Estimated Impact Of The United States-Mexico-Canada Agreement On The Us Automotive Sector

Until the end of 2017, the three NAFTA parties did not agree on the form of the new rules of origin. It is hoped that a definition of the new regime for the auto industry in Mexico, as well as in Canada and the United States, will take place at the NAFTA renegotiation meetings scheduled to take place in 2018. At the upcoming fourth roundtable, the Trump administration will propose to increase the regional wage in the auto sector from 62.5 percent to 85 percent. It also requires that 50% of this content be made by producers in the United States. One of the main reasons Trump is seeking this change is his desire to reduce the U.S. trade deficit with Mexico. The lion`s share of the trade imbalance with Mexico is due to the fact that the United States imports more than it exports in the auto industry to its southern neighbor. In late 2019, the Trump administration won Democratic support in Congress at the USMCA after agreeing to incorporate greater labor law enforcement. In the updated Pact, the parties agreed on a number of changes: the rules of origin for the automotive industry were strengthened, so that 75% of each vehicle must come from the Member States, compared to 62.5%; And new work rules have been added, which require that 40 percent of each vehicle come from factories that pay at least $16 an hour. A proposal to extend intellectual property protection for US pharmaceuticals – a red line for US negotiators – has been sacrificed. The USMCA also significantly reduces the controversial investor-state dispute settlement mechanism, eliminates it completely with Canada, and limits it to certain sectors with Mexico, including oil and gas and telecommunications. It`s remarkable that the content and tone of trade discussions has changed in recent times, Evans noted.

The U.S.-China trade relationship has received most of the media attention, but there have also been significant developments in U.S. trade relations with other nations, including their two NAFTA partners, Mexico and Canada. A new free trade agreement for North America – the Agreement between the United States, Mexico and Canada (USMCA) – was negotiated in 2018. Mexico ratified it last June, but at the time of the conference, it was still waiting for ratification by the U.S. and Canada4 Unemployment has also risen, which some economists have accused NAFTA of competing with Mexican farmers, especially corn producers, with competition from heavily subsidized U.S. agriculture. A study by CEPR economist Mark Weisbrot estimated that NAFTA 2 million Mexican smallholder farmers [PDF] lose their jobs, which, in turn, fuels illegal immigration to the United States. .

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