Collision ahead over Trump's auto goals
WASHINGTON: The Trump administration has set a collision course with the auto industry as it launches renegotiations of the 23-year-old North American Free Trade Agreement (Nafta) this week. The US aims to shrink a growing trade deficit with Mexico and tighten rules of the origin for cars and parts.
More than any other industry, autos have been the focus of US President Donald Trump's anger over the trade pact, which he blames for taking car factories and jobs away from the US to low-wage Mexico.
The US had a US$74 billion (S$101 billion) trade deficit with Mexico in autos and auto parts last year. Senior trade fellow at the Peterson Institute for International Economics Caroline Freund said: "If they (Trump administration) don't touch autos, there is no way of getting at what they want."
Among the conditions that US Trade Representative Robert Lighthizer may seek is strengthening the rules of origin to shut out more parts from Asia.
His aim, which seeks to "ensure the rules of origin incentivise the sourcing of goods and materials from the US and North America", has raised concerns among auto executives and trade groups that he will seek a deal that guarantees a certain percentage of production for the US.
The industry is opposed to increasing the percentage of a vehicle's value that must come from the region above the current 62.5 per cent - already the highest of any global trade bloc.
They say this would raise costs and disrupt a complex supply chain that sees parts criss-crossing Nafta borders and has made North American car production competitive with Asia and Europe.
"Our members feel strongly that rules of origin are not the tools to use to reshore jobs into the US," said Ms Ann Wilson of the Motor and Equipment Manufacturers Association.
Ms Wilson and other industry advocates say a better way to boost US jobs is through policies aimed at expanding vehicle exports. - REUTERS