tv North American Trade CSPAN February 14, 2017 4:09pm-6:18pm EST
african-american story from slavery to the first african-american president. we'll talk with the museum specialist and its curator. throughout the program our guests will be talking to you and hearing your input via your phone calls and tweets. join us for an exclusive live visit inside the national museum of african-american history and culture. live sunday beginning at 6:00 p.m. eastern on american history tv on c-span3. the washington international trade association hosted two panel discussions on the future of the north american free trade agreement and what changes or revisions to the agreement might be pursued by the trump administration. this panel focused on the potential foreign policy and political implications of renegotiating the trade deal. it is just over two hours.
thank you, ken. it's a real pleasure to be here this morning. thanks for organizing this very, very timely session on nafta 2.0. as someone who has been involved in the trade -- well, "war" is too strong. "debate" is too tame. the vigorous trade discussions we've had in washington over the last 20 years. we're certainly at an -- even in the scope of those discussions, we are at an unprecedented moment right now awaiting to see the unrolling of the administration's new trade strategy. we have been -- we've heard a lot from the president, when he was a candidate, when he was president-elect. since becoming president we've heard a lot about mexico, we've
heard a lot about mexicans. we've heard a lot about nafta. we've heard a lot about china. we've heard a lot about tpp. a lot of things are going to be ripped up. a lot of things are going to be done away with. a lot of things are going to be changed. and yet we have little in the way of actual specifics that have come out. the president's trade team, some of them have been named -- formally named. wilber ross is -- i guess his nomination is somewhere on the floor of the senate. they'll get to him at some point as they've marched through the list of cabinet officers. bob leitheiser's not been formally sent up because -- guess what? he advised a foreign power somewhere in his career and guess what? that may be a block to his serving there. peter navarro at the national trade council. he has very well known views that relate to china.
b wilbur ross has well known views that also largely relate to china. what's interesting sitting here at a panel on nafta 2.0 is that each of these nominees have said actually very little about nafta. so how they will roll out and implement a new nafta policy is for the moment -- unclear. we have the president's very strong statements, and for the rest of it, we're waiting. we know that rex tillerson met yesterday with the mexican foreign minister. we also know he met separately with christa freeland, the canadian foreign minister. three of them did not meet together, which is interesting. we know that pena nieto canceled a trip here and there are no plans for him to come.
we do know that prime minister trudeau will come as soon as next week. kellian conw ial kellyanne conway let it slip on the air that he may be here as soon as next week. we know wilbur ross' name is soon to be up on the floor of the senate. my sources tell me as soon as ross is in the chair they will begin implementing their trade strategy and that ross will lead it. what we're going to do this morning with our really superbly qualified panel is try to give you an idea as you walk out of here, both this panel and the next panel, of what the range of options are for what may come out of the new trade policy, specifically for nafta.
will it be a slight change? will it be a total redo? how will it impact various industries? we hope to give you as you walk out today a set of benchmarks, a ruler, perhaps some rules of thumb, to look ahead so that you can advise your clients, advise your companies of the coming impact on nafta. the first panel is focusing on the broader policy issues. the second panel is an industry-specific panel. our broader panel this morning, i think you'll agree, is superbly constructed to give us a variety of viewpoints. to my right, a noted economist, trade policy expert. he's written broadly and deeply about trade and globalization issues over the years. to his right is matt gold who is
the -- was the deputy assistant u.s. trade rep for north america. so is deeply schooled in the mechanics of nafta, and also is a professor at fordham. so he will give us the legal underpinnings. what's the legal reality of what the president can actually do on his own. for what does he need congress. for what does he need an actual renegotiation. behind him is fia lee who is for many years one of the leading voices from the labor movement on international trade and on nafta and is someone who is extremely thoughtful on the issues affecting the labor community. she'll help us understand labor's perspective on a nafta renegotiation. and then to her right is antonio ortiz mena, a long-time mexican government official, long-time official here at the mexican
embassy. understands the u.s./mexico relationship deeply and he will give us the mexican perspective, and perhaps the mexican responses -- expected responses to what president trump might do. so with that, we're go to go down the panel in the order in which we are seated here. each person will speak for five or six minutes. we'll get the conversation going up here. then we'll turn it to the audience for what i hope will be -- in fact i know will be a very -- as they say in the legal business, a very hot bench with lots of questions and lots of hands in the air. so with that, let me turn it to yuri. >> yeah, thank you very much. honored to be here with you this morning. i see three main scenarios for the new nafta. the first is a kind of modified nafta with some new features but
also other features that are closing down. i call this the nafta 0.9 scenario. okay? [ laughter ] >> this is my main scenario. the second is a return to mfn trade between u.s. and mexico. they stay in the wto but trade with each other at arm's length. >> so would that be the nafta zero model? >> that would be nafta, zero. there are minus scenarios, as well. but that's the nafta zero, as you call it. the third is the border adjustment tax on which you had an event -- beautiful event couple weeks ago which i think would have major impact on the nafta scenario. so you can't just ignore it. yeah. so, let me talk briefly -- five minutes -- about 0.9 nafta
scenario. start with the positive. there is a very rich unfinished trade agenda of the traditional kind that negotiations could address. a good point of reference is the tpp. very interesting piece. very interesting piece. the tpp has a lot of stuff that could be used. right? and included. so iprs, e-commerce, soes, investment disputes, labor and environmental standards, et cetera. a lot of that stuff could be lifted. united states very interested in a lot of that. okay? in addition, there is a big north american integration agenda that could also be part of the new agreement such as border infrastructure -- beyond the wall -- and process
improvements at the border. liberalization of telecommunications. energy collaborations. et cetera. all of these have been aired. there is a lot of positive stuff out there. okay? so, i would say that nafta 0.9 would have several of these provisions. but clearly there will not be enough to satisfy the objectives for the u.s. negotiators. what are these objectives? as far as i can understand them listening to your president is they are to reduce the $60 billion goods trade deficit with mexico, deter foreign investment in mexico, designed for exports to the united states, whether it's by american or foreign companies, encourage job sharing and at least make it look like mexico is paying for the wall. this is what i would assume mr. trump is telling his trade negotiators behind the scenes. but, frankly, there are not many
degrees of freedom, as matt is going to elaborate on, to achieve these objectives without waking wto disciplines, nafta. apparently the goal to make imports from parts of asia more rigid. one could imagine changes to safeguards, with triggers at the lower level. that's the sort of thing, it is sort of tinkering at margin. but even that may not be so easy to do in the negotiations. contrary to the common view, this is not going to be a one-sided negotiation. mexico depends on the united states in crucial ways. i don't need to elaborate them. but united states depends on mexico, too. industries such as automatic motives in states likes texas, for example, are very dependent on mexico. 40% of u.s. imports from mexico
consist of products originating in the united states. u.s. trade balance is just one aspect of the relationship. there are very large service affiliate sales in mexico which are not in these numbers. all of this would be targeted in a security situation. the second scenario, suppose negotiations break down. then the u.s. could raise tariffs to its wto/mfn applied level. that means introducing a 3% tariff on average, from 0% at the moment to 3%. mexico, however, could stay within the wto rules and raise its tariff to 8%, on average. and, very importantly, could raise its tariff in agriculture
to 20%. okay? that will hurt a lot of people. so i think it's clear that mexico hurts the united states, at least as much as the united states hurts mexico in the second scenario which is mfn trade. okay. that takes me to my last scenario. matt, be patient. on the border adjustment tax. okay? you cannot ignore -- you cannot say we had an event last week so we're not going to discuss this. the two are linked. the border adjustment tax has many attractions politically because it's a measure that looks like it might be wto consistent, like a value-added tax, but actually it is not at all wto consistent. i would disagree with the lawyers. i am an economist. it is not at all wto consistent. but it would give the united
states cover for staying in the system while adjudication takes place, countries retaliate, lots of uncertainty, et cetera. let me say unequivocally that the border adjustment tax is worse in economic terms than scenario number two, the break-up of nafta and mfn trade, because it effectively implies a 20% tariff on canada and mexico, and on everyone else in the world, and it implies a 20% export subsidy on canada -- against canada, mexico and everyone else in the world. this is a massive distortion of the u.s. economy. proponents say the exchange rate will adjust. my experience from having tried to forecast foreign exchange rates for 40 years is that nobody knows how foreign exchange rates will adjust. but what the border adjustment tax might do is to allow the
administration to say that mexico is paying for the wall and the jobs are coming back to america. and so that's why you cannot rule out the third scenario. >> thank you. good, well, thank you, yuri. now on to matt gold to talk to us about what the actual law is. >> thanks. and speaking of actual law, i agree with yuri that the border adjusted tax, there is no possible way that it can be done as it has been described, that is wto consistent. it will violate both export subsidy rules and rules relating to national treatment for internal taxation. but getting back to nafta, i think with respect to all of president trump's trade proposals and the proposal to renegotiate nafta, the first question you have to ask yourself is if it were that easy, why hasn't it been done already? and on the campaign trail the implication was, well, because every administration before was
