By on May 23, 2017

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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]

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23 Comments on “Don’t Touch Vehicle Content Rules, Say Automakers Ahead of NAFTA Negotiations...”


  • avatar
    Lou_BC

    I can see the White House putting pressure upon NAFTA negotiations. They have 3 months to start negotiations. Withdrawal from NAFTA requires a 6 month notice. That puts them into mid-term elections.
    Ann Coulter just recently said, “I hope Trump notices that if he doesn’t keep his promises, Republicans will be wiped out in the midterm election,”

    Here is another interesting factoid:

    “Since 1946, when presidents are above 50% approval, their party loses an average of 14 seats in the U.S. House in the midterm elections, compared with an average loss of 36 seats when presidents are below that mark.”

    There is benefit to renegotiating NAFTA since it has been 25 years. “New” tech and information isn’t well covered.

    It is highly unlikely that Mexico or Canada are going to want to make huge concessions. Mexico has the “cheep” labour and Canada has the resources that the USA wants. This article already points out that the auto industry and even trade unions are fine with content rules. Companies aren’t going to like a “forced” shift in location which will drive up costs.

    The pro-tariff anti-FTA types don’t realize that it is the populace of the country that *pay* for the added costs of production. The anti-socialist types fail to see that added costs of tariffs are an indirect way of subsidizing or “socializing” domestic labour.

    • 0 avatar
      Lorenzo

      As far as elections are concerned, the same rule that governs the stock market is in play: past performance is no guarantee of future results. As far as presidential approval polls are concerned, refer to Mark Twain: “there are lies, gosh-darned lies*, and statistics.”

      * original quote altered to comply with TTAC computer nannies

  • avatar
    Jeff S

    Agree, the populace will pay for the added costs or in other words the consumers buying new vehicles will pay for it. Maybe Trump meant by Mexico paying for the wall that it will be those consumers buying products from Mexico will pay for the wall with the added tariff–Mexico has already said they will not pay for the wall. What will happen is that those manufacturers that do move manufacturing back to the USA or those who have promised to keep manufacturing in the USA will increase the amount of automation in their plants. Trump has promised to bring back jobs to the USA and as you stated the midterm elections are next year. I do agree that there is a benefit to renegotiating NAFTA but the USA should not get in a trade war with Mexico and Canada. As for those wishing to bring jobs back to the USA be careful what you wish for you might get the manufacturing back but with fewer jobs and those jobs will require more education and training. Most auto workers do not have the skills and many will unlikely be willing to get the training for those jobs.

    • 0 avatar
      Superdessucke

      The alternative to new car buyers subsidizing them is for all of us to subsidize them through entitlements and increased crime and diminished property values in whatever area they live in. I say bring on the trade war.

      • 0 avatar
        Lou_BC

        Superdessucke – it was previously pointed out that NAFTA resulted in a permanent 1% increase in US GDP. Most jobs have been lost due to automation. Unskilled jobs are being replaced by machines whether that be heavy industrial or farm equipment or robots on an assembly line.

        One of the main reasons the USA has been so successful post WW2 and Great Depression is because of centrist/liberalized trade policies. Unfortunately not enough has been done to ensure that the middle and lower class’s don’t get left behind by change.

        • 0 avatar
          Superdessucke

          That makes sense but I don’t think I would define this a success. It’s not success when you leave your middle and bottom behind. Even if you are in the top 10% and benefiting, your taxes and property restrictions will be high in order to take care of the non producers.

          I know you are not a fan of Trump. Do you think he would have even been elected had we had a more fair distribution of wealth? He would have been laughed at. Now he is President. And this is only the beginning.

          • 0 avatar
            Lorenzo

            I think it was the guy before Trump who was concerned about redistributing “wealth”. Most people are interested in equal opportunity, in the form of jobs and the chance to move up economically, and socially too. After introductions, don’t we all ask, “what do you do?” A lot of our self worth is so tied up in how we make a living that campaigning to create more jobs is always a winning formula.

          • 0 avatar
            Lou_BC

            @Superdessucke – I agree that he would not have been elected if the middle and lower classes had been looked after. “Big money” runs the USA regardless of which party is in office.

            Hillary was the poster child of big government and big money. Rump triggered all of the right nerve centres in the pissed off “deplorables” minds.

            He played to their fears and she *WAS* their fears.

          • 0 avatar
            DeadWeight

            Too bad there’s no rationality, moderates or fairness today, but rather, hopping between one reactionary swing to the extremes of each side like a manic pendulum on meth.

          • 0 avatar
            Lou_BC

            @DeadWeight – agreed. It does not bode well for the USA if no one can fill the middle ground. I fear another civil war is in the USA’s future.

  • avatar
    DenverMike

    True, all of us will have to pay more to get more (US factory jobs). But what if we all decide we don’t need a brand new car (CUV/truck) every 11 years (on average)? Or so much stuff (junk) around the house?

    This whole “NAFTA” thing is like watching 2 kids fighting over a toy. What if now NOBODY gets it???

