Auto firms pin hopes on Canada’s Nafta offer
Industry majors and suppliers fret that US demands will derail 24-year-old trade pact
Auto industry officials fretting about hardline US Nafta demands with the potential to turn a globally integrated industry upside down now are hopeful that a Canadian compromise plan could avert disaster.
The officials, speaking to Reuters on the sidelines of Nafta talks here, said strenuous lobbying efforts on behalf of the industry were starting to sink in with some key members of the Trump administration.
Automakers and their suppliers are worried that the US demands will cause the 24-year-old North American Free Trade Agreement to collapse, or render its tariff-free benefits unusable.
Industry trade groups have estimated that a full reversion to World Trade Organisation tariff levels would cost the industry some $10 billion (Dh36.7 billion) a year and cause the loss of up to 50,000 US auto parts jobs.
Bone of contention
The Trump administration, which blames Nafta for killing off US manufacturing jobs, wants the requirement for the value content, or net cost, of autos sourced from the three Nafta countries boosted to 85 per cent from 62.5 per cent for tariff-free trade. It also insists that 50 per cent of the content of every vehicle produced in the region come from the United States, an option that Canada and Mexico have dismissed as unworkable.
In a bid to keep the talks alive, Canada is now suggesting that North American content in autos — known as rules of origin — should be calculated to also include the value of software, engineering and other highvalue work, which currently is not counted toward the regional content targets.
The plan got a boost from Fiat Chrysler Automobiles chief executive Sergio Marchionne on Thursday, who called it a “defensible” concept and a “step in the right direction.”
Canadian officials say their US counterparts have asked a series of questions about how the plan would work.
“I think I’m more optimistic now than I have been in quite some time, because we have an opportunity here for having a true dialogue on what a 21st century rule of origin for Nafta might look like,” said Ann Wilson, senior vice-president of government affairs at the Washington-based Motor and Equipment Manufacturers Association.
The industry fears that if North American content demands are set too high, manufacturers will simply forego Nafta’s tariff-free access and pay low 2.5 per cent US tariffs on parts and passenger cars produced outside the region.