But critics say there is plenty of room for improvement.
The USMCA has strengthened North America’s auto industry, but the rules are not without challenges as the industry transitions from internal combustion engines to clean energy vehicles.
That’s the gist of a report submitted to Congress by the Office of the United States Trade Representative, Released this weekThis is a study focused specifically on the auto provisions in the trade agreement that will replace NAFTA in 2020.
“Since the new rules of origin were published in late 2018, automakers have invested billions of dollars to increase production of vehicles and parts in North America, and the shift to EVs is spurring new investment in North America.” It reads.
That’s true. Rules of Origin (ROO) in trade agreements determine where products must be made to qualify for duty-free status, and private investment in U.S. battery and clean vehicle manufacturing is behind the major domestic industrial investments included in the Inflation Control Act (IRA). It rose sharply In recent years, it has grown from almost nothing in 2019 to $13 billion in the first quarter of 2024 alone.
However, despite this investment being a positive sign for domestic auto manufacturing, tariffs on cars imported from Mexico have increased significantly, indicating that many automakers are deciding to pay the tariffs rather than comply with USMCA’s rules of origin. Politico Memo.
this is, ReportThis refers to an observation made this winter by the United Auto Workers union.
At the February 7 hearing, the UAW argued that the 2.5% US Most-Favored-Nation (MFN) tariff on passenger cars is only a “minor violation” of USMCA rules for not following them. The UAW pointed to recent US import statistics showing that the majority of cars imported from Mexico do not claim USMCA preferences as evidence that companies are taking advantage of Mexico’s cheaper labor but not increasing the content to fully meet USMCA’s rules of origin. The UAW further argued that Chinese automakers take advantage of the North American automotive infrastructure and ecosystem that has developed over the past 25 years by establishing operations in Mexico, paying the 2.5% MFN tariff, and accessing the US market without being subject to Section 232 and Section 301 tariffs.
Indeed, Chinese automakers have not hesitated to invest heavily in Mexico, with more than 30 already operating there. Mexico News Dailyand many other companies, including global electric vehicle market leader BYD, have plans to invest there.
The United States and Mexico have agreed to cooperate on foreign investment reviews to address “national security risks,” but U.S. critics are still not happy with the increase in cars and other Chinese products moving through Mexico.
“Challenges for the US and North American auto industries,” writes Adam Hirsch of the Economic Policy Institute. In a letter from January“Under USMCA, as before NAFTA and before, a regulatory environment that favors corporations and capital over workers and communities across the global economy has led to a surge in auto imports from low-wage, low-standard producers.”