either incompetent or corrupt. well, if you're someone who knows that that's not true and i think most people in the room know that that's not true, you still have to ask yourself. well, wait a minute, if it's this easy, then why hasn't it been done before? as was mentioned, i am former deputy assistant ustr for mexico and i can tell you united states and canada and mexico have all wanted to change certain things in nafta. although there's never been formal negotiations, we all know one another's desires and we've been at an impasse for 23 years. there are things mexico would like to change. there are things canada would like to change. no american administration has been willing to give those those concessions and as a consequence they're not prepared to give us ours, that's why there's never been renegotiations to change nafta. what is president trump going to
do to change that fundamental dynamic? the answer he's threatened to withdraw from nafta if he doesn't get what he wants. does that change the dynamic? if it's credible, it certainly does. i would argue that that threat's not credible. although the populations of the three countries believe he's serious, i don't believe he's serious and i'd be very surprised if the leadership of mexico or canada or the other trade officials believe he is serious. as a consequence, i don't think the dynamic has changed. i think they are going to be very diplomatic with president trump and our administration as they have to be, but i'm not convinced there really is going to be a serious renegotiation of nafta. one question is, well, why is that threat not credible? unfortunately we don't have a lot of time to go into that. but suffice it to say, the united states and canada have the largest trading relationship between any two countries in the history of the world. mexico is our second-largest export market. we have so many supply chains that would be so severely
disrupted that it almost spins one's head just to try to even wrap your brain around all of them. economists agree that the move would be recessionary -- deeply recessionary but that's in the long run. in the short run the disruption would be a lot worse. we haven't had a huge public outcry. we've had a lot of nervous sectors and other groups but no huge public outcry because everyone's been lulled into the feeling he's not really going to pull out of nafta, he's just saying he will. but that all adds up to the threat of renegotiating it not being credible. if he actually -- if or in my view, when talks to renegotiate it are fully stuck in the mud and president trump is faced with actually withdrawing from nafta, i think there will be a public outcry will shake not only nafta but congress. even if president trump were to withdraw from nafta which he as the president has the authority to do, he's only pulling out of
agreement. unless congress repeals the nafta implementation act, nothing really changes on the ground. congress will have constituents throughout the country screaming. i just don't see it happening. now that's a much more complex topic than we have time for. >> i do want to sharpen that, matt, because i think that's something that was really highlighted in our discussions. i want to make sure everybody in the room understands this. your perspective on this is that if the president withdraws from nafta, and congress takes no actioning with action, in effect nothing changes for the countries that have relied on nafta for their cross border trade because tariffs remain the same, rules of order remain the same, import quotas all remain the same. is that correct? >> initially everything remains exactly the same. initially everything -- nothing
changes. >> unless congress acts. >> by the mere withdrawal from the agreement. the congress obviously can change anything by revising the statute. the president himself has some delegated authorities by which he could roll back some of the nafta implementation. but only parts of it. the authorities are questionable in different areas. it is a very complex area. all the precedent have different authorities. in december 16th congress reported on the different statute tory authorities the president himself has. but they only relate to tariffs. not only of the non-tariff barriers that only congress can change. his authorities on tariffs is complex and limited. we don'tefinitely don't have th time to go into it at great detail. >> if congress declined to act and mexico and canada decline to come to the negotiating table, no matter what president trump does other than this tariff
authority which is limited, nafta -- the rules of nafta remain for north american companies that have benefited from it. is that your perspective? >> that's correct. but again, if president trump did come in and use the tariff authority and raise tariffs, then there probably would be a reaction in mexico and ottawa and it would be a downward spiral. >> that's part of the scenario planning we're doing here. >> yes. but just withdrawing from the agreement itself changes nothing on the ground. at that point we are still fulfilling everyone of the terms of nafta, including the main term which was lowering all customs terms down to zero. we're still doing all of those. it is highly likely mexico and canada would continue to do all those with reference to us as long as we did them all in reference to mexico and canada. if everyone could keep their discipline and if also the president didn't use any of his limited authorities, that could
stay through the states until the end of the presidential term. all of this leads me then to the fact for the last six months i have been predicting that the renegotiation of nafta is more of a fantasy than reality and might never be more a reality. in the last two weeks, because i see a lot of things going on diplomatically and i infer what's going on behind the scenes and i see a very different picture of what's going on the last 2 1/2 weeks with respect to nafta renegotiation than the media is portraying. first, no trilateral. nobody seemed to notice that. nafta can only be discussed in a trilateral summit or trilateral ministerial or trilateral talks. it is not even remotely possible to deal with it on a bilateral level. even if president trump wants to renegotiate bilaterally, he can't. apparently mexico and canada have not agreed to a trilateral summit. keep in mind every year we have a trilateral summit, the north
american leaders summit. it is around this time of year. we also have every year a trilateral ministerial that nafta free trade commission. neither have been scheduled to a degree i am aware. all we have are two bilateral summits we had planned for the first month the president was in office. that told me a lot there. these staffers are feverishly negotiating the joint statement and agenda for the summits. i would have predicted that mexico would have dug its heels in and not agreed to put any particular provision of that of that on the agenda for the meeting that was supposed to happen this month. nor would they agree to put any particular provision on the joint statement in terms of an agreement to negotiate any particular provision of nafta going forward. i would have guessed they would have dug their heels in on that. what did we actually see publicly? first as we got very first to the summit with mexico the president answered a question about what was on the agenda. he said border security and
immigration. in other words, no nafta issues. second of all, then there was no summit. now if you think that the president of mexico made that decision, you're not paying attention. president trump made a statement that he knew would cause mexico to pull out. i think that when he answered the question about what was on the agenda, he was floating the reality that he was going to be embarrassed that nafta was not going to be on the agenda to see what the reaction was going to be. i think whatever feedback he got he decided he didn't want to have a summit. he typically engaged in misdirection ending the summit making it look like mexico pulled out and making it liked like the reason had nothing to do with nafta. he's never had the power to force mexico to renegotiate it and he's finding that out for the first time right now. >> you are saying it is sort of an un-reality show. >> yes. [ laughter ] >> and now comes canada. . take a good hard look at what's going on in canada. january 23rd, sean spicer announced that justin true bow
w -- trudeau was going to be here in 30 days but they didn't have a date. if you don't have a date, there's not going to be a summit. since all that time we haven't heard a word about the date for that summit. third, mexican president backs out. this is the first leader who stood up to donald trump. now what is justin trudeau going to do? this is a classic bully scenario. if the first kid who stands up to the bully gets pummeled and everybody rauuns in the corner, nobody's going to stand up to the bully again. suddenly somebody stands up to the president, the whole dynamic changes. justin trudeau is at a serious tipping point right now. now it is widely reported trudeau is talking to european leaders and it is widely reported -- he has admitted -- talking about his strategy and how to manage donald trump. it still hasn't given a date.
now the trump people are getting nervous. they'll get embarrassed again if he doesn't -- eventually he has to have a meet and greet. it is canada but he doesn't have to do it in the next month or do or put anything about nafta on the agenda if he doesn't want to. we have all of a sudden an announcement three days ago, "don't worry, he's coming." yesterday kellyanne conway said, well, we think he's coming next week. all of that i think is the administration's way to put pressure on justin trudeau's shoulders to comfort summit. they are raising the stakes, making it a high-profile question so if he doesn't come the stakes are bigger. he will eventually come. if they turn around and say there is no room on the schedule in february and march looks pretty busy -- >> we're going to have to be winding up.
he says he has to get back to us in april, it is going to be embarrassing. i see already this forward motion of nafta getting stuck in the mud. i'm reading the tealeaves in a certain direction but that's what i see happening. >> that's a fascinating set of scenarios. we turn now to fia lee who has been both inside and outside of nafta, someone who understands it deeply and has been looking for a renegotiation of some kind for a long time. you are a he about to get your wi wish, thea. >> or am i. >> thank you, nelson. good morning, everybody. thanks very much to the invitation to be here. it is a pleasure to be on such a distinguished panel and part of this important and timely conversation. as nelson says, the labor movement has been very engaged in the trade debate. certainly since nafta and even before. with respect to inform that, this is something that we were engaged around the negotiation of nafta, trying to improve it,
trying to change it. remember what the slogan at that time was "not this nafta," because as i've been saying, i've seen some of you at these panels before, the labor movement is not actually against globalization. we're not actually against trade. but we do have a strong critique of the exact set of rules that have been embedded in trade agreements like nafta, like the wto, and like many of the other trade agreements since that time. with nafta we engaged in the negotiations. we opposed the ultimate agreement. we used the agreement when it was in place, and in particular we used the labor chapter, the labor side agreement, very vigorously, dozens of times over the course of the last 20 or so years and it was a very frustrating experience because i think everybody knows that our critique of the nafta side of the agreement was that it wasn't enforceable. provisions are weak and it does designed not to be used and never to come to actual dispute settlement.
