Auto Lobbyists Attempt to Soften USMCA, Look to White House [UPDATED]

Matt Posky
by Matt Posky
auto lobbyists attempt to soften usmca look to white house updated

Lobbyists are reportedly seeking to soften the United States-Mexico-Canada Agreement (USMCA) now that there are some new faces in the White House. Signed in 2018, revised in 2019, and effective since 2020, the USMCA sought to restore North America’s manufacturing base with new content requirements and place the United States in a more favorable position than it held under the North American Free Trade Agreement. But industry groups are now claiming that interpretations from government agencies are gumming up the works, and accusing the U.S. of having a different interpretation from what the other nations had originally agreed upon.

meeting the … content provisions that much more difficult for everyone to achieve,” stated David Adams, president of Global Automakers of Canada.

Adams is likely upset that North American manufacturers have to source so much of the materials of the vehicles they produce from local suppliers, framing the entire agreement as a decidedly U.S. approach. The Trump administration specifically enacted the USMCA to give the United States more favorable positioning than it had under the North American Free Trade Agreement (NAFTA). Signed in December of 1993, NAFTA became a sore spot for many Americans who accused it of encouraging companies to shift production out of the United States.

Actually deciding whether or not NAFTA was effective remains difficult and is often muddled by politics — everyone wants to support every policy launched by their preferred party. While we’d like to offer a definitive answer to how bad/good NAFTA was, there’s a lot of conflicting information out there. The Economic Policy Institute released a study in 2013 alleging that the deal had obliterated nearly 700,000 high-paying manufacturing jobs from states like Michigan and California in its first decade. But some experts have claimed those would have been offset by increased automation or the changing employment landscape regardless while giving smaller businesses better access to the Canadian and Mexican markets (and vice versa).

NAFTA was contentious even when it was new, with Ross Perot spending a large portion of his time on the campaign trail criticizing it before ultimately losing to Bill Clinton — who signed it into law. Bernie Sanders also bashed it during the 2016 presidential election, along with CAFTA, the Trans-Pacific Partnership, and normalized trade relations with China. He argued that the U.S. had outsourced too much of its manufacturing already and desperately needed to prioritize job retention and helping the middle and working classes. At roughly the same time, Donald Trump was calling NAFTA ” the single worst trade deal ever approved in .”

Obviously, this set the stage for Trump to push through the USMCA, which brings us back to the lobbyists. The new agreement’s rules of origin requirements stipulate that a certain portion of an automobile’s value must come from inside the governed region. Under NAFTA, that portion was 62.5 percent. But USMCA bumped the figure up to 75 percent — 10 percent less than Trump originally wanted — in a bid to secure localized manufacturing.

Content rules don’t come into full effect in 2023. But industry groups from all member nations are suggesting they don’t want to have to bother tweaking their supply lines to adhere to it. Lobbyists are also alleging confusion from Canada and Mexico on how customs are supposed to assess how these content requirements are quantified, according to Automotive News.

Adams claimed it’s far too stringent and expensive for the industry to handle: “This interpretation was entirely unexpected, and if it sticks, it will take many manufacturers time to make adjustments and potentially rejigger supply chains to avoid the tariff. Either way, there are inefficiencies, which [equal] costs,” he said.

From AN:

Matt Blunt, president of the American Automotive Policy Council, said it was “extremely important” that the three countries “work it out as quickly as possible.” Blunt’s group represents General Motors, Ford Motor Co. and Stellantis.

“We think it’s important for Canada and Mexico and the United States to resolve this and any issue related to the USMCA quickly, but certainly one as significant as this one,” he said.

“It should really be treated as a diplomatic priority, in our view, to ensure that the USMCA is properly implemented.”

Unfortunately, any changes made to appease the industry or the other two member nations by the United States ultimately weakens its own position. It would also be an incredibly bad look for Joe Biden to undo a trade agreement that took years to negotiate and hadn’t had adequate time to get off the ground. He’s used numerous executive orders to undo Trump-era policies already and would undoubtedly take flak for neutering the USMCA. But Adams said he hoped Katherine Tai, Biden’s nominee for U.S. trade representative, might be willing to take action instead. Automotive News cited an anonymous source claiming that would likely be the plan.

