Trump's NAFTA 2.0 Auto Nothingburger

    By NCD on Wed, 10/03/2018 - 4:37pm |

    Proposed changes to North American auto trade rules expected in the new NAFTA pact are unlikely to significantly increase U.S. manufacturing jobs or boost wages in Mexico, an analyst at the Center for Automotive Research in Ann Arbor, Mich. said.

    "The big upshot is there's nothing in this agreement that looks like lots of jobs are coming to the U.S.,” Kristin Dziczek, vice president of industry, labor and economics at the auto industry think tank, said in an interview on Wednesday about the details of new U.S.-Mexico trade agreement. “On the margin, there may be some tweaks — companies moving content [production] to the higher wage region, which is the U.S. or Canada basically. There's nothing in this agreement that raises wages in Mexico," Dziczek said.   link

    The agreement specifies certain wages for auto workers, and raises the requirement for North American car content from 62.5% to 75% to avoid a 2.5% duty on the price of the car. 

    1. The US auto industry as is can produce 17 million automobiles a year, last year they produced 14 million. Sales would have to rise well over 20% to justify new factories in the US. No new factories needed.

    2. Mexico has a permanent duty pass in the new agreement exempting the first 2.4 million vehicles exported to the US, That's whether or not they meet the NAFTA 2.0 wage and parts requirements. Mexico currently exports from 1.7 million to 2.33 million vehicles depending on where you get the numbers. The exemption covers all current exports from Mexico, and leaves room for more.

    3. On the $16 an hour 2023 requirement for the average auto parts worker, right now, only 0.5% of Mexican workers receive $16/hour.

      Only 269,000 Mexicans earn US $16 or more per hour, the wage level proposed for specialized automotive sector workers as part of the trade agreement announced Monday between Mexico and the United States. link

    It will likely never happen that Mexico will pay an average of $16 to auto workers, even by 2023. It may be cheaper for car companies to pay the 2.5% penalty than it would to pay the high salaries. Or they could make the parts in even less expensive labor nations than Mexico.

    Comments

    Yeah.

    The FT editorial says the same,

    They credit Canada


    by Flavius on Fri, 10/05/2018 - 6:16am

    This sounds like more TDS driven sour grapes coming from the peoples republic of Ann Arbor. They can't even call the agreement by its new name USMCA because that would acknowledge that Trump had delivered again on another of his campaign promises. NAFTA is dead replaced by a more fair trade deal that should benefit everyone without destroying more jobs in the US.

    by Peter (not verified) on Fri, 10/05/2018 - 10:35am

    You had gleefully imagined a 35% tariff on manufactured Mexican imports, what happened? 2.5% and an exemption for all current imports+. Nothingburger.

    November, 2016:

    Trump has repeatedly promised to renegotiate a better deal, and he has even suggested placing a 35% tariff on trade with Mexico.


    by NCD on Fri, 10/05/2018 - 11:56am

    Harsh bargaining rhetoric is needed to show our trading partners and competitors that the days of appeasment have ended. The goal is fair trade with low or no tariffs that benefits everyone. With this new agreement finalized Trump and his trade team can focus on China where their unfair trade practices will end one way or another.

    by Peter (not verified) on Fri, 10/05/2018 - 12:46pm

    There wasn't really a big problem with NAFTA. We even had a trade surplus with Canada. The new trade deal made a few minor meaningless tweaks. Since I didn't see a problem in the first place I'm glad there were no changes. My side won.

    What I don't get is why Trump's supporters like this deal. Trump campaigned on this issue. He started a big fight, over nothing in my opinion but you thought it was meaningful. He then produced a trade bill that is virtually the same as the trade bill he criticized. All there was was harsh bargaining rhetoric. You're happy about what I see as just a show. Are there any policy ideas Trump supporters actually care about? Or are you just happy watching the show, believing the spin, and "winning" these faux battles?


    by ocean-kat on Fri, 10/05/2018 - 3:28pm

    A lot of Sound and Fury signifying nothing. If only Trump were literate and could read Shakespeare and Faulkner.


    by PeraclesPlease on Mon, 10/08/2018 - 1:03am

    "While the flim-flam man mesmerizes and entertains the crowd, the real damage is done by the pickpockets who work the crowd."

    Trump and the pickpocket Republican's irresponsible (again) tax cuts for their rich plutocrat donors, giving an exploding deficit of a trillion a year, and growing, is going to give us the mother of all recessions. 


    by NCD on Fri, 10/05/2018 - 3:10pm

    I can't find anything about them paying for The Wall. Is it in there?


    by artappraiser on Fri, 10/05/2018 - 12:22pm


    by artappraiser on Sat, 10/06/2018 - 5:19pm

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