it's fulfilled that promise very well. but we've also criticized the nafta template. that's what i would like to focus on today. we have one question in front of us, which is -- will nafta be renegotiated if at all, should it be renegotiated, how should it be renegotiated. but i think the bigger question is -- what does the nafta debate mean for our trade policy and what should be the principles that guide our trade policy going forward. i want to talk about nafta absolutely but i also want to talk about what does it mean for all of us as we think about these important issues. and i do want to say that there has been, for the labor movement, not just the labor movement but a lot of our allies in the globalization debate. environmental groups, the consumer groups, the women's groups, access to medicines group, immigrant rights groups, these are the groups we're working with not just in the united states but
internationally. because we do as a labor movement believe in international solidarity. we believe in trying to write a set of rules for the global economy that will be good for workers everywhere. i think that's one important difference between the way we approach these issues and the way the current administration does. we don't say america first. we don't believe that the countries are winners and losers in the trade debate. we want to talk about what type of global economy do we want to live in as working people. what type of protections for the environment, the consumer would be necessary to have trade policy benefit communities and workers and to, certainly in the united states, create good jobs including on the manufacturing sector. that's a different set of questions than how to get more free trade or how can we get the trade barriers down or what kind of protections for investors do we need in trade agreements. and so that goes to the heart of what i want to say. we said a long time ago that
nafta was not only about trade. it was about investment and protections for investors whether it was the investor state dispute, the financial services chapter, and that it was also about outsourcing as much as it was about exports. and at the end of the day if you look at the trade flows, there wasn't really as much of exporting of consumer goods to the 90% of consumers on our southern border as promised. nafta failed to live up to most of the promises made on its behalf during the debate 23 years ago. instead of exporting a lot of consumer goods, a lot of american companies took advantage of nafta to move jobs to mexico. bring the goods back into the united states. and that's why our small trade surplus with mexico turned into a pretty large trade deficit pretty quickly. we also said that the investor state dispute settlement, embedding that into a trait agreement for the first time was a bad idea, and that it would be
used to challenge legitimate environmental and public health regulations in all three countries. and i think the record has shown that that has been the case, that nafta was used in a way that wasn't about trade so much but was also about corps operate interests and taking advantage. nafta was supposed to strengthen the competitiveness of the north american continent, vis-a-vis asia and europe. for the united states that didn't work out. our trade deficit with the rest of the world went way up. it didn't go down. so in a lot of ways it failed. but how could nafta be improved? and i do want to lay out the -- we've laid out or nafta blueprint. it's something we're working also working with a lot of allies on. we think we should eliminate the investor state dispute settlement. we want to strengthen and of course enforce the labor and environmental provisions in nafta. these are provisions that have
evolved over the years but have evolved over the years but have never really worked. never really worked. we've brought a lot of cases, as i said, under the labor chapter and yet there's never been a dispute settlement case, an enforcement mechanism that actually made a difference there. so that needs to be done. we need to address currency manipulation. having trade agreements that discipline tariffs and subsidies and other trade flows but don't address currency at all is a weakness. we want to upgrade the rules of origin. we have concerns about the procurement chapter and how it prevents the u.s. government from using its purchasing power to achieve its goals. and upgrade the trade enforcement chapter and address some of the concerns around trucking and make sure that safety is paramount. but tpp, let me just be clear here, the idea that tpp is the model for renegotiating nafta i think is delusional. i just think people have to
remember that one of the things we learned -- and i think we shouldn't have come through this election without learning something, which is that there was a groundswell of frustration and anger and opposition to our current trade model. the kinds of changes we need are deep. they're not shallow and tweaking. we need to rethink the basic principles of our trading policy. and in some of those areas, president trump has outlined some top notes that i think we should agree with, that we should be concerned around the trade deficit, concerned about outsourcing, be concerned about how trade affects good jobs in the united states of america. but i think what is missing from the way president trump has outlined his concerns is that we are part of a rules based system. we need to continue to be part of a rules based system. i think the labor movement has done this. we will work within the system
to convince our government, to convince the congress, to work with unions and environmental groups in other countries, to work with their governments to change the rules that we disagree with but not to toss them out and work in an arbitrary way. but to work in a way that reflects a respect for our trading partners and a sense of the importance of global solidarity. in terms of immigration -- you know, globalization is about trading goods and services but it is also about the movement of money and financial flows across borders and about people. and so, you know, i think one of the biggest concerns the labor movement has expressed around the trump administration is the immigration policies and whether those are demonstrating the kinds of principles that we want to see in terms of our interactions with the rest of the world that we need to be
humane, we need to be rational and we need to make sure that those principles are constitutional. so at the end of the day trying to put a lot on the table so we'll have room for a good lively discussion. i think, you know, we believe in a rules based system. we believe -- i mean, ultimately trading -- trade agreements and trade rules are about addressing the intersectionality of decision-making with international movements of goods, services, people and money. and we in the labor movement, and i think a lot of our allies said that democratic decision-making is more important than that. so we haven't -- maybe we haven't gotten the balance right of whether, you know, we need to have trade agreements that can undermine our domestic regulatory systems, undermine labor rights and consumer protections.
as well as environmental standards. particular with ists but also the way we've addressed the regulatory kcoherence in our trade agreements. we have nod done a good job, we have not found the right balance. i would say that a lot of the people in the d.c. trade community are used to thinking of the critics of nafta or the critics of tpp as the enemy. but i would say to you i think we actually have a lot in common in the sense that we want to figure out how we can fix the trading system and the rules of the trading system. we believe that it is important to take into consideration what the payment the impact of jobs is going to be of our trade policy. and it shouldn't be only donald trump who says it. it should be leaders of the democratic and republican party whether they're presidential candidates or in congress.
and to the extent that we can build together a progressive internationalist framework for international trade, i think we will be in a stronger position than if we stick our heads in the sand and pretend that nafta has been a tremendous success and that all we need to do is to pick it right back up and move it forward as it is. we need to recognize the issues and the problems that have been clear over the last couple of decades. >> thank you, thea. you know, shortly after the president's inaugural, he called the labor leaders to the white house and they emerged wreathed in smiles, which is not typical between labor leaders and republican presidents. do you feel like you have a good dialogue with the administration on the trade issues and on -- are you able to offer your input to a process? >> we do have a dialogue and we will continue to use whatever avenues we have. we have formal avenues like
we've had with every previous administration, through labor advisory committees. that hasn't met yet. our job is to advocate for american workers. we'll do that with this administration. there has been outreach, there have been some conversations. and as i said, i think we might agree on the top note that our current trade system is broken but we don't necessarily agree on what the narrative is or how to fix it. we want to continue to offer or views. one thing i would say in terms r views. one thing i would say in terms of what's wrong with the u.s. -- why has the u.s. run a big trade deficit, why are we not as competitive as we might be. to the extent that the trump administration has said the problem is we're overregulated, that taxes are too high and that workers' wages are too high. we would have a fundamental disagreement with that. we don't think that's the problem. >> to parra phrase your famous to paraphrase your famous
novelest, "poor mexico, so far from god, so close to the united states." [ laughter ] you no longer speak for your government but you obviously did for many years and you since this dynamic as well as anyone. what -- how do you anticipate mexico responding to president trump? >> well, thank you, nelson. and as you say, i no longer speak for the mexican government. so i'm speaking on my own behalf, my own opinion and i'm very glad to speak my mind. i want to give a sense of what i believe is at stake in this nafta renegotiation debate and then give my own views on some different scenarios. first of all, i think that much more than trade is at stake. there are a lot of trade policy
wonks and it's all sps and tpc and all of that. that's fine. but what's at stake here is the future of the bilateral relationship, the future of the relationship between mexico and the u.s. and i believe that is the most on a day-to-day basis. there might be a rogue state here doing crazy stuff, a crisis there. there's always china. but on a day-to-day basis for americans, for their prosperity and security, i believe there's no more important relationship. so when there's talk about the wall and it's not about a great album by pink floyd, it's something different. and when there's talk about who is going to pay for that wall -- >> by the way, some of the younger members in our audience looked up and said what are you talking about? >> i strongly recommend when you think about the wall, yeah, there's a great section about tearing down the wall. okay?
it really generates a toxic environment. and when there are ingenuous proposals about how to fund the wall, will it be a border tax, taxing remittances, will it be taxing real estate transactions by mexicans in the u.s. regardless of whether these initiatives are approved by the congress, regardless of whether they're legal or not -- and i do believe all those to be inconsistent with nafta and wto, they create a life of their own. words matter. and mexico will have a presidential election next summer. campaigns will start before that. we have a noisy democracy. we also have a congress. and this political environment
in the u.s. is making it increasingly difficult for the mexican government to achieve a constructive negotiated solution with the u.s. i believe that as time goes by the window of acceptable solutions is getting smaller and smaller and smaller. i hear an old book called "distant neighbors" written by alan writing, the mid 1980s being quoted again. if you want to get a context of what's going on, i would recommend that they read or reread "distant neighbors" and then read something for recent, shannon o'neill's book "two nations indivisible." she's got actual factual facts if you want to take a look at that. a lot of it is at stake here. what scenarios do i see.
i think that the most likely scenario would be one where there is a nafta upgrade, a modernized nafta. and for mexico, the starting point should be the state is cool. i don't see why mexico should accept anything less than tariff free, quota free access and then build upon it. maybe include some provisions on energy. you know, there are huge investments in energy, deep water investments. some of them by, you know, exxonmobil corporation. i don't know why the u.s. think it's a bad idea for exxonmobil to produce in deep sea oil in mexico to invest there and have mexican oil shipped to the u.s. a friendly country. energy, telecoms, ecommerce and labor on the environment. there's vocal and vibrant civil society in mexico.
