UPDATE: Commerce Dept. NAFTA Report Cites Drop in U.S. Content

The ratio of U.S. value-added content in cars imported from Canada and Mexico has dropped significantly since the North American Free Trade Agreement took effect, according to a Dept. of Commerce analysis.

The study’s release comes one day before NAFTA negotiators plunge into talks about local content requirements. The 12-page report bases its findings on trade data from the Organization for Economic Cooperation and Development.

The analysis focus on percent changes in the U.S. content of goods the country imports from Canada and Mexico. But critics note the report ignores OECD data about growth in the volume of imports during NAFTA, which show a sharp increase in the absolute value of American-made content in those imports.

In the case of Mexico, for example, the ratio of U.S. content in goods imported from Mexico has dropped 10 percentage points. But the overall volume of imports grew so much that the overall value of the U.S. content in those imports more than tripled.

U.S. Secretary of Commerce Wilbur Ross says the analysis affirms the Trump administration’s assertion that NAFTA’s so-called rules of origin must be changed to “meaningfully shift” the U.S. trade imbalances with Canada ($11 billion) and Mexico ($64 billion).

The Trump administration reportedly will ask that vehicles should qualify for duty-free shipment among the three NAFTA countries only if at least 70% of their value comes from the member countries—including at least 35% from the U.S.

The overall share of U.S.-supplied content in cars imported from the two countries shrank by 8 points between 1995 and 2011, according to the report. The analysis says the proportion of U.S. content in imported manufactured goods overall from Canada and Mexico dropped to 15% from 21% and 16% from 26%, respectively, over the period.

During the same 16-year interval, the ratio of automotive value-added content from non-NAFTA countries more than doubled to 30% for vehicles from Mexico, the analysis concludes. It says components from China surged 20-fold to nearly 6%.