The Chamber of Commerce warned Friday that the Trump administration appears to be on the path to pulling out of the North American Free Trade Agreement, on the eve of the fourth round of talks to renegotiate that deal.
"Today we are increasingly concerned with the state of play with the negotiations," John Murphy, the chamber's senior vice president for international policy, told reporters Friday. He said the administration's continued pursuit of an expiration date for NAFTA and its push to favor U.S. companies for government contracts, over those from Canada and Mexico, was alarming the business community.
"The vast majority of business groups oppose these provisions emphatically," Murphy said, adding that Canada and Mexico, the other countries in the deal, were not inclined to support them either. "The concern is that leading with these proposals could lead to a chaotic breakdown in the talks."
That could lead the Trump administration to pull out of the deal entirely, he warned. President Trump has repeatedly made that threat in the past if the administration does not get what it wants out of the talks.
"There is an old adage in negotiations: Never take a hostage you wouldn't shoot," Murphy said. He urged the administration to pull back and "recalibrate" on the talks.
The comments were a stark break from protocol for the Chamber, the nation's leading business lobby, which is rarely so publicly critical of an administration on trade matters.
The next round of talks open next week in Washington, D.C.
While many business groups would like to see some changes to NAFTA, which was signed in 1993, most believe the deal has been a huge benefit to the economy. They have been calling on the White House to push for only modest changes, such as addressing the few products not fully covered by the deal, like dairy and timber.
U.S. Trade Representative Robert Lighthizer, however, has pushed for more fundamental changes, such as making participation by member countries in the deal's investor-state dispute settlement system voluntary. That idea has apparently gotten little traction, and the Canadian government would oppose that change, an official told the Washington Examiner.
The administration also has proposed: adding a sunset provision to the deal, which would require countries to periodically reaffirm their support of the deal; allowing countries to favor their own industries in government contracts; and changes to the "rules of origin," which determine how much of a product must be manufactured in a country for that country to be seen as the country of origin.
Business groups are strongly opposed to such provisions. The auto industry, which uses supply chains in Canada and Mexico, would be hurt by the rules of origin change, Murphy warned. Adding a sunset provision would engender uncertainty and make businesses reluctant to invest if they worried the deal could be revoked.
The Chamber is concerned that altering NAFTA rules to allow the U.S. to limit the bidding process for government contracts would allow Canada and Mexico to do the same, which would lock U.S. companies out of competing for those countries' government contracts. The Chamber argues that very few foreign companies are competitive in bidding for U.S. contracts but that U.S. companies are very competitive in bidding for foreign countries' contracts. Therefore, U.S. businesses stands to lose much more than theywould gain should those rules be changed.
"The negotiations next week will be extremely difficult. These proposals will meet with resistance from Canada, Mexico and the business community," he warned.
Recent comments by top U.S. trade officials suggest there has been little progress in other areas and appear to be laying the groundwork for a pull-out. In an op-ed last month for the Washington Post, Commerce Secretary Wilbur Ross warned, "If we don't fix the rules of origin, negotiations on the rest of the agreement will fail to meaningfully shift the trade imbalance. Our nation's ballooning trade deficit has gutted American manufacturing, killed jobs and sapped our wealth. That is going to change under President Trump, and rules of origin are just the beginning."