NAFTA tracking rules could drive automakers abroad, Magna warns

The head of North America’s largest auto parts supplier says automakers will move more production offshore if changes to NAFTA make it too complicated, echoing a similar warning from Canada’s foreign minister.

Magna International Inc. CEO Don Walker, speaking Thursday at his company’s annual general meeting north of Toronto, said any revised North American Free Trade Agreement has to encourage long-term investment and that the sector favours a “do no harm” approach.

“The end objective is NAFTA has to be competitive because we’re in a global industry, and every country in the world is trying to attract automotive,” he said.

Countries are looking to raise the percentage of a car that must be built domestically to be traded under NAFTA, while also potentially expanding the amount of parts whose origin must be tracked.

“I just hope they don’t put so much administrative burden on us that it costs a fortune to track it all,” the Magna CEO said.

The U.S. wants almost half of every car to be built by workers making at least US$16 an hour, a demand that Mexico opposes, given its labour costs are the lowest among NAFTA nations. Canada is open to the idea, but the issue remains in flux as talks continue.

“If we drove the labour for everything in Mexico up, even doubled it, then that means you’re not competitive anymore in a lot of the products and it all goes back to China,” Walker said.

Canada’s Foreign Minister Chrystia Freeland warned automakers could just not bother and instead pay tariffs, which are relatively low.

It could make North America less competitive compared to the rest of the world, she told the CBC: “I want the rules that we come up with to be rules that don’t force our car companies and our car parts companies to be spending too much time on administration.”