Trade talks could place auto plant jobs at risk

Study by parts sup­pli­ers pre­dicts in­creased costs

The Buffalo News - - BUSINESS - By Ryan Beene BLOOMBERG NEWS

The Trump ad­min­is­tra­tion’s push to change the au­to­mo­bile rules in the North Amer­ica Free Trade Agree­ment will lead to higher costs on man­u­fac­tur­ers and could put jobs at risk, ac­cord­ing to re­search spon­sored by an auto sup­plier trade as­so­ci­a­tion.

The ad­min­is­tra­tion is set to seek an in­crease in the amount of a ve­hi­cle’s com­po­nents that must come from within the re­gion to qual­ity for duty-free sta­tus un­der the pact.

But chang­ing the so-called rules of ori­gin would in­crease man­u­fac­tur­ing costs and ex­pose car­mak­ers to new tar­iffs, lead­ing to higher ve­hi­cle prices and lower de­mand for costly tech­nol­ogy and safety fea­tures, ac­cord­ing to re­search pre­pared for the Mo­tor and Equip­ment Man­u­fac­tur­ers As­so­ci­a­tion, the auto sup­pli­ers trade group.

“Up to 24,000 jobs could be im­pacted, could be lost ac­tu­ally, if we start in­creas­ing the cost of prod­ucts,” Xavier Mos­quet, a se­nior part­ner at the Bos­ton Con­sult­ing Group, said at a con­fer­ence for the group, cit­ing an anal­y­sis he pre­pared for it.

The warn­ings come amid a grow­ing cho­rus of au­to­mo­tive ex­ec­u­tives and in­dus­try groups warn­ing that the Trump ad­min­is­tra­tion’s hard-line stance in talks to rene­go­ti­ate NAFTA could lead to neg­a­tive con­se­quences for the sec­tor.

Charles Uthus, vice pres­i­dent for in­ter­na­tional pol­icy at the Amer­i­can Au­to­mo­tive Pol­icy Coun­cil, told the con­fer­ence that NAFTA has cre­ated some $10 bil­lion in an­nual sav­ings for the auto in­dus­try in North Amer­ica since it took ef­fect. Elim­i­nat­ing those ef­fi­cien­cies would amount to “es­sen­tially a $10 bil­lion tax on the auto in­dus­try in North Amer­ica,” he said.

The U.S. had a $64 bil­lion trade deficit with Mex­ico last year, largely thanks to a trade im­bal­ance in au­tos. Trump has said re­duc­ing trade deficits is the ad­min­is­tra­tion’s top pri­or­ity in the rene­go­ti­a­tion of NAFTA, a goal shared by the largest union for U.S. auto work­ers.

“No amount of spin by cor­po­rate lob­by­ists rep­re­sent­ing com­pa­nies who out­source can change the facts on what has hap­pened to work­ers as a re­sult of NAFTA,” United Auto Work­ers Pres­i­dent Den­nis Wil­liams

Auto

said in a state­ment. “NAFTA rene­go­ti­a­tion will only be suc­cess­ful if it leads to higher wages for work­ers in all three coun­tries and puts an end to our crip­pling auto trade deficit with Mex­ico.”

Af­ter re­peat­ing threats to exit the ac­cord, Trump on Wed­nes­day wouldn’t say how he was lean­ing on a NAFTA deal as he met with Cana­dian Prime Min­is­ter Justin Trudeau at the White House. Ne­go­tia­tors from Canada, Mex­ico and the U.S. be­gan the fourth round of talks to re­vamp the trade pact on Wed­nes­day out­side of Wash­ing­ton. Auto in­dus­try lob­by­ists and ex­ec­u­tives are pay­ing close at­ten­tion to U.S. pro­pos­als on the rules of ori­gin for ve­hi­cles. Those rules will be a ma­jor fo­cal point in the cur­rent round of talks. Com­merce Sec­re­tary Wil­bur Ross said this week the U.S. will pro­pose a hike to rules of ori­gin per­cent­age, and re­gional pro­cure­ment rules and “you’ll find that the car com­pa­nies will adapt.”

Auto ex­ec­u­tives and groups have warned such changes will up­set a thriv­ing North Amer­i­can auto in­dus­try by bur­den­ing the com­plex sup­ply chain erected around NAFTA with added costs and com­plex­ity.

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