    And will anybody (foreign country) buy our stuff when we won’t buy theirs?

    The older stuff (cars/trucks, 11+ years old) is starting to look pretty damn good, and really tempting… But who’s watching the “foreign content” of reproduction (re-pop) and replacement auto parts? That’s a huge industry btw, growing exponentially!

    • 0 avatar
      Lou_BC

      “And will anybody (foreign country) buy our stuff when we won’t buy theirs?”

      Valid point.

      • 0 avatar
        DenverMike

        A diminishing export market is one thing, but what if we start rejecting new vehicles in a big way? I think it’s already happening.

        It’s interesting to note, fleet sales are way down, as much as some automakers (GM) like to claim it’s *them* rejecting fleet sales. Ford temporarily shut down its F-650/750 production (that’s strictly fleet).

        But with all the current and upcoming regulations/complications and added expenses, why not look at keeping existing fleets and civilian cars/trucks going a little longer? Especially if they still look good and run great? Or look at slightly used, instead of new?

        I’ll stop short of calling it “backlash”. But then again why not?

        • 0 avatar
          ToddAtlasF1

          Plenty of people in the industry know 2013 cars are better than 2017 cars. CAFE is changing buying practices. No fleet operator wants AGM batteries and science project transmissions. They’re already seeing what plastic oil pans and small displacement DI turbos do to operating costs.

          • 0 avatar
            DenverMike

            Yep. Every year they get more complicated to wring out every drop of fuel, plus safety and emissions, for very little benefit to fleet owners and most consumers. Not to mention, more Chinese parts content all the time.

  • avatar
    Jeff S

    Much of the World already does not buy our stuff, but it is a valid point. It is a noble idea to produce more in the USA but in the case of most vehicles made in the USA it seems that many of the parts are from various countries. At least Mexico and Canada are part of North America and the benefits of NAFTA are not just limited to both those countries but jobs in the USA. Canadians and Mexicans buy products made in the USA.

    True that many replacement parts are made elsewhere. One might have to go back to the 70’s to find a domestic brand that has mostly domestic parts. Even outdoor power equipment has parts made elsewhere and in some cases the entire product is assembled elsewhere. I bought a new Troybilt riding mower last year with an engine made in China and probably many other parts were made somewhere else–the mower itself was assembled in the USA with a sticker stating “Proudly made in the USA”. It is truly a Global Market and I doubt that will change.

    • 0 avatar
      highdesertcat

      Let’s see what develops. Trump got elected on the promises he made, one was to get out of TPP and NAFTA.

      Trump already got us out of TPP but relented on getting out of NAFTA. Now he’s going to renegotiate NAFTA. That’s one promise not kept.

      But I won’t be able to keep up with the news because we’re leaving for our trip to Vancouver, BC, by way of a number of stops along the way.

      Going to visit Lou_BC’s part of the world for the summer.

      So the outcome will be a surprise for me.

      • 0 avatar
        Lou_BC

        @highdesertcat – BC is a big place. The lower mainland is a long way from me.

        I do think that a new NAFTA deal will be signed into effect by President Pence.

    • 0 avatar
      Freddie

      According to US Dept of Commerce, 12 million US jobs are tied to exports. Also, a lot of our automotive exports come from the foreign “transplant” factories in the US.

  • avatar
    Jeff S

    So Lou_BC you think that Trump will either be impeached or leave office voluntarily? Everything has been so crazy with the firing of Comey and the Special Prosecutor appointed to look into the Russia Gate all in the first 4 months of office. Crazy man crazy.

    • 0 avatar
      Lou_BC

      @Jeff S – I’m not sure if he’ll be impeached or resign. The fellow who ghost wrote “Art of the Deal” feels that he will resign and try to make it look like it was his idea and turn it into a “win” for him.

      If his approval ratings drop further, especially among Republicans, they will turn on him to try to keep themselves in power. If they don’t, the GOP will get slaughtered mid term. Once Democrats have a majority, it will be a matter of time before they demand his head on a platter.

      It is telling when world leaders think that he is an idiot. NATO is telling leaders to keep any comments to 2-4 minutes because he can’t focus for much longer than that. Massage his ego and get what you want.

  • avatar
    Jeff S

    @Lou_BC–Agree I think Trump will resign at some point. I don’t think 2018 is looking good for the Republicans and many are distancing themselves from Trump. Trump had no idea what the Presidency entailed and I even think he was surprised he won. Hillary was much more qualified to be President but she ran a bad campaign and Hillary is very unlikable and lacks any kind of charisma (unlike Bill). Also the Clinton Foundation dealings did not help her campaign along with calling a group of voters deplorable. Trump really has to do something with NAFTA to deliver on one of his campaign promises and because of the mid-term elections which as you stated are not looking very good for Republicans. I believe a compromise will be worked out which will let the automakers keep their plants in Mexico and Canada with a much lower tariff than promised that will not hurt trade. Doesn’t help US workers if trade between Canada and Mexico is significantly reduced.

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