Automakers say new North American trade deal could hurt industry

The new auto rules in the United States-Mexico-Canada Agreement (USMCA) could add costs for automakers and reduce the industry’s overall global competitiveness, industry representatives have warned. Testifying before the U.S. International Trade Commission on Thursday, John Bozzella, president of the Association of Global Automakers, said the new agreement could hurt the industry. “It is clear that the USMCA auto origin rules will introduce unnecessary complexity, require costly changes to supply chains and potentially redundant investments.”

Bozzella said his statement represents the “consensus views” of international automakers in the United States who have invested nearly 82 billion U.S. dollars in the country and directly employ 133,000 Americans at nearly 500 facilities. The USMCA, if implemented, would raise the requirement for North American content in cars to a whopping 75 percent from 62.5 percent, among other things. Bozzella said automakers will need to invest in “elaborate processes” to ensure compliance with such rules, and suppliers will have to establish similar “costly processes.”
New rules will hurt demand for vehicles
The new rules will hurt demand for vehicles and parts, reducing U.S. production and causing “significant” job losses, said Jennifer Thomas, vice president of federal government affairs at the Alliance of Automobile Manufacturers. The new agreement also requires at least 40 percent of car production to come from factories with an average wage of 16 U.S. dollars per hour, which could put Mexico, a low-cost production hub, at disadvantage.
In his testimony, Bozzella also criticized trade actions that are “adding cost and creating tremendous uncertainty,” namely, the section 232 tariffs on steel and aluminum imposed on Canada and Mexico, and the threat of additional tariffs on autos and auto parts under the section 232 investigation.
Damaging the industry
The fact that the 232 tariffs on steel and aluminum have not yet been removed is “highly disappointing,” he said, which damages the industry and is contrary to the spirit of these negotiations. “In our view, there is no credible justification for the idea that automotive imports threaten our national security,” Bozzella said.
The USMCA, reached a month ago, still needs to be ratified by lawmakers from the three countries. It resulted from talks on renegotiating the North American Free Trade Agreement (NAFTA) beginning in August 2017.
Source: Xinhua