U.S. Wants Updating of NAFTA Auto Content Thresholds

The United States has requested the updating of NAFTA’s automotive rules, which would carry a four-year phase-in to meet a higher, 75 percent regional value threshold as well as new labor content rules requiring substantial work at hourly wages of at least $16.

According to Reuters, a summary of the U.S. proposal would require the $16 wage on work comprising 40 percent of the value of light-duty passenger vehicles and 45 percent for pickup trucks. The wage demand was pushed last week, by U.S. Trade Representative Robert Lighthizer, who had intensive talks on modernizing the North American Free Tree Agreement. The talks are intended to preserve U.S. and Canadian auto production and put upward pressure on Mexico’s low auto wages.

According to estimates by the Center for Automotive Research, Mexican auto assembly workers on average earn under $6 an hour, while those in parts plants less than $3 an hour.

The U.S. proposal calls for overall regional value content to rise to 75 percent from the current 62.5 percent, but significantly lower than USTR’s initial 85 percent demand. Reuters adds that automakers would get a four-year phase-in rate for light passenger vehicles and two years for pickup trucks, which represent a key high-value product segment that USTR considers important for U.S. production.

Meanwhile, the head of Mexico’s automotive industry association (AMIA) said on Monday that the proposal was not acceptable and not viable. AMIA President Eduardo Solis said that apart from the 75 percent regional automotive content requirement, and the envisioned phase-ins, the plan also proposed that 40 percent of the value of light vehicles would need to be produced in areas paying an hourly wage of at least $16, and 45 percent at that salary for pick-up trucks.

Solis simply dismissed the proposal as unacceptable.

Be the first to comment

Leave a Reply

Your email address will not be published.