A U.S. NAFTA Withdrawal Means Big Business For China

October 24th, 2017


The Hudson Institute’s Center for Latin American Studies hosted an event last week titled The Implications of China’s Growing Involvement in Latin America. Featuring Dr. Evan Ellis, a research professor of Latin American Studies at the U.S. Army War College Strategic Studies Institute, and Ambassador Jaime Daremblum, director of Hudson’s Center for Latin American Studies, the discussion outlined the implications of China’s expanding strategic engagement in Latin America.

One of the key takeaways from the discussion was that a U.S. withdrawal from NAFTA would be advantageous for the Chinese. China has been aggressively pursuing transpacific trade deals with Latin America, especially since the United States abandoned the Trans-Pacific Partnership. In executing these deals, China has been able to establish norms and standards that disproportionately benefit China.  If the U.S. withdraws from NAFTA, China will take that opportunity to further cement its economic ties with Mexico and establish trading rules and supply chains that benefits its economy.

Mexico is currently seeking to expand its trading agreements with a number of other countries and is specifically looking towards fostering closer manufacturing ties with Pacific nations such as Japan, Korea, India, and China. During the discussion, Dr. Ellis was asked, “In the case of no NAFTA, do you see the Chinese actually focusing on trying to benefit from that with Mexico?” He answered, “Well, the Chinese clearly already are.”

This sentiment was reflected by Rufus Yerxa, the president of the National Foreign Trade Council. Last Thursday Yerxa said,

“What does it mean to withdraw from this agreement, or de facto withdraw by imposing such high content requirements that nobody meets it? It really means that costs go up in manufacturing vehicles in North America just at a time when we’re going to have to worry about not only the traditional competition we have from Japan, Korea, Europe, but China becoming a major auto producer.”

The negative repercussions of a U.S. withdrawal extend beyond just automobile manufacturing, though. Abandoning NAFTA would have serious consequences for all facets of the U.S. economy, especially in terms of global competitiveness. Yerxa further explained,

“I really think that given the options that seem to be presented to us now of this kind of a change to the NAFTA agreement or even potentially no NAFTA agreement at all, they must be pinching themselves in Beijing because this is a huge gift to our competitors if we move in this direction of making the U.S. and the North American economy less competitive just at a time when everybody else is moving forward on trade.”

China is rapidly expanding its presence in Latin America and it will only grow in the absence of NAFTA. The United States’ economic leadership in our hemisphere and around the globe greatly benefits the economy and national security of our nation. We must preserve this role by maintaining existing trade agreements and expanding trade with allied nations.