US Auto Industry Urges USMCA Completion

NTD Staff
By NTD Staff
April 9, 2019Business News
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The Trump administration originally planned to get the United States-Mexico-Canada agreement (USMCA) approved by Congress before the end of this summer, but the trade deal now faces challenges in the three countries involved. The business community, especially the automotive industry, hopes that the agreement will take effect as soon as possible to stabilize their supply chain.

President Trump said last Friday that if Mexico can not effectively prevent illegal immigrants and drugs from flowing into the United States, punitive tariffs will be imposed on cars imported from Mexico. He added that closing the border is the last resort. This is a major cause for concern in the auto industry, because if the commercial flow is stopped at the border, the industry could collapse within a week.

Matt Blunt, former Michigan Governor and current President of the U.S. Automotive Policy Council said, “Because we build cars with our Mexican partners, and depend on Mexico for some of the parts and components that go into our vehicles, just as Mexico depends on the United States for up to 20 percent, 30 percent, perhaps even 40 percent of the parts that go into their vehicles.”

“We ultimately think it will be implemented, and will become an effective free trade agreement for North America. But right now, members of Congress are asking the sort of question you expect them to ask, as they consider free trade agreement.”

The USMCA, which replaces the North American Free Trade Agreement (NAFTA), is currently awaiting approval from the legislatures of the three countries. White House economic adviser Larry Kudlow called on the business community to help get the deal across the finish line, but experts said there are at least three major issues to overcome.

“The first is that Mexico really needs to pass the labor law. The second is the White House needs to provide the implementing legislation to Congress. And the last is that we need to have a resolution to the steel and aluminum tariffs for the imports coming in from Canada and Mexico,”
 according to 
Leila Afas, Toyota’s Director of International Public Policy.

The House is currently controlled by the Democratic Party, and Speaker Pelosi has said that Congress will not take action on the USMCA unless Mexico carries out legislative reforms on labor issues and implements them. Now, the Mexican ruling party is strengthening the labor bill to meet the requirements of the agreement and plans to vote this month.

In the process of ratifying the USMCA, the White House’s biggest ally is the business community, particularly the automobile industry. The rules of origin and other provisions in the agreement directly affect the automotive industry’s supply chain, which leaves the industry hoping for confirmation of the new rules as early as possible.

Afas added that: “From [Toyota’s] perspective, we have already made moves to invest heavily in the United States market and to expand and modernize our plants in America even before the USMCA is negotiated. The key issue is will we see the USMCA pass and that is our hope, because I think, one thing everybody agrees on is that we really need certainty and to understand what those rules are and how we need to meet them.”

Matt Blunt anticipates positive competition in United States businesses with the passing of USMCA.

“We think you will see more investment in the United States and North America to comply with the provisions of the USMCA, and ultimately this is an agreement that keeps the North American auto industry competitive.”

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