i'm sure they would welcome real and serious, substantial commitments on labor and environmental issues. perhaps even rules of origin that could focus on regional production. what i don't see viable is a fuel renegotiation of nafta starting from scratch. having mexico accept less than it already has. if that's the scenario and if negotiations would take a long place, a better alternative could be to say, okay, we'll go down the route. again, recall that there will be presidential elections in mexico. i don't -- next summer. summer 2018. i don't think that negotiations can go on endlessly because of uncertainty for political actors and for political reason. and you've had some very
respected mexican leaders, like the former president in an op-ed last weekend in the "washington post", my former post who was trade minister during the nafta negotiations saying, no agreement and mfm is better than a bad agreement. it's better than managed trade, the quotas. so i think that's something that the u.s. should be very cognizant about. from a more proactive perspective, the u.s. is interested in the big infrastructure program. why not focus on north american infrastructure. if you look at international rankings, roads, railroads, ports, airports, north american does dismally -- not one of the top ten airports or ports are in north america. that's no way to compete as a region. why not focus on a north american infrastructure plan and
let the u.s. companies build in mexico and mexican companies in the u.s. and in canada. i mean this could sound like a pipe dream. but we need a reality check. and lastly, you know, according to pricewaterhousecoopers who has done some estimates about the world in 2050, mexico will be the number six economy by 2050. i do not understand why the u.s. would want to make trade and investment for difficult with a nation that could very well become its main partner, its main destination for u.s. exports, one of its main investors. it just boggles the mind and i think it's important to be very frank and hopefully to have more u.s. companies speak loudly and speak clearly. i know they don't want to be the object of a tweet.
but, you know, this is not a zero sum game. and there are specific story to tell about why u.s. investment in mexico benefits, you know, the shareholders of companies that are publicly listed, benefits workers in the u.s., how the supply chain works and why it makes sense from a u.s. perspective. so i would sort of invite and encourage, otherwise we'll always be playing a defensive and post-factual game and we'll be in deep trouble. >> thank you antonio. we have only 20 minutes left. i want to turn to the audience very quickly. be thinking about any questions that you do have. but i do -- i think we've missed one important thing, topic, each of us in our discussions which is why has president trump, candidate trump, president trump, why has he made trade, why has he made nafta one of the
key signature issues in his campaign and of his new administration. i believe it's because we has a deep political project in mind, which is to remake the republican party as a party that will be the party of -- a more populist party and the party of the working man to have strategies that bring them to a new loyalty to the republicans. clearly if you look at how he won ohio, pennsylvania, wisconsin, michigan, the key states that gave him the presidency, it was because of that appeal. as he looks to his reelection, he wants to cement his relationship with those voters even more strongly. and that suggests to me that a, sort of a tepid massaging of nafta and an announcement of victory may not be what he's going for, that he's actually going for something more
radical, more dramatic that will speak directly and meaningfully to this constituency he's trying to attract. with that provocative comment, let's turn to the audience. when you speak, please tell us who you are, what institution you reside, put it in the actual form of a question and remember we do have c-span here. so your mother might see whatever it is that you say at some point. with that we'll turn to you, sir. >> bob, georgetown center for business and public policy. the keystone of this discussion is that nafta is bad. >> not the keystone xl. >> i didn't mention that, sir. i meant the essential element here, the basis of all of this is that nafta has been a failure and is evil and has to be corrected. i wonder if there's anybody on the platform that who could make the case for nafta.
has it not in some aspects been quite beneficial to both sides. >> thanks, bob. that's a great question. >> uri and matt. you're the two most likely. >> anybody but me. >> hello. well, in a nutshell, mexico's economic performance is disappointed, compared to integration of many relatively poor countries into europe, the growth of mexico and capital income terms has been very disappointing. a lot of it has to do very little with nafta. there's also been a sequence of crisis in mexico which has to be taken into account. as far as the united states is concerned, this is a giant
economy of which trade is not the biggest part. trade with mexico is significant but it simply will not be found in terms of the overall statistics with regard to acceleration of growth. rates or anything like that. nevertheless, there has clearly been an huge increase in trade between the two sides. and since we're operating in a free market, i think you can fairly assume that a lot of that trade is beneficial, at least to those who engage in it. okay? final point is that -- and yeah, i should add that without question that trade has enabled some companies in the united states, i would say particularly automotive companies, but several other to become and remain competitive on the global
market. finally, i would say that the effect of -- the big effects of nafta unfortunately are distributive, distributive. we have to look within the countries. and i would argue that there have been significant benefits for both american consumers and mexican consumers. but some have lost out and this is very clear. i agree with thea on this. yeah. >> matt and then antonio. >> when i was the deputy assistant for north america, i used to say the north american free trade agreement that the american people are divided. half of the american people blame nafta when it wasn't rain for five days, the other half of people blame nafta when it rains too much over a five-day period. three things are important. first of all, the agreement,
improve the economies of both counties. the second, the majority of the manufacturing jobs we've lost -- and we've lost tens of thousands of manufacturing jobs since we entered into nafta. but the majority of the jobs were lost to automation, not to trade. and it's because of nafta and the agreements that we were able to bring in a very large number, a larger number of better jobs in other sectors, although quite obviously the individuals who lost jobs in manufacturing were not geographically or otherwise positioned to take the incoming jobs. and certainly there are so many disappointments with nafta, so many things we would like to improve. so many things that could be better. but overall it was truly a great thing for america. and the last point is that if you ask any national security expert who are the four biggest national security assets of the united states, 100 of 100 experts will tell you the atlantic ocean, the pacific ocean, our relationship with
canada and our relationship with mexico. americans do not even begin to comprehend the cost of having a contiguous neighbor that is hostile or even unstable. in europe they get that. not just because of the world wars but centuries before and in asia they get that too. americans sometimes don't grasp that. i don't want to play down the economic aspects of the agreement. i think it helped both countries. we all know that individual regions and sectors were hit and hurt. we know of things in the agreement that can be improved. but america is much better off with nafta than it is without it. >> yes. i believe that nafta is foreign economic policy. and foreign economic policy is a part of foreign policy. so in terms of mexico-us relations, it is absolutely essential. i believe it to be a fact that
mexico and the u.s. sink or swim together, whether they like it or not. maybe at some point, you know, the u.s. or mexico would like to move to a new neighborhood. no can do. you cannot do that. we're stuck there. you know, again, in the 1980s, our late dear friend wrote a book called "a marriage of convenience." this is a marriage where you really can't divorce, where you're stuck in the same house or apartment and you have to engage constructively. there's no way out for both countries. and i think that is good. i would say, you know, so close to the u.s. it's good that we're close to the u.s. but the political environment, to restate this, is so toxic that, you know, the saying is coming to haunt us back again. in terms of just the economics itself, i would say that nafta
created a strong area of rule of law in mexico. that is good for the u.s. and that is good for mexico. what we need is more rule of law in mexico. and nafta represents rule of law and transparency and accountability. in terms of u.s. interests, in the next panel there's someone speaking from the dairy association. i'm sure that corn producers, pork, beef, chicken, poultry, just the ag which is complicated, they rely on mexico. >> we'll be hearing from them. >> we eat their beef. >> thea lee rising in defense of nafta? >> well, bob, i know you didn't expect me to answer this question. >> it's okay. >> it's okay. thank you. i appreciate that. and i appreciate the deference of the chair. i want to say that i think we need to separate out some things. for one thing, i want to stipulate that the value of the relationship with mexico and canada is paramount.
i agree with antone io we need to value that, treasure it and take care of it. i also agree two-way trade has gone up between u.s., mexico and canada. is that the right measure, the right benchmark. we need to look at what's in nafta, not the aura that we've given to nafta. if you look at the components of it, the tariff is sometimes the least economically part of it. but the investment rules, the property right protections, what happened to price. but also we talk about the rule of law. let's talk about labor law. you know, one of the most important things we could have done if we really wanted to tie our economy to mexicos would have been to protect mexico workers' rights to organize a union. an independent and democratic union. we didn't do that under nafta and that was a failure. that's one of the reasons why if
we look at the benchmarks -- the benchmarks, not about the volume of trade. nobody cares. they wake up thinks about their jobs, wages, the living conditions, the cleanliness of the air and the safety of their consumer products. on that part nafta did not, nafta did not fulfill the right rule of law of making sure that workers could exercise their fundamental human rights at the workplace without fear of arrest or violence or being fired. and so that's the failure of nafta that it was the wrong rule of law. >> we've got about seven minutes left, which is nothing. but what other questions do we have out in the room? what i'd like to do is take two questions and we'll do them at once. this gentleman here in the front and then the gentleman here. >> hi, dan newman. mr. gold, very interested in your analysis of how withdrawal
may or may not occur by executive action. it seems to sort of run counter to conventional wisdom on the hill these days. they may not realize they would have a role to play in withdrawing these duties. i know that in subsequent agreements like the korea agreement there's section 107 actually says if the president withdraws implementing legislation goes away. and there's also language in the original fast track of '74 saying that easy executive agreements and the president has the authority to enter into them or withdraw. let's imagine an example where this administration plays it fast and loose -- >> your question is? >> -- issues a executive order to do a pull out. does that lead to a court challenge? do we need congressional fortitude to step up to this? how does that work out. >> let's go ahead and answer that one now and then we'll go to the second question here. >> i can make that quick. i'm not sure.
