By on December 6, 2019

Replacing the North American Free Trade Agreement (NAFTA) has proven difficult for the Trump administration. Trade negotiations have progressed slowly, with Mexico, Canada, and the United States rarely seeing eye-to-eye on most issues. Some of the biggest problems have dealt with content requirements.

The latest hangup stems from a rule requiring 70 percent of the steel and aluminum found in North American vehicles to come from the same continent in order to ensure a duty-free existence. Mexico isn’t keen on the proposal — as it sources a large amount of metal from Brazil, Japan and Germany. Meanwhile, the United States is attempting to use the inclusion to appease the United Steelworkers union and keep labor-focused jobs in the country. 

According to Bloomberg, a letter from Mexico’s industrial chamber (La CONCAMIN) was sent to chief negotiator Jesus Seade on Wednesday. The document stipulates that the changes the U.S. is seeking on steel and aluminum are unacceptable and essentially impossible for the nation’s automakers to adhere to. It believes the rule threatens their competitiveness and risks destroying two decades of supply chain integration.

Seade reportedly returned to U.S. Trade Representative Robert Lighthizer’s office for more talks on Friday.

From Bloomberg:

On Monday, President Donald Trump announced plans to reinstate tariffs on steel and aluminum from Brazil and Argentina, nations he accused of devaluing their currencies to the detriment of U.S farmers.

Rules for cars are at the heart of Trump’s bid to replace the North American Free Trade Agreement with the so-called U.S.-Mexico-Canada Agreement, or USMCA, that gives more incentive to manufacture in the U.S. They were among the most difficult and painstaking issues to resolve in the negotiations last year.

“The USMCA rule of origin is challenging to comply with, but we can meet this additional requirement,” said Matt Blunt, President of the American Automotive Policy Council which represents the Detroit 3 automakers. “Passage of USMCA remains our highest priority.”

Another major sticking point for Mexico is a provision aimed at ensuring greater protections for the Mexican workforce, especially in the automotive sector. This particular item is being pushed hardest by American Democrats. But Mexico’s leadership has mixed feelings on the matter — fearful that higher wages could further reduce its competitiveness against the U.S. and Canada. On Thursday, House Speaker Nancy Pelosi told CNN she’s still optimistic the USMCA can be completed. However, she harbors concerns that there won’t be sufficient enforcement provisions in the final document and wouldn’t want to vote without them. Seade’s take is that bringing in U.S. inspectors to monitor the treatment of its workforce is totally unreasonable.

Unfortunately, if the USMCA doesn’t get passed, there’s a strong chance Trump will simply wish NAFTA out of existence. The clean-slate approach is one he said he’d be fine pursuing, suggesting the current trade deal is poisonous for the United States and that it could simply renegotiate with countries individually after its demise.

While economic analysts initially criticized the strategy as reckless, few believe member nations would prefer that outcome. Killing NAFTA with no replacement would bring untold levels of uncertainty, upending a regional economy trading more than $1 trillion in goods every year. While all nations would undoubtedly be hurt by such a decision, the U.S. would almost certainly emerge as the country in the best position to bargain once the dust had settled.


[Image: Chess Ocampo/Shutterstock]

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19 Comments on “Vehicle Content Rules Still Slowing North American Trade Deal...”

  • avatar

    I remember life before NAFTA and I loved it. May NAFTA go down in the burning embers. Ross perot was right when he said that deal was the sucking sound of American manufacturing and other jobs leaving. It sure was the truth. Glad to have a president reverse this disaster.

  • avatar

    “ Meanwhile, the United States is attempting to use the inclusion to appease the United Steelworkers union and keep labor-focused jobs in the country. ”

    Nice dig but there is a lot more to it than that. Due to imports from China and other places the US has gone from 23 aluminum smelters to 5. There has also been a somewhat less dramatic decline in steel capacity.

    A considerable amount of this decline is the result of Chinese subsidies. These subsidies have the dual goal of growing the Chinese steel and aluminum industry while at the same time crippling US defense capabilities.

  • avatar

    USMCA is already negotiated with Mexico and Canada. It’s awaiting passage in Congress. NAFTA’s loophole was Mexico and Canada sourcing Chinese steel (50% of the world supply) thus allowing China to circumvent US tariffs.

    • 0 avatar

      I would really be pleasantly surprised if the House were to pass it. That would give President Trump a HUGE economic WIN, something the delusionals cannot allow to happen.

      I have tapped my knuckles on the fenders of Silverados made in Mexico (VIN start with 3) and ones made in the US (VIN starts with 1), and the ones made in Mexico sound tinnier. I did this several times and even the sales guy was a witness.

      There is a difference between cheap steel and pricier, costlier US-made steel.

      • 0 avatar

        Are you a well-known metallurgist? The tap test is as phoney as the rest of the malarkey you come up with.

        Canada imports scarcely any Chinese steel. We make our own. And our biggest imports by far are from the USA.

