08 Dec Estimated Impact Of The United States-Mexico-Canada Agreement On The Us Automotive Sector
Many economists argue that the current level of TaA funding is largely insufficient to meet the increase in trade-related job losses. “There are pockets that have felt a lot of pain,” Hanson says. “The existence of these pockets underscores our political failure to help regions and individuals adapt to the effects of globalization.” In fact, NAFTA has helped the U.S. auto sector compete with China, Hanson says. By contributing to the development of cross-border supply chains, NAFTA has reduced costs, increased productivity and improved U.S. competitiveness. That meant losing a few jobs in the United States, since jobs were relocated to Mexico, he said, but without the pact, we could have lost even more. “Because Mexico is so close, you can have a regional industrial cluster where goods can come and go. Manufacturing in all three countries can be very integrated,” says Hanson. These links, which have given U.S.
automakers an advantage over China, would be much more difficult to achieve without NAFTA tariff reductions and intellectual property protection. The second reason is more specific to the company. In 2017, Ford committed to building new facilities in Michigan and renovating old ones. A trade agreement that will promote North American and U.S. production will increase the value of these investments. “Of course, higher prices will have an impact on revenue,” Wakefield said, but the alternative – by swallowing higher costs – could exacerbate the so-called “profit desert” in which the sector is soaring. While Canadian automakers and the Tier 1 and 2 automotive equipment industry are grappling with these changes, they also addressed the uncertainties associated with discussions on NAFTA renegotiation and issues related to the ratification of the new USMCA. Recent measures to end this uncertainty are positive, and changes – such as content provisions in North America and by workers with hourly wages of at least $16 – could have a positive impact on Canada. But there could be drawbacks. Neither the worst fears of Canadian trade opponents – that open trade would erode the country`s manufacturing sector – nor the highest hopes of NAFTA proponents – that this would lead to a rapid increase in productivity – have been realized. Employment in Canada`s manufacturing sector has remained stable, but the productivity gap between the Canadian and U.S. economies has not been closed: until 2017, Canada`s labour productivity remained at 72% of the U.S.
level. As things stand, the main sensitive point of NAFTA renegotiations is the rules of origin for the auto industry in Mexico, as well as for the sector in the United States and Canada.