you know, as i said, that topic is actually far more complex than we have the time to wrestle with here. we can talk about it later if you want. >> ken, you maybe have a topic for your next event, the president's legal authority as it exists and the role of congress. go, matt. >> that's the answer to the question. i'm not 100% sure and to go through the possibilities is far beyond what we have time for right here. it's an excellent question that you're raising an it's an issue. >> right over here. >> great to have thea back in washington. we need her more. we need her voice. thank you. two short questions. one, economists -- >> remind us who you are. >> steve landy, manchester trade, the longest experience. i did mexico and i did britain. we go back years. two quick questions.
one, question one the economist had mr. trump said i always ask for the extreme but i'm unbelievable when i actually agree to at the end how much i compromise. where do you think trump will have a compromise in nafta. if he isn't out to destroy it like you explained. and secondly there was a glib this week about how well the extremists have done in european politics, their percentage have gone up. but they also pointed to mexico where the leftist candidate went up 7% or 8% and of course the current president is very low. do you think that if this continues we're going to see a much higher percentage among the mexicans. thank you very much. >> thank you, steve. antonio, why don't you start with that one. >> right now the president has low levels of popularity. some people estimate 12% approval rates. but high levels of political support. i haven't seen mexicans united
to such a degree since maybe the nationalization of the oil industry in 1938. of course i wasn't there. i'm using that as a precedent. this is something pretty unique. but that support comes with a cost. as i mentioned during my remarks, the wind set of politically acceptable solutions for the mexican president is getting fairly slow. and you rightly point out that a leading opposition candidate is doing very well in the polls. and you know, relations could be much more complex and problematic between mexico and the u.s. should that person be elected. just one quick remark. i hope that the u.s. -- u.s. decision makers do not take mexico for granted. when i was working for the mexican embassy, we tried for
years, for years to reach a negotiated settlement over a cross border trucking dispute. when we exhausted all options, we imposed trade sanctions on the u.s. which were validated by a nafta panel. suddenly members of congress discovered that mexico was vital for their exports of agricultural goods, manufacturing. sometimes people appreciate something when they lose it. i hope we don't wait until that. >> and the other part of steve's question. yeah, where is trump going to compromise, or does we -- will he go for the doom's day scenario or will he massage and declare victory? >> i don't think there's an absolute answer to that question. this is a game. it's a very complicated game. and it will depend critically on
the willingness and ability of your trading partner to retaliate. and to make clear that they will retaliate. and second, it will depend critically on the ability of those in the united states who clearly are going to lose out from a collapse of nafta to make their voices heard. so there's no absolute answer. a lot of it -- unfortunately i'm an economist but i have to reduce it to. this. you have to have guts. that's what it's about. >> one of the things that both donald trump has been clear on is that they hate multi-lat ral agreements and they want bilateral agreements. navarro said last night tpp is not dead. it's dead as a multilateral agreement. we're going to have bilateral agreements with the countries over there.
think about that in the nafta context. it would be very easy for trump and trudeau to sit down and have a bilateral cabinet agreement. would we ever solved soft wood lumber, salmon, maybe not but you could see the two of them reach an agreement because the trade between the two countries are balanced and from steve bannon's perspective, canada looks a lot like us. and on the mexico side, i think maybe no relationship, maybe no nafta with mexico, no agreement with mexico. we might wind up with a true two speed north america with a u.s.-canada trade agreement and with mexico nafta, zero. >> i think if president trump wants to end nafta one way or another he'll eventually get there. i think if he wants to renegotiate it, the biggest mistake you can make trying to predict what will happen is to
forget that canada and mexico have equal voices in that conversation and he won't be making that decision by himself. >> anyone else want to comment? thea. >> i'm just commenting to say i don't know, you know, what ends up happening or where the fault line is. but i think it would be a mistake not to take this conversation very seriously. there's a lot at stake here. the labor movement is going to weigh in, we're going to outline the issues that we've had, particularly with the labor and environmental side agreements with the investor state, with procurement. i don't know where it ends up. you see deliberately within the trump administration that there are conflicting voices in there that represent the different polls of the republican party, the goldman sachs and the chamber of commerce and the economic nationalists populist voices. at the moment everybody is jockeying for position and maybe in six months from now it will
be a lot clearer which voices will dominate. >> and i believe that motion mexico is taking the u.s. conversation very seriously and the challenges very seriously. they're trying to come up with solutions for that. there is a win-win solution. i believe something very rare and that trade is a positive sum game. we're trying to find solutions for real problems. where mexico is not the problem is the solution. that i know. but i also know that mexico will not accept a bad agreement. and i don't think the u.s. should be thinks along those lines. those are real discussions. >> thank you, nelson, thank you to the panel. we are not having a formal break, everybody. we're going to swap out the panels. it's going to take us about a minute and a half. thanks, everybody. [ applause ]
restarted. thank you all for joining us again today. our second panel is going to have a more specific industry takes on different sectors of the economy and their thoughts about nafta. pleased to have a couple of my board members, ralph carter and doug gauty. thank you all again. with that i'll turn i it over to doug from pfizer. >> thank you for being here this morning. the problem is leading the second panel is no matter how many profound and insightful thoughts you've had in the shower this morning, they've all been said. and there's nothing to do but tell a story about i found myself waking up in tijuana at spring break.
i'm not going to tell that story. i have a better one about running the quebec marathon. when i worked at the im i had a wise boss when i gave a particularly negative view on something, he said you need to be resolutely in search of optimism. no matter how bad the situation is. you need to find something to optimistic. that may have been difficult in the last couple of months and weeks as we've watched trump. propugate a trade agreement that's very different. at the same time there is some positive things to look at if you look at nafta and nafta 2.0 -- if we have this panel next year, i hope we're not using negative integers. what we look at is nafta needs to be modernized.
i think a lot of people are saying, look, if nafta were an appliance, it would be a 25-year-old harvest gold refrigerator, right? i don't want that anymore. what i want is one of the cool knew whirlpool refrigerators that has internet access and keeps my milk cold and gets delivered to my door in less than a day and a half. that's what we want from nafta. there are a lot of opportunities here with canada and mexico together or separately to try and sort of improve areas that either weren't imagined 24 or 25 years ago, like the internet, or at least wasn't widely available. or supply chains that have changed because of technology, productivity, efficiency, overall rising in economic growth in all three countries. so, you know, i don't think we want to get into either a mexican standoff or its canada equivalent which is of course two people holding the door for each other. i'm half canadian so i can say this.
the reason they have roundabouts in canada instead of four-way stop signs because traffic would gridlock. sorry. i'm not here to do standup. i'm just a moderator. with that i'm going to introduce my panelists and let me talk instead of me. first up will be ari from the international association, ralph carter from fedex, the dairy food association. their full bios are in the handouts. these are all very smart, very experienced people with government and private sector experience and they're going to tell us what's going on. >> great, thanks, doug and thanks ken and weda for putting this on. as we can see, it's clear folks working on trade are going to have no lack of work in the upcoming year in this new administration. so it's really good to see a lot of friendly faces here. so real quick on the internet
association. we represent 40 leading internet companies. we are across the board. ecommerce, cloud search, sharing economy. we represent a really wide number of internet companies that are all over the world. and who are really working to advocate for policies to enable a free and open internet globally. so with that on the topic that we're speaking on today, nafta, when it was negotiated 25 years ago, that was before the advent of the commercial internet. this was at a time where mozilla was in the first stages of development. the world wide web was still a thought over in geneva. there's a lot that has happened since nafta was negotiated. and this was long before digital
trade was actually an area of focus in our trade negotiations. so you know, back then we didn't have online marketplaces. we didn't have the cloud, the app economy was nothing anybody had thought of. smart manufacturing, internet of things, precision agricultural, machine learning, these are all science fiction at the point that nafta was negotiated. so since those days the internet economy has grown into the largest and fastest growing sector in our u.s. economy today. this is directly employing nearly 3 million americans. it's obviously related to many many other jobs that are, that are related. and it's actually a really strong point and a point of strength in our u.s. economy because we have a massive surplus in digitally delivered services.
and that's $159 billion when it was last looked at in 2014. so not only is the internet transforming the u.s. economy, but it's transforming trade in a fundamentally positive way. you know, when nafta was negotiated, it took massive capital and resources to participate directly in trade. and today hundreds of thousands of u.s. small businesses that are internet enabled are able to access customers in mexico and canada with the click of a button or the swipe of an app. so at the same time this is -- you know, there's a lot of good stories on small business. but this is also a traditional industry story from financial services to flat rolled steel to dairy to appliances. everybody is relying on the internet today.
