Bet You Forgot Today Was the NAFTA Deadline
If you forgot today was the deadline for finalizing North American Free Trade negotiations, don’t worry, so did practically everyone else. In fact, the whole affair is starting to feel like that old car that’s been sitting in your friend’s yard for far too long. He keeps telling you he’s going to fix it up and make it better than new. “This is the summer,” he says. But you know he’s just going to keep mowing around it while it continues to rust and collect mice, so you’ve tried to push it out of your mind.
Like the restoration, the entire concept of a deadline for the trade deal is rather arbitrary at this point. NAFTA’s initial target date for an agreement between the three countries was March 31st, roughly one year after negotiations began. The May 17th deadline was claimed by U.S. Speaker of the House Paul Ryan, who said Congress had to be notified under the Trade Promotion Authority statute.
“We need to receive the notice of intent to sign soon in order to pass it this year,” explained Ryan’s office. “This is not a statutory deadline, but a timeline and calendar deadline.”
Basically, Congress wants to influence the president and NAFTA negotiators to conclude talks swiftly and reach an agreement before midterm elections. But Mexican officials warned everyone not to get their hopes up. “The possibility of having the entire negotiation done by Thursday isn’t easy, we don’t think it will happen by Thursday,” said Mexican Economy Minister Ildefonso Guajardo earlier this week.
U.S. Trade Representative Robert Lighthizer followed up by telling lawmakers in a meeting on Wednesday that he didn’t believe any agreement could be reached by then or even in the near future, Bloomberg reports. “He was not optimistic this was all going to get wrapped up in the next 24 hours, to be sure,” said Representative Ron Kind of (D-Wisconsin). “He felt there was some back-sliding going on with Mexico, and Canada, to a certain extent.”
One of the biggest points of contention between the three nations is rules of origin for automakers, which dictate how much of a vehicle’s individual components need to stem from North American sources to be able to be traded without tariffs. The United States revised its initial proposed increase (from 62.5 to 85 percent of a vehicle’s overall content) after noticing how poorly it went over. The new proposal applies a 75 percent requirement on major components and allows for lesser parts to maintain the existing NAFTA mandates.
Mexico hates the idea. Canada is also not particularly enthusiastic, but at least expressed a willingness to entertain the new proposal. Like the United States, Canada seems interested in passing some kind of agreement before the Mexican presidential election in July. While the same should go for the current administration in Mexico, the country has begun dragging its feet on trade talks over the last few months, especially after the U.S. said it would have to pay its workers higher wages. Very little progress has been made in 2018, and the Mexican auto manufacturing industry has started voicing serious opposition to the content rules of origin proposed by the United States.
U.S. and Canadian auto industry representatives seem similarly concerned, though appear less interested in putting up a fight. Could the revised content mandate harm the car industry? According to a recent study from by the Michigan-based Center for Automotive Research, yes. It speculated that higher targets could force some U.S. automotive and parts manufacturing to eventually move to lower-cost regions outside North America. That’s a bummer, considering Trump said the whole point of this new deal was about securing American jobs.
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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