The United States has requested that Mexico investigate worker rights violations that were alleged to have taken place at one of the parts factories owned by Stellantis. Officials are curious about what’s been happening at Teksid Hierro de Mexico, a facility located in the border state of Coahuila that’s responsible for manufacturing iron casings, in regard to unionization. According to U.S. officials, this is the fourth such complaint under the United States-Mexico-Canada Agreement (USMCA).
Having supplanted the North American Free Trade Agreement (NAFTA) signed into law by the Clinton administration in 1993, USMCA sought to rebalance trade laws the Trump administration believed had disadvantaged the United States. However, it also sought to advance worker protections in Mexico and give employees an easier pathway toward unionization.
When the United States-Mexico-Canada Agreement (USMCA) was being floated as a possible replacement for the North American Free Trade Agreement (NAFTA), one of the biggest selling points was the inclusion of new labor protections for Mexican workers. The Trump administration wanted to ensure serious labor reform took place south of the border to ensure union business was conducted responsibly and wages would increase. As a byproduct, USMCA is supposed to encourage North American synergies while gradually discouraging U.S. businesses from blindly sending jobs to Mexico to capitalize on poverty tier wages.
That theory will now be tested in earnest after General Motors employees from the Silao full-size truck plant voted overwhelmingly to dump the Confederation of Mexican Workers (CTM) for the Independent Syndicate of National Workers (SINTTIA).
Mexican and Canadian officials have been dropping hints that they’re not all that enthusiastic about the United States-Mexico-Canada Agreement (USMCA) since before Enrique Peña Nieto, Donald Trump, and Justin Trudeau all sat down to sign it in 2018. But just getting to that point required months of formal negotiations that rarely looked to be all that productive.
Sadly, things don’t seem to have changed now that the USMCA is in full effect. Last week, Mexico requested a dispute settlement panel under the terms of the trade pact to help resolve disagreements about the surprisingly contentious automotive content stipulations that determine whether or not vehicles and parts will be slapped with tariffs. Under the previous North American Free Trade Agreement (NAFTA), 62.5 percent of the vehicle’s components had to be sourced from member nations to be considered tax-exempt. In an effort to spur localized production, USMCA increased that number to 75 and not everyone is thrilled with the updated content requirements with Mexico claiming it’s not even sure how to apply them. Canada now intends to formally sign onto Mexico’s complaint against the U.S. over their divergent interpretation of rules.
When the United States abandoned the North American Free Trade Agreement (NAFTA) to embrace the United States-Mexico-Canada Agreement (USMCA), it did so under the premise of crafting a better trade arrangement for itself. Established in 1994, NAFTA created a trilateral trade bloc that encouraged commerce between nations. But critics have accused it of encouraging the offshoring of U.S. jobs and dramatically suppressing wages — particularly within the automotive and manufacturing sectors.
Signed in 2018, and revised the following year, the USMCA was supposed to remedy those issues. But it’s been difficult to get all parties on board, especially when it comes to those persnickety rules of origin that stipulate how much of a vehicle’s hardware needs to be sourced from member nations.
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.
Mexico is considering reopening factories after May 18th, now that automakers and the U.S. government have requested it resume production at plants serving the American market. With supply chains needing time to catch up, vehicle assembly will be precarious until parts can be reliably sourced. And Mexico is an essential part of that industrial recovery plan, necessitating some light coordination with the United States.
Despite seeing a spike in new COVID infections, Mexico released a plan to ease restrictions on Wednesday. Making sure U.S. manufacturers have what they need has been incorporated into that strategy, with a few conditions. While industrial employees will soon head back to work, Mexico made no assurances that it will prioritize supplying the rest of North America with automobiles or their components.
The U.S. Senate approved changes to the North American Free Trade Agreement on Thursday, effectively replacing the 26-year-old deal with the new United States–Mexico–Canada Agreement. USMCA embraces stronger automotive content rules for the region, updates language for new technologies, and enacts sweeping labor protections aimed at uplifting the Mexican workforce. As a byproduct, it’s also likely to discourage automakers from isolating themselves south of the U.S. border in an effort to secure cheap labor.
Passing with a 89-10 vote in the Republican-controlled Senate, USMCA also allows President Donald Trump to keep his campaign promise of replacing NAFTA — a pact he often referred to as “the worst deal in history.”
The House of Representatives approved a new North American trade deal on Thursday, causing many to breathe a sigh of relief. The House vote sends the measure to the Senate, with the probable outcome of it being pushed through.
When is another matter, however, as Senate Republican leader Mitch McConnell said the measure would likely be taken up after an impeachment trial. That means we’ll be waiting until 2020. Still, the U.S. Mexico Canada Agreement (USMCA) is one step closer to replacing the North American Free Trade Agreement (NAFTA). Barring a governmental curveball, the automotive industry now knows what to expect.
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.
The Trump administration has reportedly expressed an interest in deciding where and how automotive manufacturers do their business if they want to secure duty-free deals under the United States–Mexico–Canada Agreement (USMCA) that’s positioned to replace NAFTA. According to Bloomberg, there’s currently a discussion taking place between administration officials, congressional staff, and domestic and foreign automakers regarding the context of the legislation that lawmakers will ultimately have to vote on. The White House is said to want highly specific language that would allow it to select production rules unilaterally.
Considering how messy things have gotten with China, it could be useful to have extremely clear trade language and some direct oversight of businesses with global interests. But critics are worried the strategy could bring U.S. trade policy closer to the rigid policies already in place in the People’s Republic — a country America has attempted to distance itself from due to its ludicrous levels of government intervention.
The real fear is that the government could use this to give one manufacturer better treatment than another — cutting it a sweet deal for building in a politically advantageous area, for example. While plausible, we can’t confirm something that’s largely speculative.
U.S. Trade Representative Robert Lighthizer will be in Michigan this week to meet with union leaders from United Auto Workers in a bit to gain their approval for the Trump administration’s new North American free trade deal. Lighthizer is scheduled to meet with union officials in Dearborn on Tuesday to answer questions about the United States-Mexico-Canada Agreement (USMCA) while simultaneously drumming up support.
The USMCA deal suggests increasing existing requirements for North American content for vehicles, stipulating that 40 percent of a vehicle’s overall content be manufactured in areas paying at least $16 an hour, while also encouraging Mexico to tailor its labor rules to allow unions to wield legitimate collective bargaining powers.
Canada’s autoworkers feel pretty confident they’ll still have a job next year, as the free trade agreement reached by the U.S. and its northern neighbor Sunday night pretty much keeps the status quo alive in that country’s auto sector.
Just last week, with headway essentially absent from the trade negotiations, President Trump repeated his threat of levying a 25 percent import tax on Canadian vehicles. Such a tariff could easily have seen 160,000 jobs erased from the auto and parts manufacturing industries; perhaps more.
However, just because the industry came out all right in the end doesn’t mean the future is entirely rosy.
Following some furious 11th hour bargaining, Canada reached an agreement with U.S. trade negotiators Sunday night, marking the end of the North American Free Trade Agreement (NAFTA) and the creation of its successor, the U.S.-Mexico-Canada Agreement. USMCA, for short.
While some of the finer details have yet to be released, the trilateral trade deal prevents the nightmare scenario of heavy tariffs levied on vehicles imported from Canada. To keep General Motors, Fiat Chrysler, Ford, Honda, and Toyota plants humming, officials in the Great White North reluctantly offered up some milk and cheese.
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