and the tools that the internet enables are helping further global competitiveness for these industries. there's a statistic, 75% of the internet's benefits are actually -- they actually go to more traditional industries. so with that we really think that it's not only about internet companies, it's not only about small businesses, developers, entrepreneurs, content creators, but it's really about almost every sector in the u.s. economy. >> so shifting to nafta, when it was negotiated, if you do a search of the text, it doesn't say the word internet, anywhere within the agreement. so it has little on information flows. the intellectual property chapter has some detailed rules but overall doesn't have the
provisions that are critical to the internet economy and to be honest those provisions of u.s. law hadn't even been put in place. those weren't in place until the late nineties so nafta clearly has some places that not only is our public policy developed quickly that we could really look at updating. one other piece to this puzzle on the internet economy and digital trade is that -- without tpp we have no global standard that's been agreed upon widely on digital trade. so i believe that it's essential for the u.s. to really see this as a huge strength of our economy and move very quickly to complete rules in this area
globally that will allow our companies to function in the future and not be blocked as a -- just because they're u.s. companies. so i really think that whether it's nafta or some other bilaterals that are being discussed, we need to move quickly to crystallize the rules in the digital trade age so we're the ones around the world leading. so just -- i'll go quick but in terms of nafta, we see some pretty important updates in the ecommerce base on data flows and digital services. so this would be the free flow of information and data localization restrictions. we also see an issue of intermediary liability that here in the united states has been a principal in our communications and decency act since 1986 that
allows individuals to post content on any number of services. this could be a review on an ecommerce website. this could be a cloud based service that's hosting content for one of their customers. you're able to post that content freely and at the end of the day the internet service is not liable for what that content is. so we actually in the u.s. see section 230 of the cda as a critical component of our domestic, legal apparatus for the digital economy so we see that as a place that should really be included in future trade negotiations including a potential nafta rewrite or renegotiation. i think that there's also some other places open digital markets. nafta allows for some broad
cultural carve out that limit the distribution through internet content. we see areas like encryption and source code that would be really critical to get some enforceable rules in. and then we'd also push for no custom duties on digital transmissions and also look at some unnecessary regulation of online services that we're starting to see pop up in many countries around the world. so shifting to intellectual property real quick. again as i touched on section 230 of the cda in the intellectual property base we see safe harbors posting online content as critical for the growth of the digital economy. so two places that i would hope negotiators would start looking quickly on fare use which is a limitation and exception to copy
write. this essentially without it the internet economy doesn't exist, u.s. innovation leadership doesn't exist. these provisions allow web searches, machine learning, text and data mining, it gives cloud based technology the ability to copy content without the explicit permission of the copyrighted material and then share it. obviously there's mechanisms in place that protect against theft and illicit activity and we fully support those but for the online ecosystem to work and function appropriately, we need to see some limitations and exceptions in the space. again, back to safe harbors and this is also critical for the copy write space as well, so
this is portions of our digital millennium copyright act and many of these provisions were negotiated in tpp but we don't see tpp as starting place, finishing place, et cetera. i think we see it as a good reference point but there could be other areas that we'd want to move forward in as well and lastly i just want to mention and ralph will jump in here as well. customs and trade facilitation are also critical for internet enabled businesses and what we call microbusinesses which is often just the one person etsy seller in middle america that is shipping all over the world. so as we see some of these barriers in the service space, we're also seeing barriers on the custom side that due politictive paper work and really difficult procedures to get small packages, very small
low cost packages in and that's another place that i think that we would look to see some work done is on dominius threshold for small packages which is a place that really effects these small online sellers. with that i think we see a nafta renegotiation as a great opportunity for our industries and look forward to continuing the conversation and pass it here to ralph. >> thanks ari. thanks doug. it's hard to follow doug. i'm not going to try. ari it warms my heart to hear you mention dominius. i've been talking about that more many years before anybody had ever heard of it. and i'm glad to see that other people are now seeing the importance of it. i'll get to it a little bit later on. antonio we're a company that's proud to stand up and say we support nafta and that's it been
good for fedex and our employees. we're moving 12 million packages a day and a lot of those are around north america of all of our customers shipping goods back and forth across the border. mexico and canada are second and third largest trading partners. a lot was said on the other panel about the importance of this but i think it's important to lay out some of the facts. we do make things together, the u.s., mexico and canada and that is a great strength for all three economies. the fact that we have access to the unique vallated and competitive contribution of mexico and canada makes the united states that much more competitive. so it works for all three of us. it is a win-win-win. and it especially is works for the united states. there are 14 million jobs in the united states that depend on trade with nafta or with canada and mexico.
and trade among the three countries has quad drupled over the 20 years since it was signed as was said earlier, 40% of mexican exports to the united states are american content. peterson institute has a study out that nafta makes americans or the united states $127 billion richer every year. so it's incredibly important for all three of our economies. the automotive industry has been discussed a lot. i think it's the poster child for how the modern supply chain works and how integrated the three economies are. the average car and all the parts that go into it cross the u.s. canada border seven times. a car seat, article few weeks ago talked about a simple car seat having component parts made in four different u.s. states and four different locations within mexico. that's the integrated nature and
it's a good thing. it makes the united states economy more competitive, not less. and, in fact, if u.s. manufacturers could not get access or had their access limited or prices went up, two mexican and canadian value added inputs, it would have severe disruptions our supply chains. it would make the united states manufacturers much less competitive. think about it if someone said on the last panel you don't realize something until you don't have it. we have two good examples in the last several years about how the disruption to supply chain, how bad it can be on business and the economy. the tsunami in japan if we remember that, the dramatic impact that had on u.s. manufacturers who were suddenly cut off from their suppliers, similarly a volcano in iceland years ago when i was in brussels caught off air space across
europe and that had massive implications across supply chains that were relying on goods from other countries coming in on airplanes. i think we need to keep this in mind when we think about the importance of nafta. so our view is that the bedrock principal of nafta must be maintained and we should not erect any new barriers to trade among the three countries. that said, again, lots of questions about where we go from here and what can be improved and if we're going to have a full negotiation or a partial one as has been said. there are a lot of good principals, modern principals that have been agreed by mexico and canada which could be implemented. for us we've got one particular instance and ari talked about it and that's -- i would refer to doug's point as well is making things more modern. i was going to do a slide but i couldn't do it. you can't see it. this is a picture of the
u.s./mexico border. there are seven lanes across of trucks waiting and the line going back goes to the horizon as far as you can see. the average truck crossing on the u.s./mexico border takes 17 hours and it takes three different drivers just to cross a one mile space, one driver drives it to the border, they unhook the trailer, give it to another driver, he drives it across, unhook it again and give it to the next driver who will drive it to its next destination. there's got to be a better way, right? we can use nafta to make all -- take advantage of all the technological advancements that have been achieved over the years and create a truly seamless border. seamless but not unsecured, right? data and technology can both make the border more efficient and more secure at the same time. and we would like to see nafta take this on.
the u.s. we're the chair of the u.s./mexico ceo dialog and we've been working on ideas to improve the movement of goods across our southern border and there's some great ideas there. canada and mexico have been doing this initiative called beyond the border that's been going on for years. they've made great progress. the u.s./canada border is efficient and they've got some great ideas. nafta would give us an opportunity to take the best of those ideas, implement them on the border, make it part of the agreement and really take a lot of cost and time out of the border crossing. finally, mentioned dominius. you may know that u.s. goods going into canada, everything over $15 pays duties. going into mexico everything over $50 into mexico pays duties. coming into the united states, it's $800, anything up to $800 is duty free and this is great for the united states. we did this because we saw it in
our own interest. nafta gives us an opportunity to address this imbalance and create a truly global and powerful ecommerce platform where all three countries could trade, small businesses could sell to one another across the border, united states would have a huge benefit in selling goods made here and imported here in the united states to consumers both in mexico and canada. huge opportunity to modernize our trade relationship and that's something if we have a renegotiation would be a good idea. >> thank you, ralph. michael representing the international dare food of united states. pleased to be here to represent the interest of the dairy industry. this is a trade association of about 525 members. we represent all the people who take a gallon of milk and process it into fluid milk that
you drink, cheese that you may eat, yogurt that you may eat, ice cream that some of you in the room may eat occasionally and infant formula and many other ingredients that are in milk. very pleased to be here. i too would like to add my comments in support of mexico and the relationship we have with mexico as i explained the other day when i was visiting in the embassy here in washington and as antonio said earlier, there's also investments for mexico into the u.s. especially in our dairy industry from la la to boredlands as one example. as we think about nafta, we see them in two different worlds. we see great benefits from nafta. food and ag trade is quad drup appealed from 9 million to 36
million in that range. supports a lot of jobs and food and egg. we have about 1.4 million jobs supported by food and agriculture. it's a large industry. we are currently exporting milk over the last 20 years, our milk exports have increased from a little less than 5% to over 20%. our production efficiency per cow and our total milk production is increasing every year and today when our farmers milk cows, problem no one in this room has ever done that, but if you were to milk cows, you know what i'm talking, you milk cows one day a week, it goes to the export market. so exports are extremely important to us and mexico is an extremely viable trade partner and extremely viable market to us. we export 1.7 million in dairy products and about 1.2 million of that goes to mexico. our trade with mexico has been
increasing and we have a great relationship with mexico. so our main issue with nafta and renegotiation, reopening or whatever we do with nafta, our main objective with mexico will be to preserve the excellent trade relationships we have with mexico. in terms of canada, we have a different story with canada. we've been in the news frequently. i was interviewed last night by the canadian tv, i was interviewed a week ago for canadian tv. we have joined together with the national milk producers federation which represents the dairy farmers, 50 state ag secretaries and the u.s. dairy export council to voice our concerns to the new administration over policies that the canadian governments doing that is foreclosuring about $150 million to canada. with some of their pricing strategies that we fully expect,
according to the reports in the media that they intend to extend across all prove vinces of canada. so we've had ongoing issues with market access with canada. we'll continue to push those. we are concerned that those current pricing schemes on the ingredient pricing strategies will also spill over into not just the domestic canadian market that forecloses our company's located primarily in wisconsin and new york at the current time, but we'll spill over into the global markets as they start subsidizing milk powder to the world. so we are watching canada and we have strong interest in what's happening with dairy trade and market access in canada. if the negotiations continue or the renegotiations or however the process plays out. we intend to be at the table.
