NAFTA auto rules will hurt sales
WASHINGTON — New NAFTA rules could increase the cost of a car by hundreds or even thousands of dollars, act as a multibillion-dollar tax and ultimately hurt sales as consumers keep their wallets shut, a new study predicts.
The study by the Center for Automotive Research attempts to predict the impact of proposals under consideration as the three North American countries huddle in a negotiating session in Washington to try getting a deal.
Negotiators are refining a proposal that would insist every car have more North American parts; use primarily North American steel and favour production in high-wage jurisdictions, meaning the U.S. and Canada.
The study calculates that at least 46 vehicle-types currently produced on the continent would fail to meet these new standards, more than doubling the current number of products that fail to comply with existing NAFTA rules. The companies making these vehicles always have a choice: comply with the NAFTA rules or pay the tariff, which is 2.5 per cent for a light vehicle in the United States, 6.1 per cent in Canada.
The study offers a broad estimate, with a range of outcomes. It finds that 25 to 87 per cent of vehicles currently sold in the U.S. would fail to meet the standard and would wind up paying a tariff. “Tariffs (would) add at minimum a US$2.1-billion to $3.8billion tax on U.S. consumers,” said the study, released Thursday.
Its findings are consistent with the view of Jeff Rubin, a senior fellow at Canada’s Centre for International Governance Innovation and a former chief economist at CIBC World Markets. He says that under the current NAFTA many groups win: consumers with cheaper cars, car companies with higher profits and Mexican autoworkers with higher salaries than Mexicans in other sectors.
Rubin sees the new NAFTA as producing a 2.5 per cent added tax on cars and no improvement in the lives of Canadian and American workers — a scenario that “isn’t going to bring a single job back to the U.S.”