U.S. Chamber of Commerce urges Trump to back off ‘dangerous’ protectionist NAFTA demands

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The top American business lobby group is calling on the Trump administration to back off its "highly dangerous" demands in the renegotiation of the North American free-trade agreement with Canada and Mexico.

The U.S. Chamber of Commerce fired a stunning shot across the administration's bow on Friday, arguing that President Donald Trump's tough demands, including for a U.S. content requirement on cars and trucks made in the NAFTA zone, risk destroying the trade pact and throwing hundreds of thousands of Americans out of work.

"We see these proposals as highly dangerous," John Murphy, the chamber's senior vice-president for international policy, told a roundtable with reporters at the organization's Washington offices. "These proposals, if adopted, will do harm, most likely leading to a failed negotiation that we just can't afford."

The stark warning comes ahead of the fourth round of NAFTA talks, next week in the Washington suburb of Arlington, Va., when the United States is expected to present some of its toughest proposals to the other two countries.

Prime Minister Justin Trudeau is also meeting with Mr. Trump at the White House that day, and hunkering down with the powerful House of Representatives ways and means committee.

Mr. Murphy said the chamber is particularly alarmed by the administration's demands for increased barriers to Canadian and Mexican companies bidding on American government contracts; a sunset clause that would automatically terminate NAFTA in five years unless all three countries reached an agreement to keep it; and a major toughening of the so-called rules of origin on autos.

A source with knowledge of the rules-of-origin demands said the U.S. is mulling a proposal that 50 per cent of the value of any auto made in the NAFTA zone come from the United States in order to be shipped tariff-free between the three countries.

The proposal would also boost the required amount of North American content to 85 per cent from 62.5 per cent, the source said.

Mr. Murphy contended such policies are not only bad for business but could unravel the talks because Canada and Mexico would not agree to them. Mr. Trump has repeatedly threatened to tear up NAFTA if he cannot get the other countries to accept major changes.

"Withdrawing from NAFTA would immediately blow up in the face of the administration," Mr. Murphy said, pointing out that Republican states in the U.S. Midwest rely heavily on trade with Mexico and Canada. "Those who would feel the pain most thoroughly and immediately are in states that voted for the President, and they would know who brought this about."

But one powerful congressman said Canada is responsible for thwarting progress in negotiations by dragging its feet. Michael Conaway, a Texas Republican and chairman of the House agriculture committee, said Canada must take "meaningful" steps to open its protected dairy and poultry markets to foreign imports as well as address U.S. complaints involving wheat, potatoes and lumber.

"Our side is real serious, and we need the Canadians to be serious as well," Mr. Conaway said in an interview Friday in Ottawa, where he is leading a delegation of farm-state members of Congress pushing for a speedy NAFTA renegotiation. "One of the reasons why we're up here … is to try to communicate a sense of urgency to our Canadian counterparts."

He rejected the notion that the Trump administration's hardline demands are jeopardizing the talks.

"We are all going to get our feelings hurt. But the deal is too important to let that squirrel it," said Mr. Conaway, who is slated to meet Canadian Agriculture Minister Lawrence MacAulay on Sunday. "If Canada doesn't want to negotiate and change anything, our President has shown himself to be a pretty good negotiator."

While U.S. business has long been largely aligned with Canada and Mexico in wanting to preserve as much of NAFTA's market access as possible, it has so far mostly chosen to press the administration behind the scenes, making Mr. Murphy's blunt public warning extraordinary.

The auto industry fears tougher rules of origin would be too onerous a burden on manufacturers, putting them at a cost disadvantage compared with their overseas competition. Matt Blunt, president of the American Automotive Policy Council, said in a statement Friday that he was concerned the administration's approach "would be harmful to the short- and long-term competitiveness of the North American auto industry."

Geronimo Gutierrez, Mexico's ambassador to the U.S., reiterated that his country was "prepared" for the possibility the U.S. will pull out of NAFTA. "Mexico's position will continue to be serious and constructive, but we have also been very clear about the fact that we [would] rather leave the negotiating table than accepting a harmful deal," he told The Globe and Mail.

Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association, suggested the response of U.S. business to Mr. Trump's proposals could ultimately rein them in. "The most important consideration is what the feedback will be from the domestic industry in the U.S., and how that will effect what is tabled this week."

But Mr. Murphy said Friday that companies' warnings have often seemed to fall on deaf ears. "The expert analysis and the view of industry have too often been just brushed aside," he said.