we special the dairy industry are well represented. on the agriculture side with the example a few years ago about the trucking industry and the trucking issues. we will be mindful of any efforts to retaliate against agriculture products because of all of the goods and services, food and agriculture are services that every citizen around the world needs. and we also see one of the things that was mentioned earlier was a national security. we see food and agriculture as being a piece of the national security piece as well and all though it's a topic for another panel, when it comes to food and ag, our top markets are canada and mexico. with china fast approaching. so we'd be mindful with the issues of china as well. today's discussion is about nafta. so we'll be there. we'll be looking to make some improvements perhaps in some of
the spf agreements making those more transparent, making those have a speedier process. some of the stuff that we were able to negotiate with tpp and also be watching this intellectual property and if it comes to dairy one of our big issues is the geographic indicators for things like feta cheese and those kinds of things, i see many of you that have been in the trade battles for many years. you know i would be remiss if i didn't mention geographic -- >> in interest of time let me see if i can speak in headlines. whirlpool corporation. whirlpool is head quarted in the united states. we manufacturer appliances for the u.s. market and for many markets. we are an exporter, we're an
importer. we have 25,000 u.s. employees and 100,000 employees worldwide. north american market couldn't be more integral to our business. canada is a very important export market. and our global operating platform positions us to manufacturer in mexico for mexico production and 80% of what whirlpool sells in the united states is made here in the united states in states like ohio and iowa and michigan the very rust belt where a lot of folks came out to vote in this last election. three quick principals. as we think about nafta, the first is do not pull up the draw bridge. allow us to keep things in place. let's look at where we can refresh. some of the principals that we negotiated 23 years ago, 23 years ago i think i was in grad school, probably reading economics book written by --
remember him? and joe stiglet's i think we got the mac crow economic stuff, rights. we can see the benefits to the industry, to the gee owe political issues but in hindsight i think there probably is some reconsideration that has to be looked at the in the mike crow economic levels and those are the communities in which we live and operate and as any of you and i travel around the united states, there are many small towns where you see sort of these displaced workers and communities and while i don't associate that to nafta, it certainly raises the question of how did we get the trade adjustment? did we get the retraining right on that side of the equation. did we get the enforcement provisions right as part of the mac crow economic upside. so yes indeed, there's no
question that we embrace nafta and our workers embrace free trade, but we're also think we need to ensure that if the institutions haven't kept up to the realities and the results of open and free trade then we may have to take another look at updating and modernizing not only the agreement but the institutions that enforce them. so renegotiating nafta in my mind is doable and we hope that it will be done under due process with a notification period to congress and that it will be done under what was a heavily fought for tpa so that congress and the administration can work and due process and solicit industry and other stakeholder feed back to get it right. the one thing i guess i would say just to spring board off a couple of you folks is that, i
think one of the things that is an opportunity is we are a couple cycles past the post industrial period when we negotiated nafta and if you step back and look at where we are, we're even past the it cycle and the internet of things and we're now more in the knowledge economy. so there's a lot of intangible things and services that go and supply chain issues that go with updating this agreement. and so when we take a look at renegotiating this agreement, i think one of the things that heartens me is that we're going to have a number of business principles renegotiating the agreement and what i mean by that is if you take a look at the administration, folks like wilbur ross, the potential of designate for ustr there are a number of grownups who have lived nafta, whether it was in the textile and apparel industry or the steel industry.
i think they've seen both the upside in terms of wall street validating and the street validating the integration of the economies and also the downside to some of their communities and smaller industries. let me just do what my other fellow panelists did hear and that is to say if we were to take a look at nafta and focus on particular areas of deeper dives, one area that would be appealing i think to whirlpool and to our industry at large is the areas of rules of origin. the same conditions that brought us to tpp haven't changed. those realities are the same and that is that we're operating with rules of origin that don't recognize where we are or what we are making today and that is also true in manufactured goods, not just in some of the it and to that ends, there are rules of origin that could absolutely
benefit from another look and this is not in any way specific to mexico or canada, but it does beg the question of, you know, what was negotiated 23 years ago, is that relevant today. let me stop there to give the floor back to you all and to doug. >> thanks. that was fantastic. as i sit here and listen to the windows nearly blow out from the wind, one thing we should add to the -- i enjoyed yesterday a lot more than i'm enjoying today. sorry. we're open for questions. you've heard from four key sectors of the economy and with that we'll just go straight here. >> either one. two people had their hands up. you can fight each other if you want. brian popular and bill lane.
>> thank you. great panel. nice to see you all. a lot of the discussion today has focused on mexico, not entirely but a lot of it has been and there's been some reporting that the administration may try to make a nafta renegotiation mostly about mexico, kind of winking at canada, hey it's not about you trksz really about mexico, would that be from your perspectives a politically feasible approach in the united states and in the ag industry, i wonder how the ag industry would feel about a nafta renegotiation that largely left canada untouched? >> thank you. for those that don't know, brian one of the best trade experts in washington, d.c., so thank you brian for the question. for us, obviously, we want to see canada be a major part of any renegotiation for dairy and
we are -- we're working on our concerns about canada, whether there's renegotiation or not, because we have significant issues and they boil down to market access in canada and excessive tariffs and drqs on our products like yogurt and ice cream. we are going to be pushing to preserve what we have with mexico and aligning with mexico on the current arrangements we have on trade and we're going to be pushing on the canadian side for greater market access. >> hi, bill lane and great panel. let me first of all, correct one thing. there was no internet when we negotiated nafta but we really were proud because fax machines had come out and they were really cool. i don't know if a lot of you know this or not but cc actually stands for carbon copy and we were getting rid of carbon copies and that was another big deal as far as xerox machines. it was cutting edge.
my question to you is regarding your customers. to make all this protectionist stuff work we've got to raise prices. particularly, it seems strange that we're picking the two countries that are the greatest consumers on a per capita basis of american products. our number one and our number two export market or canada and mexico. you put them together, 150 million people out of 7 billion people that live outside the u.s., and they consume one-third of our exports. it's pretty good. put another way, the average nafta consumer buys 38 times more products than the average chinese consumers of american products. so i want you to think about your customers. if we're going to raise prices a lot, 35 to 45%, i guess that's the starting position as far as the tariffs, how price elastic are your products? will people gladly pay that for
some assembly jobs coming to the united states or will they resist? will they fix up their old car? will they keep the old electronics and what have you? elasticity of your products and the fact that we're going after our two biggest customers of american products? >> i've been volunteered. there's no one i'd rather respond to than bill lane. great question, bill. and from the perspective of perhaps the appliance consumers, it's a function of price and quality and many factors, options, bells and whistles, performance so at the end of the day it isn't just price so i don't see anything but an opportunity actually to keep their prices competitive. at the end of the day, it's not -- put aside the protectionist language, i'm not sure it's appropriate here. i think what you've got to think about is, actually beyond that.
and that is in terms of competitive trading blocks and i think the biggest fear for me as someone who cares deeply about free movement of goods is how do we preserve the right for this hemisphere to compete globally and there are some enhancements that need to take place in the supply chain and the trucking. yesterday i got a note about canadian's our biggest markets and we got trucks at the border going through new bio screens. they inhibit the movement of goods and cost us money. i think there's an opportunity to get it right and to be competitive and maintain prices where they are. >> anybody else want to -- >> i guess i would just say quick on i guess geographically canada and mexico for a lot of our users, just based on the
portability of services, i think that a lot of times they're much more likely to travel to canada or travel to mexico with their smart enabled devices where they're going to want to have the exact same services they do at home and the united states. so to the extent there are issues that may be restrict different content distribution or as i mentioned earlier some of the different cultural carve outs for canada, i think that there are -- that is something to think through. >> i would just make the point that has been made before, but that tariffs and price increases that result from tariffs, hit the poorest among us the hardest. clothes, foot wear, the things that the working class spends the higher percentage of their income on are the ones that have usually the high reft tariffs and those are the things that get caught up in retaliation and
so we get into this retaliatory spiral. it's the folks who can lead afford it who will end up paying the highest price. >> thank you. erik coolish american shipper magazine. two questions. just curious if you could go into more detail about what manufacturers like whirlpool are looking for in any potential nafta renegotiation? and then haven't we kind of renegotiated nafta with the tpp? wouldn't that have implement aid lot of things that we seem to be wanting? >> i think that question actually -- your second question may have answered your first question and we were propoents of the ptt. there are a lot of really thoughtful chapters in that
agreement and i think it's something that should be leveraged as we look at nafta. not only as i mentioned the rules of origin but in ip and other very relevant components there are border issues, there is transportation issues, there are a number of areas labor mowability i have on my list, mutual recognition of standards and testing bodies so a pledge ora of opportunities if that helps answer your question. >> we got three over on this side. you go first. >> thank you very much. i just wanted to see if you could comment a bit -- given the fact that the president of the united states has said he intensely dislikes nafta but never been specific and the only thing he has mentioned is increasing tariffs. things are looking pretty dicey.
