Don't Touch Vehicle Content Rules, Say Automakers Ahead of NAFTA Negotiations

As the clock counts down to the beginning of talks aimed at revamping the North American Free Trade Agreement, automakers in Mexico, the U.S. and Canada know one thing they don’t want to see changed — rules of origin.

Auto manufacturers must abide by minimum regional (NAFTA-wide) content rules in order for vehicles to remain free from import tariffs. President Trump’s proposed reforms aim to benefit U.S. companies, but could lead to greater costs heaped onto automakers — something no profit-minded company desires.

Naturally, automakers wants their feelings known well before the three countries get down to brass tacks.

According to Reuters, the Mexican Automotive Industry Association (AMIA) has announced automakers in all NAFTA counties agree the existing rules of origin should remain in place. Under NAFTA, a North American-produced light vehicle must contain a 62.5 percent level of regional content to confirm to the rules.

“Our position is that the trade agreement has been a success, and we shouldn’t be touching something as important as the rules of origin,” Eduardo Solis, AMIA’s president, told Reuters. “In terms of access to markets and rules of origin, what we have is a shared position.”

Solis said the rules have helped make the auto industry more integrated, offering greater value to car companies. Mexico has benefited greatly from the pact, with automakers investing billions into its low-cost manufacturing base. Each member of the Detroit Three has assembly plants in the country.

In the past, Trump has threatened to levy a 20-percent tariff on Mexican-built cars. That created a rift between the two countries, with a Mexican trade official flatly refusing to attend NAFTA talks if the proposal remains on the table.

“We need to remain cautious and at the same time prepare the data that shows why NAFTA has been a success for the three nations,” Solis said.

Last Thursday, the Trump administration kicked off a 90-day countdown to renegotiation talks, during which it will consult with Congress, industry, and the public. Some U.S. and Canadian labor leaders have voiced support for elements the plan. Former UAW president Bob King and his successor, Dennis Williams, have both expressed a desire to see NAFTA reformed in the interests of protecting U.S. autoworkers.

[Image: General Motors]