According to a report prepared by the United States Trade Representatives’ office, automotive aluminium and steel stand to benefit from a US$600-million surge over the next five years under the newly-negotiated United States-Mexico-Canada Agreement.
Citing sources provided it by U.S. automakers, the report hones in upon the USMCA’s updated rules of origin as it concerns automotive parts. With the new language in place, the USTR concludes that the new rules will incentivize at least US$23 billion in new U.S. automotive parts purchases each year for the initial five-year period of the agreement.
The USTR says the new rules of origin will require 75 percent of auto content to be produced on the North American continent, with a new labor requirement that between 40 and 45 percent of each unit’s labor content be produced by workers who earn at least US$16 per hour.
Per a USTR official, American automakers have already agreed to abide by this rule. Under the USMCA, automakers will enjoy a grace period for providing the USTR a transition plan aimed at bringing its operations into compliance with the new rules.
“The automotive rules of origin (ROO) in the North American Free Trade Agreement are outdated, contain significant loopholes, and have encouraged the outsourcing of US jobs,” explained the USTR’s report.
“The new automotive ROO in the [USMCA], by contrast, are designed to incentivize investment, production, and employment in the US automotive sector.”
In addition to content requirements, the USTR expects approximately US$34 billion in new investment from automakers and battery suppliers due to the new provisions in USMCA, which it concluded from information provided by automakers, and publicly-announced investments by other stakeholders that the USTR believes are at least partly the result of USMCA.
Though the USMCA bears the signatures of the heads of state of all three countries involved, each country’s legislative branch has yet to officially approve of the measure.