Metals Tariffs in NAFTA Region Major Obstacle to Ratifying NAFTA Replacement
The message from both parties in Congress on the steel and aluminum tariffs has become more pointed over the last six weeks, according to a source who's involved in the push to get the new NAFTA passed. That message is: We won't ratify the new NAFTA until those quotas are gone. The source, who works for a large business organization, said the administration is realizing "you don't lift them in the morning and then vote later that day."
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This organization, which insisted on speaking on background during a roundtable discussion with reporters, has met with hundreds of Congress members or their staffs, and is finding that members can use the problem of the tariffs -- and particularly, the retaliatory tariffs from Canada and Mexico -- as a reason not to take a position on the NAFTA rewrite. They just say they can't really consider the deal until the tariffs are gone. "We can't really get a broad whip count until those tariffs are lifted," the source said.
The U.S. could lift the tariffs tomorrow, and the retaliation would disappear, but U.S. Trade Representative Robert Lighthizer says the administration believes it needs to get Mexico and Canada to agree to quotas in order to maintain the integrity of the program. Section 232 quotas are designed to bolster U.S. steelmakers and aluminum smelters.
Canada and Mexico are clearly resisting the quotas the administration has in mind. And domestic voices are also critical of replacing the tariffs with quotas. The Aluminum Association said March 15, "The Aluminum Association continues to view a quota -- particularly on metal from Canada -- as destructive and potentially damaging to the industry's long-term growth and investment in the United States."
The Aluminum Association is the largest trade group in aluminum, and while it represents smelters, most of its members are downstream fabricators. The large business organization source said its members who have experienced the hard cap Korean steel quota see it as a cautionary tale. The product-by-product quarterly quotas fill up each quarter, and then you cannot import from Korea at all.
"What we hear from our member companies is: Tariffs are bad, and quotas are worse," he said. But he left open some room for quotas, if they're more symbolic. He pointed to the quotas on cars that Canada agreed to in a side letter to the new NAFTA. Those are so high that Canada believes "they would never hit that."