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Automaker Provision In Tri-Nation Trade Deal Will Benefit U.S., Navarro Says

NOEL KING, HOST:

This country's top Democrat and its top Republican are each claiming a win on an important trade agreement.

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NANCY PELOSI: There's no question, of course, that this trade agreement is much better than NAFTA. But in terms of our work here, it is infinitely better than what was initially proposed by the administration.

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PRESIDENT DONALD TRUMP: But honestly, it's an incredible deal for our country - took too long. It waited in Congress for too long a time - incredible deal.

KING: That was House Speaker Nancy Pelosi and President Donald Trump talking at separate events about the U.S.-Mexico-Canada Agreement, or USMCA. They've announced that they've reached an agreement to move that trade deal forward. It will replace NAFTA, which has been in place for 25 years. So what is the deal, and is it a done deal? Let's ask Peter Navarro. He directs trade policy for the Trump administration, and he had a key role in shaping the USMCA.

Good morning, sir.

PETER NAVARRO: Noel, how are you today?

KING: Very well, thanks. So Speaker Pelosi and President Trump seeing eye to eye on something - what is in this deal that has made the two of them agree?

NAVARRO: The key part of the deal that I think is great for America is a provision that will bring back auto manufacturing to the United States. It's called domestic content rules. Seventy-five percent of the auto has to be made in the USMCA zone. And then to ensure that American workers get their fair share, there's a really strong provisions on the environment and labor so that we don't have jobs migrating south and that giant sucking sound to Mexico.

KING: For cars to qualify for tax breaks, they'll need to build more of the vehicle in North America, where workers make more money than they do in other places like Asia, for example. That has led to some concerns among economists that cars will become more expensive. If you're paying people $16 an hour to make a car rather than $8 an hour, the cost will be passed on to consumers. What do you say to that?

NAVARRO: Well, a couple of things. First of all, what this is going to do is spark a tremendous amount of new investment from car companies around the world on U.S. soil. And what that investment does, it gives the state-of-the-art production higher productivity. A higher productive American worker can get paid more without raising the cost of the vehicle, so one really shouldn't worry about that. The other thing is, if you go back to the days of Henry Ford, he paid a good wage back in those days because he wanted his workers to be able to buy their own cars. So the Trump administration loves when wages go up, which has been happening in his economic boom. We love that, and we don't worry about this other issue you raised.

KING: OK. OK, no worries then that the cost of cars might be prohibitive for consumers.

NAVARRO: None whatsoever.

KING: Let me...

NAVARRO: I heard that yesterday on your show, and I thought that Cato Institute guy, these guys never love anything other than to ship our jobs offshore.

KING: All right. Fair enough. I take your point. Let me ask you, some Republicans are worried that the administration gave too much to Democrats. Senator John Cornyn of Texas said anything that gets the AFL-CIO endorsement could be problematic. And Senator John Thune, the Republican whip, said if they got the unions, my assumption is there are going to be a lot of things that were changed from the last time we've seen anything on this.

Can you explain briefly why they are worried? What are they worried about?

NAVARRO: They shouldn't be worried, and they won't be worried when they see the deal. This is a great deal for America. It's basically a state-of-the-art template. It has good domestic content rules, but it also updates the digital trade so that we have strong copyright protections for that. There are some really innovative things on currency manipulation and state-owned enterprises which are designed to defend American markets in this hemisphere from China. So I'm sure this will go quickly and well, once - this has been held up for a year by Speaker Pelosi, and that's a shame because we've lost billions of dollars and thousands of jobs. But once it gets on the floor, it's done.

KING: Well, just briefly, I do want to ask you about another holdup. Senate Majority Leader Mitch McConnell says the Senate won't vote on this until next year, presumably because of impeachment. Republicans, you're certain, are behind this?

NAVARRO: Yes.

KING: OK.

NAVARRO: This will pass overwhelmingly in both the House and the Senate. And it's literally been sitting on Speaker Pelosi's desk for a year while they made what are essentially small changes around the edges in constructive consultation. But it should not have taken this long. This goes back to 2016 June. President Trump, when he was a candidate, promised to renegotiate NAFTA. We signed the deal in 2018 November in Buenos Aires. I was there. All of the presidents of Canada, Mexico and the U.S. signed it. And we've just been in a holding mode...

KING: Well, I imagine to that end, you've got some reason to celebrate. White House trade adviser Peter Navarro, thanks so much.

Also with us is NPR's chief economics correspondent, Scott Horsley. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Noel.

KING: So Mr. Navarro - a couple quibbles about how long this took but overall sounds really optimistic. What did you hear there?

HORSLEY: Well, I do think this deal is going to win bipartisan support now that the AFL-CIO has given its backing. That's a green light for a lot of House Democrats to go on board. They did win important concessions, changing the deal that was initially negotiated by the Trump administration. Robert Lighthizer, the U.S. trade representative, worked very hard with Democrats throughout this process. He said he wanted to have Democratic support for this deal. Peter Navarro himself is a former Democrat, so they wanted this to have support across the aisle, and I think it's going to have that.

We should keep in mind, though, Noel, this is more of an updating of NAFTA than a wholesale rewrite. It does cover 21st-century products like digital trade, which barely existed when NAFTA took effect in the mid-'90s. But it's not an overwhelming rewrite of the deal. It is a tweak at the margin that will make some changes and some improvements. But the estimates are that it's going to boost GDP by about one-third of 1%. So it's not going to be a huge economic shot in the arm. What it does do is avoid the calamity that would have happened had President Trump made good on his threat to scrap NAFTA with nothing to take its place.

KING: I see. So a bit of disaster avoided here - potential disaster avoided.

NPR's Scott Horsley. Thanks so much, Scott.

HORSLEY: Good to be with you, Noel. Transcript provided by NPR, Copyright NPR.