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Congress may wish to consider the impact of imposing tariffs on certain products in the event of a NAFTA renegotiation. As noted in this report, NAFTA has played an important role in the development of supply chains throughout North America, particularly in the automotive industry. Many automotive assembly lines and parts manufacturers in North America collaborate as an integrated production region ranging from cities like Toronto in Canada to Detroit and many parts of Mexico. Labor-intensive parts can be produced in Mexico, where production costs are lower, while more complex parts are made in the United States. According to some estimates, the entire North American auto industry employs more than 1.5 million people and contributes significantly to the U.S. economy.109 tariffs or trade barriers have the potential to disrupt these production chains. Proponents say it would bring some of the world`s production back to the United States. Opponents say this could result in thousands of jobs lost in all three countries and benefit countries like Germany and Japan as they relocate their factories from Mexico to their country.110 NAFTA has boosted Mexican agricultural exports to the United States, which have tripled since the pact`s implementation. Hundreds of thousands of jobs in the auto industry have also been created in the country and most studies [PDF] have shown that the agreement has increased productivity and reduced consumer prices in Mexico. Under Article II of the Constitution, the President has the power to negotiate with foreigners.
If President Trump decides to renegotiate NAFTA, the transposition of the renegotiated agreement into domestic law would likely take one form out of two, depending on the subject of the negotiations: president`s proclamation85 or, whether the renegotiations should lead to changes by the United States. The President would likely seek to expedite the processing of implementing legislation, in line with the Trade and Accounting Promotion Act of 2015 (TPA). 86 The legislation was developed under president George H. W. Bush, the first phase of his Enterprise for the Americas initiative. The Clinton administration, which signed NAFTA in 1993, estimated it would create 200,000 U.S. jobs in two years and 1 million in five years, with exports playing an important role in U.S. economic growth. The government expected a dramatic increase in U.S. imports from Mexico as a result of lower tariffs. A World Bank study finds that NAFTA has brought economic and social benefits to the Mexican economy, but that it is not enough to reduce the economic disparities between Mexico and the United States.73 She says Mexico needs to invest more in education, innovation and infrastructure, as well as in the quality of national institutions. The study also notes that income convergence between a Latin American country and the United States is limited by large differences in the quality of national institutions, the innovation dynamics of national firms, and the capacity of the workforce.
While NAFTA has had a positive impact on wages and employment in some Mexican states, the internal pay gap has widened as a result of trade liberalization74 Another study also finds that Mexico`s ability to improve economic conditions depends on its ability to improve its domestic institutions, adding that Mexican institutions have not improved significantly since NAFTA entered into force. 75 Dominican Republic-Central America – The United States Free Trade Agreement (CAFTA/DR) between the United States and Costa Rica was concluded on January 1, 2009 between the United States and the Dominican Republic on March 1, 2007, between the United States and Guatemala on July 1, 2006, and between the United States and Nicaragua on January 1, 2009. Entered into force on 1 March 2006 and between El Salvador and the United States. 2006. . . .