Carmakers Counsel Caution on NAFTA Talks

Several auto industry trade groups told a public hearing in Washington, D.C., on Wednesday that U.S. negotiators should proceed very carefully when talks to update the North American Free Trade Agreement begin in mid-August,.

Commerce Secretary Wilbur Ross wants to tighten the current rule that says vehicles shipped between Canada, Mexico and the U.S. must contain at least 62.5% local content to avoid tariffs. Ross frets that the allowed 37.5% of foreign content gives parts suppliers in China and elsewhere a “back door” into the duty-free NAFTA region.

But Reuters reports that the American Automotive Policy Council says the current standard achieves a good balance between encouraging local parts makers while keeping the region’s overall costs competitive. AAPC tells the hearing that Chinese components account for less than 6% of the value of vehicles built in North America.

Reuters says other industry trade groups agree about the perils of upsetting what the Motor Equipment Manufacturers Assn. describes as a delicately balanced ecosystem of suppliers. But the trade groups also emphasize that they don’t oppose reviewing the 23-year-old NAFTA agreement.