“It would be very hard for Biden to say, ‘No, we side with the industry and Canada and Mexico, and we want to let you roll up’ because that would mean less content [sourced from] North America,” the insider said, adding that they expected it to be “quietly resolved” by Tai.

[Update 3/15/2021: Mr. Adams reached out to us to express his displeasure regarding how we characterized him and the situation. He has asked that we issue a correction or retraction and criticized us for inserting our “own narrative on a story that is not there.” We’ve informed him that we’re inclined to let lobbyists do their own work and are awaiting his response.]

[Image: Orhan Cam/Shutterstock]

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  • 28-Cars-Later 28-Cars-Later on Mar 16, 2021

    Rereading the article I realized the high and mighty president of the Global Automakers of Canada was quoted using the word: "rejigger". Ironically enough he implies his group members would exercise creative ethics in further calibrating their supply chains, as defined by "to change or rearrange in a new or different way, especially by the use of techniques not always considered ethical." How did you get that job again, Mr. Adams?

  • DenverMike DenverMike on Mar 16, 2021

    The Tacoma plays by USMCA rules but has 0.0% US content. So what's it taxed at?

    • See 5 previous
    • Slavuta Slavuta on Mar 18, 2021

      @Lou_BC But Lou, funny how it works. I am not a commie like you.

  • Nrd515 I bought an '88 S10 Blazer with the 4.3. We had it 4 years and put just about 48K on it with a bunch of trips to Nebraska and S. Dakota to see relatives. It had a couple of minor issues when new, a piece of trim fell off the first day, and it had a seriously big oil leak soon after we got it. The amazinly tiny starter failed at about 40K, it was fixed under some sort of secret warranty and we got a new Silverado as a loaner. Other than that, and a couple of tires that blew when I ran over some junk on the road, it was a rock. I hated the dash instrumentation, and being built like a gorilla, it was about an inch and a half too narrow for my giant shoulders, but it drove fine, and was my second most trouble free vehicle ever, only beaten by my '82 K5 Blazer, which had zero issues for nearly 50K miles. We sold the S10 to a friend, who had it over 20 years and over 400,000 miles on the original short block! It had a couple of transmissions, a couple of valve jobs, a rear end rebuild at 300K, was stolen and vandalized twice, cut open like a tin can when a diabetic truck driver passed out(We were all impressed at the lack of rust inside the rear quarters at almost 10 years old, and it just went on and on. Ziebart did a good job on that Blazer. All three of his sons learned to drive in it, and it was only sent to the boneyard when the area above the windshield had rusted to the point it was like taking a shower when it rained. He now has a Jeep that he's put a ton of money into. He says he misses the S10's reliablity a lot these days, the Jeep is in the shop a lot.
  • Jeff S Most densely populated areas have emission testing and removing catalytic converters and altering pollution devices will cause your vehicle to fail emission testing which could effect renewing license plates. In less populated areas where emission testing is not done there would probably not be any legal consequences and the converter could either be removed or gutted both without having to buy specific parts for bypassing emissions. Tampering with emission systems would make it harder to resell a vehicle but if you plan on keeping the vehicle and literally running it till the wheels fall off there is not much that can be done if there is no emission testing. I did have a cat removed on a car long before mandatory emission testing and it did get better mpgs and it ran better. Also had a cat gutted on my S-10 which was close to 20 years old which increased performance and efficiency but that was in a state that did not require emission testing just that reformulated gas be sold during the Summer months. I would probably not do it again because after market converters are not that expensive on older S-10s compared to many of the newer vehicles. On newer vehicles it can effect other systems that are related to the operating and the running of the vehicle. A little harder to defeat pollution devices on newer vehicles with all the systems run by microprocessors but if someone wants to do it they can. This law could be addressing the modified diesels that are made into coal rollers just as much as the gasoline powered vehicles with cats. You probably will still be able to buy equipment that would modify the performance of a vehicles as long as the emission equipment is not altered.
  • ToolGuy I wonder if Vin Diesel requires DEF.(Does he have issues with Sulfur in concentrations above 15ppm?)
  • ToolGuy Presented for discussion:
  • Kevin Ford can do what it's always done. Offer buyouts to retirement age employees, and transfers to operating facilities to those who aren't retirement age. Plus, the transition to electric isn't going to be a finger snap one time event. It's going to occur over a few model years. What's a more interesting question is: Where will today's youth find jobs in the auto industry given the lower employment levels?