i wonder if you're communicating with your employees too and what is the strategy to have this more intelligent renegotiation, because if tpp has already been shut down and that was what a lot of that content implied how are we going to get around this politically and what are you as companies doing to ensure the more positive outcome? >> speaking for fedex, we just launched just a couple of weeks ago a new initiative came from our chairman to all of our employees, communication to them making the point that all fedex jobs are trade jobs, that every one who works for fedex is somehow responsible for and supported by international trade because that's our business. and we are putting signage up in all of our facilities so that
every one sees pictures of individual fedex workers saying trade is important to my job. and there is a mechanism to send letters to congressman and i would say that the response was phenomenal, our employees were incredible engaged and receptive to this message and so we're excited about this and as you know our chairman has been very vocal about the importance of trade and so we will be continuing to educate our employees going forward and we think and hope that other companies are going to be doing the same, that we can't -- we can't wait until, you know, a few months before a big trade vote to start ginning all this stuff up. we've got to do it ongoing constant basis if we're to make a change in the debate and so we're prepared to do that.
>> i think when it comes to agriculture, not so much employees but individual farmers, we're probably hasn't been a more supportive of trade than agriculture. we've been on the forefront and the reason being quite frankly is we know there's going to be another couple of billion people added to the planet and we're going to be looking at a situation where 95% of the consumers are going to reside outside the u.s. borders. we're going to need trade. i think another aspect to your question, obviously in the last election, there are a lot of people that feel differently about that and having grown up in southeastern kentucky where we had almost everyone either in the family or a relative worked in a sewing factory and those were gone almost overnight. not saying that's a good thing or a bad thing. i'm just saying it happened. and if you talk to the people who did those jobs and i think that was the point made on the previous panel, to those people it's a real serious issue and some of those new jobs that have
been created and many new jobs have been created they haven't all been recreated in the same geographies so clearly there was an message in the last election that there's concern about job loss and whether right, wrong or indifferent, it's been equated to trade. and i think there are lots of factors with job loss, automation, new technology for one. instead of packing boxes and lifting boxes as your job, your job now is probably to repair a robot that does that 24/7. the last election clearly there's a strong feeling that we've got some kind of imbalances and i think that is the underpinning of why we're hearing all the rhetoric we're hearing about trade. >> maybe just a quick comment from whirlpool on this. whirlpool is the last standing major u.s. home appliance manufacturer in a very competitive global dynamic and
we are employees care deeply that we protect their jobs. we have 15,000 manufacturing jobs in the mid-west. so as we pursue an advocate for open markets, we also embrace competition. we believe we can compete with anyone, anywhere by the same rule of law and so part of that communication with employees is that we embrace, we do not runaway from these tounts stay integrated as a global economy but we're also going to fight for fair trade and make sure that we're working to protect those jobs so that we all are playing by the same rules of law. >> nelson? >> thanks. nelson, your comments are so thoughtful and well presented and well thought through. any traditional trade negotiator would be crazy not to be sitting
down with you and getting input before rolling out new trade negotiations. so let me ask the question that i ask thea lee, do you all feel that you have input into the administration, meaningful input and a dialogue with those who are going to be doing whatever they're going to be doing with nafta? >> we are working at that, yes, have input today. obviously we'd like to have greater input. i think that's always the way of industry. we always like to have more input, but we are working on that and yes we feel as though have input and once the rest of the cabinet gets in place, we will be there during the confirmation process and once they're in place advocating our positions on these things. one of the other things you kmened on was competition. we had our major dairy meeting end of january, i guess last week or two weeks ago, and i heard something there that really struck with me and that
is that, competition spurs innovation and policy picks winners and losers and i think competition is extremely important to echo your comment. that's where our innovation comes from. and we have to continue to innovate and we have to continue to compete. >> and i would just say we're looking forward to engaging with new administration and whether it's commerce department, ustr or otherwise. we're ready to do that, but i do think we would be remiss to not mention that transparency ended up such a big issue in the tpp and a lot of the opposition groups ended up using that as a real wedge as whether they could support the deal or not. from our perspective we hope that as this negotiation or others are looked at, that there is a real big effort put in to public consultation, working with civil society groups that may not have been included in past negotiations.
our industry we're relatively new to all of this. the trade world, so it's, you know, just in the tpp was really the first time that our industry really thoroughly engaged on our whole wide range of issues so i think that not only is it bringing in new industries, new sectors but also making sure the public is kept apprised of what's going on. >> take a brief moderators prerogative. i think -- as this administration starts to put the senior people and the next ranks of people in, obviously this is the time to strike. you make the cookie dough while you're preheating the oven. you need to get the education. this is a very different administration than past ones. it's not just an obama versus bush administration fight over whether a trade agreement should have higher labor standards. this is a completely sort of different divergence in a lot of
ways if we go on what we've heard in the campaign trail. every industry, every sector, every trade association that's interested in preserving what we have here, what we had in tpp which was a pretty good agreement, i think in most sectors' views, even ours, you need to be able to preserve that and sort of push forward. i think that education is more important now than in the past and by the time the people who actually know what's going on are in place and starting to make the decisions, they'll at least be better off understanding how much there is to lose if you go to a protectionist, throw up the barriers, resurrect the bodies of smooten holly or whatever and go down that road. because there's some fairly determined comments that have been made by folks on the transition and then during the campaign, so i think it's important everyone in this room to go out and make sure that education is done on behalf of their company, their association, their sector so
that there's an understanding and awareness of things once they start to have those conversations. so -- yes? >> thanks so much for your comments. you talked about the role institutions can play in retraining workers. i was wondering if there's a role industry can play in that regard and what that role could be and if that's going on and if you could just be more specific about your work in that area. thanks. >> with all due respect to doug, my name is bill earl, with all due respect to doug, if you look at the voting population, i don't think we have as much canadian former canadian voters as we have latino or hispanic voters. the last election had about
12.5% growing of hispanic voters, but voters are also customers. as we see perhaps the tipping point coming in that segment of the voting population being more important, how do you relate to those voters in the context of this nafta question and it being a sharp stick in the eye of that hispanic voting population? >> perhaps i could tackle the adjustment questions that you asked and institutions keeping up and also give this cred for nelson asking really important question. i'm a traditionalist and i love to see some due process in terms of the 90 day lay over with congress but also the issuing of a federal register seeking agriculture and industrial input. that is the best way to collect data and methodically examine
priorities. economy we're also going to have to be telling our stories out in the public and really telling our stories in a way that resonate not just with our employees but with our communities. on the upside of trade and of the areas where we need to make adjustments in communities. so in the public side of the equation, trade adjustments, assistance stronger enforcement bodies, i can't tell you how many times commerce has come to us in years and said we don't have enough staff to do a cost verification, we're not properly allocated and set up to deal with these agreements? we got to update our organizations to keep up with our aggressive trade agenda. on the private side, one of the areas that we're exploring and i think many companies are doing this in their communities is working with worker training programs and community colleges to look at what is the next generation of employees that we need to hire and getting in early, even in high schools and in the first couple years of
college and community college to train in particular trades. we see a real dirth of opportunity or a real dirth of labor and many markets across the u.s. and that's an area we need to reinvest very quickly and where the private sector can through internships and partnerships get these workers new experiences and get ready for the next ten years. >> i think there's a role for business certainly and i think the u.s. is behind if you look at a lot of other countries in materials of the degree of importance that they place on having their workers trained and/or retrained for the jobs that are being created in their economies. i think for too long, we've neglected this and i think maybe part of the positive that can come out of all these discussions is that we have some serious discussions on ways that the u.s. can improve in this
area. i think there's a lot of ideas out there that we can look at if we sat down and said how do we really move our economy and our workers towards the higher end of the value curve. what i'm concerned about is we're hearing so many policies that would actually take us down the value curve towards the lower skilled production. america's great competitive advantage is in the higher skilled, high technology industries and we will win in that competition around the world. and that is our strong suit going forward. but we've got to have the people that are trained to do that. thousands, hundreds of thousands of jobs are unfilled around the country right now because we don't have the right match of skills and so, you know, to address those, protectionism is not the right answer. addressing those worker skills and skills' gap is the right answer. i think denmark -- i heard bill give this example, denmark has
the program where -- it is a public/private partnership the government will give money to retraining institutions whether they're private or educational institutions. they pay them 25% up front and they don't pay the remaining 75% until the person that's going through the retraining gets a job and we've never tried things like that. i think there's a lot of things we can do to improve in this area and i think we should. >> i think with that we're going to wrap up. i want to thank our panel. thanks for all your perspectives and your incites. i want to remind everybody we're going to have another event in this room again just a week from today to look at do a deep dive on china trade. i think we'll have a vigorous debate and discussion like we did today and of course march 3rd with the congressional trade councils. thanks again to the panel. [ applause ]
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