        “Among Mexico’s top import sources, the United States, Canada, and South Korea sent the largest shares of their total steel exports to Mexico in 2016.”

        I swear you lot sit around and dream up BS theories instead of using Google. It’s the land of the old wives tales.

        • 0 avatar

          Eh!!! No malarkey!!

        • 0 avatar

          eh, he’s just a product of decades of conditioning by the American mindset of “we’re all a bunch of rugged individualists who know better than everyone else, so anything I assume to be true *is* true.”

        • 0 avatar
          Jeff Semenak

          Speaking of google…
          I’d never use a link from when a better link is available.

          This story from Oct. 2018 showed deep concern about Chinese dumping of steel in Canada screwing over Canadian steelmakers.

  • avatar

    I think it’s time to completely nuke the Earth back to nothing and start all over.

  • avatar
    Arthur Dailey

    Throughout the 20th century Canada was a major steel manufacturer.

    The City of Hamilton rivaled Pittsburgh.

    Prior to free trade and during the Canada-US Auto Pact both
    Stelco and Dofasco were profitable.

    Then Reagan and Mulroney brockered the original Free Trade agreement, initiated by the USA. Then the American government pushed to have Mexico included. Prior to that Canada have very little economic ties/involvement with Mexico.

    Under the Harper government, the Canadian government allowed US Steel to purchase Stelco. Stelco fell onto hard times after NAFTA as it made was a major manufacturer of high end steel and steel for the auto industry. US Steel itself had been unprofitable for years. The Canadian government provided subsidies and loans for this purchase in return for ‘job guarantees’. Instead US Steel ended up stopping most product of high end steel, seriously downsizing the workforce and eventually driving Stelco into bankruptcy. In effect what US Steel did was use Canadian taxpayers’ money to put a competitor (Stelco) out of business.

    As a result of this and NAFTA, there is no longer any Canadian owned major steel manufacturer. Dofasco is now owned by ArcelorMittal (Europe), Algoma is owned by Essar (India) and what is left of Stelco is owned by either Max Aicher (Germany) or an ‘investment’ company (Bedrock).

    Alcan (the Aluminium Company of Canada) was at one time the largest producer of aluminium in the world. It is now owned by an American investment company (Apollo Global Management) and a British company (Rio Tinto).

    So for American’s complaining about ‘foreign steel’, sorry but blame your governement’s (largely Republican) and trade negotiators and Wall Street for what has happened to the North American steel/aluminium industry. And thanks to free trade, things are worse in Canada.

    • 0 avatar

      your governement’s (largely Democrat) and trade negotiators and Wall Street for what has happened to the North American steel/aluminium industry. And thanks to free trade, things are worse in Canada.

      FTFY, NAFTA was passed during a dem admin.

      BTW, I saw Canada last 71k jobs last month, equivalent to American losing 500k jobs.

      • 0 avatar
        Arthur Dailey

        @Hummer: The Canada-US Free Trade Agreement was negotiated in 1986 and came into effect in 1987. I believe that Ronald Reagan was still the President. So, no, not a Democratic government/President that negotiated that a Republican one.

        And it was a Conservative government that negotiated it in Canada. Reagan’s close personal friend Brian (brown envelope) Mulroney.

        Things did take a massive downturn last month in Canada. But easily explainable of those 71k jobs lost 25k were in public administration due to the federal election. So many of those will have their contract renewed or be rehired now that the election is over. The majority of the remaining job losses are from Quebec and Eastern Canada, areas with large swings in seasonal employment.

        • 0 avatar

          “ The Canada-US Free Trade Agreement was negotiated in 1986 and came into effect in 1987. I believe that Ronald Reagan was still the President. So, no, not a Democratic government/President that negotiated that a Republican one.”

          Are we talking or a US-Canada trade agreement or NAFTA? The US -Canada trade agreement may have hurt Canada but that’s hardly another countries fault that your country signed something to your detriment. It is not, after all, another countries job to look out for your countries people. This is also not the NAFTA you speak of that came 10 years later, under a Democrat president.

          Canadas southern neighbor just added 266k jobs beating expectations, one would expect Canada to take advantage of the economic upswing of its southern neighbor.

          • 0 avatar
            Arthur Dailey

            The US-Canada Free Trade Agreement. And yes, if we look at things as a zero-sum game even when between allies, it is not the fault of the US government that Canada got shafted.

            However how Canada got shafted is that after the US-Canada Free Trade Agreement, the US government pushed to have Mexico included in the agreement, hence NAFTA. Up until then Canada conducted very little trade with Mexico. Once the American government pushed to have Mexico included, then things went seriously ‘upside down’ for all except executives/shareholders/profit margins.

            Canada has been recording its lowest unemployment rates in decades. Even with November’s numbers.

            However just like in the USA ‘there are job, and then there are jobs’. Growth in precarious employment does not equal stability. And that goes for both nations.

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