April 16, 2018 | by    

In Effort To Reach Quick NAFTA Conclusion, U.S. Eases Auto Content Requirements

Last week, Connecting the Dots reported the U.S. government wanted to have a deal to modernize the North American Free Trade Agreement (NAFTA) finished by the Summit of the Americas, which started last Thursday in Lima, Peru.

While that deadline obviously was not met, on Friday the Trump administration “significantly softened” its “demands to increase regional automotive content under a reworked NAFTA trade pact in an effort to move more quickly towards a deal in the next few weeks …” As Reuters explained, the administration originally wanted to increase the percentage of content required to come from NAFTA countries from the 62.5 percent requirement in place now to 85 percent, and to require that 50 percent of content come from the United States alone. Canadian and Mexican negotiators have continually said that demand is unworkable. On Friday, U.S. negotiators acquiesced and said they would accept a 75 percent content requirement from NAFTA countries. (U.S. negotiators already had abandoned the requirement that 50 percent of content from the United States.) Reuters explained, “The 75 percent regional content is for major components such as engines, drivetrains, axles, suspensions and body panels. Aluminum and steel would go into a bucket of other parts and materials requiring 70 percent regional content, while a third bucket of lesser parts would require 65 percent regional content.”

Despite other disagreements (outlined by BloombergBusinessweek here) U.S. negotiators are still hoping to wrap up negotiations soon so Congress can consider NAFTA before this November’s election. At the Summit of the Americas in Peru over the weekend, U.S. Vice President Mike Pence told reporters there is “a real possibility that we could arrive at an agreement within the next several weeks on a renegotiated NAFTA.”

MSCI encourages its members to discuss their opinions about NAFTA reauthorization with lawmakers. The Canadian government has established a webpage for stakeholders to submit their views. Companies also may submit comments by email (NAFTA-Consultations-ALENA@international.gc.ca) or by mail to: NAFTA Consultations, Global Affairs Canada, Trade Negotiations – North America (TNP), Lester B. Pearson Building, 125 Sussex Drive, Ottawa, ON K1A 0G2.

MSCI members in the United States who are interested in weighing in on NAFTA deliberations should contact their representatives in the U.S. House and Senate to let them know how altering or eliminating NAFTA would affect their businesses, employees, and customers. Click here for contact information for every member of the House and here for senators. Click here to re-read MSCI’s own NAFTA negotiating priorities.