NAFTA uncertainty rattles Canadian automotive sector
- September 3, 2018
Canada’s automotive industry is anxious about details to emerge from current NAFTA negotiations, despite the recent agreement between the US and Mexico on revisions to the deal.
The industry will have to meet tough new rules of origin that will determine which parts and vehicles can be shipped across the border duty-free. The new rules would mandate that 75 per cent of auto content has to be made in North America to qualify for duty-free border transit, and 40 to 45 per cent of auto content has to be made by workers earning at least US$16 per hour (this is largely an attempt by the US to raise labour rates – and hence component and vehicle cost – in Mexico). Passenger vehicles would also need to include a certain percentage of North American steel and aluminum.
Flavio Volpe, president of the Automotive Parts Manufacturers' Association in Canada, told Automotive News Canada that suppliers will need time to transition to the new rules
"Some companies are going to feel more pain than others. But if the transition was immediate you'd have losers" all around, he said.
Mark Nantais, President of the Canadian Vehicle Manufacturers Association released a statement on the Canada-US talks.
"The progress made by the US., Mexico and Canada in these negotiations will ensure the automotive industry remains competitive on a North American basis. We understand that negotiations between Canada and the USTR [US Trade Representative] will resume Wednesday next and we continue to support the government in seeking a positive modernized NAFTA agreement."
Trump’s suggestion that NAFTA will work without Canada at all drew a response from Richard Trumka, the president of the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO).
Trumka said Canada needs to be on board, alongside the US and Mexico, due to existing economic integration across the continent, acc to a Fortune article.
“The three countries in North America, the economy is pretty integrated,” Trumka said in a Fox interview. “And it’s pretty hard to see how that would work without having Canada in the deal.”
In an interview with the Fortune Global Forum, Prime Minister Trudeau said killing NAFTA would be a bad move. “NAFTA has been an extraordinarily successful trade deal over the past 25 years,” Trudeau said. “It has created millions of good jobs for all three of the countries involved. Any negotiations are going to be challenging, but I remain fundamentally convinced of the positive impact that trade has had. I think cancelling NAFTA would harm our citizens – and I have to ultimately believe that that’s not going to happen.”
You can watch the full video interview with Prime Minister Trudeau here.