The Detroit Big Three – Ford, GM and FCA – are urging the Trump administration to row back from rule-of-origin proposals for NAFTA that they claim would add thousands to car costs and disrupt supply chains.
The North American Free Trade Agreement (NAFTA) is currently being reviewed and a fifth round of negotiations between the member states of the US, Canada and Mexico ended last week with substantial differences and disagreements unresolved. President Trump has been a strong critic of the agreement, arguing that it has enabled US companies to decamp US manufacturing operations to lower cost Mexico and supply the US market from there.
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However, auto industry groups from Canada, Mexico and the US have pushed back against the Trump administration’s demand for higher US automotive content in a modernised and renegotiated NAFTA.
US negotiators have proposed raising the minimum percentage of parts that must be made in the US, Canada or Mexico — from 62.5% to 85% — in order for manufactured vehicles to circulate freely between NAFTA countries. They also want 50% of parts to come from the US. Mexico and Canada are opposed to the US proposals.
The three Detroit automakers – represented by GM CEO Mary Barra, Fiat Chrysler Automobiles CEO Sergio Marchionne and Ford Executive Vice President and President of Global Operations Joe Hinrichs – met this week with US Vice President Mike Pence to voice industry concerns over the proposed NAFTA rule changes. US Trade Representative Robert Lighthizer and National Economic Council Director Gary Cohn also attended the meeting.
Governor Matt Blunt, President of the American Automotive Policy Council (AAPC; a body that lobbies on behalf of the Detroit Thee), said they “appreciate the opportunity to directly address the industry’s concerns with the administration’s rule of origin proposal.”
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By GlobalDataBlunt also said that the AAPC “appreciate Vice President Pence taking the time to meet us and for the opportunity to continue our discussions with the Trump administration about the future of NAFTA and the US auto industry”.
He also said the modernisation of NAFTA is an important opportunity to update the 23-year-old agreement and set the stage for an expansion of US auto exports.
“We believe achieving inclusion of strong and enforceable currency discipline and ensuring foreign markets accept products built to our standards are important components of a modern NAFTA agreement,” he said.
‘Lack of headway’ after fifth round of NAFTA talks
Little progress seems to have been made in the fifth round of renegotiations to modernise the NAFTA that concluded last week. Following the meetings in Mexico City, United States Trade Representative Robert Lighthizer observed that to date the US has “seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement.”
He warned: “Absent rebalancing, we will not reach a satisfactory result,” reigniting concerns remain that US President Donald Trump may end the agreement should the US, Canada and Mexico be unable to strike a deal. The US expressed concern at the “lack of headway.”
Meanwhile, Canada and Mexico continue to view the US proposals on such key issues as auto rules of origin and dispute settlement as “unfeasible,” according to customs and international trade law firm Sandler, Travis & Rosenberg.
The sixth round of negotiations is set to take place from 23-28 January 2018, in Montreal, Canada. In the meantime, negotiators will continue their work in inter-sessional meetings in Washington, DC throughout mid-December and will report back to chief negotiators on the progress achieved.
