Wages at heart of auto talks

THE CENTREPIECE OF MAJOR U.S. NAFTA PROPOSAL: HIGHER AUTO WAGES

Mexican workers’ wages are at the heart of a major proposal from the United States aimed at breaking through an impasse on automobiles and securing a new North American Free Trade Agreement.

The latest U.S. idea incorporates worker salaries into the formula for calculating which cars can avoid tariffs under the auto rules of origin, several sources in different countries said Tuesday.

Sources familiar with the negotiations said it would create incentives for car companies to pay wages far higher than the current average salary in Mexico, which, according to some estimates, is about US$2.04 per hour.

The U.S. has identified Mexican wages as a key priority, for two reasons: creating more middle-class Mexican buyers of imported goods, and reducing the incentive to shift car plants from high-wage countries.

The revelation adds context to enthusiastic comments last week from the Canadian government. Canadian officials said the Americans had proposed creative solutions for achieving their main overarching goal, which is more production in the U.S.

“There’s no question it’s a step forward,” Canadian union leader Jerry Dias said in an interview Tuesday.

“At least people are starting to understand that we have to fix the main problem — which is wages in Mexico,” said Dias, president of Unifor, Canada’s largest private-sector union. “The Mexicans will obviously push back ... but Mexico knows there’s not going to be a deal without higher wages.”

The negotiations have accelerated, as the U.S. pushes for a new NAFTA within weeks.

Sources say the U.S. has introduced wages as a substitute for dropping its controversial demand that cars have 50 per cent American content, deemed a non-starter by both Canada and Mexico.

The U.S. continues to demand a big increase in the percentage of car parts that must come from North America, from the current 62.5 per cent to around 85 per cent, but higher-wage labour would count as a credit toward the total.

Different sources described different salary levels as the cutoff rate.

Inside U.S. Trade, which first reported on the development, pegged the rate at US$15 per hour. One American briefed on the proposal understood it to include a range from $13 to $17.