tariffs were to suddenly spike on clothing, for example, companies in the United States could not simply switch overnight to T-shirt factories in another part of the world.

Changes could also raise prices for consumers, and there are manufacturing jobs to consider — as well as related jobs in retailing, shipping and other industries that would be indirectly affected — according to Stephen E. Lamar, executive vice president at the American Apparel & Footwear Association.

Another group, the Retail Industry Leaders Association, has been lobbying for updates to the 23-year-old Nafta that reflect modern shopping realities, including e-commerce.

“We’re looking to see a Nafta that is updated and modernized to reflect current supply chains, but also updated to reflect new sectors like the digital economy,” said Hun Quach, the association’s vice president for trade. RACHEL ABRAMS

Agricultural trade between the three countries has significantly expanded under Nafta, but many economists agree that the trade deal was only one factor in that increase. International trade agreements, changes in domestic farm policies, and laws and international trade rulings were all part of the mix.

“The effects of this trade agreement on agriculture, that’s something you can’t assign a number to,” said Ryan Cardwell, an associate professor in the department of agribusiness and agricultural economics at the University of Manitoba in Winnipeg. “However, there is a broad consensus that Nafta did increase integration of agricultural markets in North America.”

Certainly, some farmers in all three countries saw immediate and significant changes because of Nafta.

American corn, for example, now flows into Mexico, a market from which it was once mostly excluded. And common food safety standards introduced under the pact led to an explosion of Mexican exports to Canada and the United States, particularly of avocados.

But the agricultural provisions in Nafta, perhaps more than those for other sectors, allowed the countries to keep some of their markets closed. Canada still has tight controls for dairy, poultry and egg production, effectively shutting out imports from the United States and Mexico to keep domestic prices high.

James Rude, an associate professor of resource economics at the University of Alberta in Edmonton, said that while cross-border integration had certainly increased in the farm sector under Nafta, it is nowhere near the levels found in other industries, like automaking. Integration mainly reflects corporate investment decisions, rather than changes in trade rules, he said. IAN AUSTEN

Manufacturers of medical devices have come to rely significantly on the free flow of goods afforded by Nafta. The United States imports about 30 percent of its medical devices and supplies, and Mexico is a leading supplier. Several American companies have established factories in Mexico in recent years, including Medtronic, the large device maker, and Integer, which makes components for defibrillators.

Moving that work back to the United States could be complicated, given that the Food and Drug Administration must sign off on even the smallest changes at medical factories.

“Our companies make plans five, 10 years into the future, sometimes at the very least,” said Andrew C. Fish, the chief strategy officer at the Advanced Medical Technology Association, a trade group representing the medical device industry. “Uncertainty is always a challenge for our industry, and I think most others. We would certainly welcome policy clarity, sooner rather than later, and would like to work with the Trump administration.” KATIE THOMAS