On Tuesday, President Donald Trump moved forward with his “America first” economic strategy by meeting with the CEOs of Ford, General Motors, and Fiat Chrysler to talk about bringing manufacturing jobs back the United States. At the beginning of the meeting with Detroit’s “Big Three” automakers, Trump said he planned to make the United States a more attractive place for companies to manufacture products by lowering taxes and removing business regulations—such as environmental regulations, which the new president criticized in his remarks. This pitch to businesses has been a common theme during Trump’s first days in office, such as at his meeting with corporate leaders on Monday.
American automakers have been repeated targets of Trump’s tweeting activity, such as the times he admonished GM and Toyota for building cars in Mexico. On Tuesday, Trump took a more conciliatory tone, saying he wasn’t singling out car manufacturers, and wanted to let them know that he plans to make the process of building factories “much more simple for the auto companies.” Though Trump didn’t specify which regulations he would remove, he said environmental rules in general are “out of control.” The rest of the conversation was held in private, though it’s likely that NAFTA—the trade deal Trump has blamed for companies moving manufacturing jobs to Mexico—came up during the discussion.
I spoke with Kristin Dziczek, who researches the impact of public policy on the auto industry for the Center for Automotive Research, a nonprofit research organization in Ann Arbor, Mich. She talked to me about whether regulations are in fact keeping automakers from building cars in the United States, and if there is any way to rewrite NAFTA to incentivize companies to keep manufacturing jobs in the United States. The following interview has been lightly edited for length and clarity.
Alexia Fernández Campbell: What did you think about the meeting between Trump and auto-industry leaders?
Kristin Dziczek:The auto industry has been a focus of Mr. Trump’s during his campaign and during the period of time before he took office, so it’s a positive sign to see that he's talking with automotive leaders early on in his administration. [The impact] remains to be seen. There are a number of fronts on which the auto industry engages with the federal government, and trade has dominated the discussion. Today he mentioned pulling back on regulations. There's the product itself, so we're talking safety and emissions and fuel-economy rules, and some of the new regulations that are coming down on automated driving features in vehicles. Then there are regulations that impact the plants themselves, like emissions and waste and other things that come out of a plant. Probably the more heavily regulated segment of the auto industry is dealerships. They comply with FTC and truth-in-advertising rules and financial regulations because they're often lenders or involved in approving folks for credit. It's a very wide swath, and you have to think of the industry as manufacturers, retailers, and financial-service organizations.
Campbell: Trump suggested that excessive business and environmental regulations are the reasons companies choose to relocate outside the United States. Do you think they play a role in U.S. automakers’ choosing to moving jobs across the border?
Dziczek: I don't know that they’re a huge issue. You still have to meet a lot of the product-related regulations if you're selling in this market, so it's not about the place of manufacturing, it's about the product. Regarding the location of manufacturing plants, regulations on air quality and that sort of thing are less onerous in other parts of the world, so that’s an advantage to producing in other regions, like Mexico or China, where environmental regulations may be fewer. But there are many other reasons that companies have moved there. It's access to a market in those regions and a difference in labor costs. Regulation is just one part of a decision on where to locate production. Trade is another big issue. NAFTA has been in place for over 25 years, and early on, we saw a lot of moves to Mexico to chase the lower-wage labor. Lately the reason has been all about trade—it's about accessing from Mexico half of the world's global market for vehicles, tariff-free. For example, a vehicle produced in Mexico for export to Europe versus a vehicle produced in the United States to export to Europe: There's a 10 percent tariff on that vehicle from the United States, whereas there's no such thing in Mexico. It’s not just labor, it's transportation costs, it's access to these other markets. That’s why production is taking off in Mexico.
Campbell: NAFTA has been criticized for hurting autoworkers in Detroit because it made it easier—and cheaper—for companies to build cars in Mexico. Do you think there is a way to renegotiate NAFTA to make it profitable for American automakers to keep their factories and jobs in the United States?
Dziczek: Well, I hope so. I want to point out that Mexico has won the bulk of most new plant investments. But if you look at overall investments in the overall American industries, going back to January 2009, automakers themselves have announced investments in the amount of $116.5 billion, and 73 percent of that investment has come to the United States. But it’s usually the big, sexy new plants that make headlines, not the retooling and expansion and refurbishing and maintenance that's required in order to keep the plants in the United States modern and competitive on the world stage. So we've gotten 73 percent of all North American investments in the United States already. Right now, our industry is going at 94 percent capacity. Oftentimes, plants are over 100 percent capacity because they've done overtime, or they have a third shift running. I don't know why they would potentially risk overcapacity in North America.
NAFTA could definitely be improved. When it was first negotiated, NAFTA promised to raise the standard of living in Mexico so that Mexico would become a market for U.S. and Canadian goods, and that has not come to fruition. Mexico has a relatively porous southern border, so there is a large influx of immigrants looking for jobs, so that keeps wages low, and has made it difficult for Mexico to develop that market and that middle class that was promised. The Mexican market for automobiles has just started to grow in recent years. I think there are certainly changes that can be made. I know that there are groups that are looking for improvements in Mexican labor protections, improvements in environmental protections. Also, right now we're not able to send used vehicles to Mexico, and that might be something that would help make new vehicles or new-to-used vehicles more affordable for the Mexican market as it starts to grow as a player in North America.
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