Dismay over U.S. auto content proposal

Pessimism about the fate of NAFTA is mounting amid dismay that the U.S. wants to impose stringent new American content requirements on vehicles that are allowed duty-free movement across North America.

The United States is set to propose that cars and trucks must have at least 85 per cent North American content and at least 50 per cent specifically American content to qualify for duty-free status, according to a report by Inside U.S. Trade.

The rules of origin proposal is expected to be tabled next week in Washington during the fourth round of negotiations to rewrite the North American Free Trade Agreement.

Canada and Mexico have, from the outset of talks, been adamant that they won’t agree to a specific American content requirement that would bolster the U.S. industry at the expense of automobile and auto parts manufacturers in the other two countries. And Canada’s automotive industry agrees. “You can’t have protectionism within a free trade agreement. It’s an oxymoron,” Flavio Volpe, president of the Automotive Parts Manufacturers Association, said Friday.

Studies have found that Canadian-produced vehicles already contain 63 per cent American content, while those produced in Mexico contain 40 per cent, Volpe noted. But he said casting an American content requirement in stone would handcuff the industry’s ability to pivot to suppliers in other countries — including Canada and Mexico — should they be able to offer a better product at a better price.

“If the U.S. becomes less competitive and you’re tied to doing it in the U.S., then you are less competitive,” Volpe said, adding that in the meantime the industry’s global competitors, like China, will be “eating your lunch.”

“It’s goofy.”