U.S. and Mexican negotiators have begun bilateral discussions as part of a scheduled six-year review of the United States-Mexico-Canada Agreement, with discussions reportedly focusing on attempts by the U.S. to increase domestic content rules for vehicles and components.
Canadian negotiators are not included in the current discussions.
The USMCA went into effect in July 2020, replacing the 1994 North American Free Trade Agreement (NAFTA), involving stiffer rules of origin for automotive manufacturing, higher standard wages for auto workers, and stricter labor and environmental standards.
USMCA also contains provisions on digital trade, copyright and patent protection, and enforcement on thefts of trade secrets.
In its new proposal, the U.S. has proposed a 50% requirement for vehicle components and materials to originate specifically from U.S. sources; the current requirement is that U.S.-built cars and trucks must have at least 75% of their total components manufactured in North America.
The USTR has also put forth a proposal for a new, minimum-percentage requirement for U.S.-made content in vehicles assembled in Mexico. And there is an effort to expand the definition of “core parts” in vehicles, to cover more electronics and advanced components currently sourced from Asian manufacturers.
USTR also aims to set a 100% requirement for North American-produced steel and aluminum in vehicles, and expanded cooperation among the three nations to tighten security around critical minerals, batteries, and strategic manufacturing.
Other USTR objectives involve tighter regulations to block the access of transshipped products or lightly processed goods from China qualifying under USMCA regulations.
In addition, with urging from the United Auto Workers union, the USTR is seeking increase in the wages of Mexican workers, to disincentivize the offshoring of manufacturing jobs.
The Vehicle Suppliers Association (MEMA) also offered support for the USTR's effort to strengthen North American manufacturing and domestic supply chains, but domestic automakers have been more reserved on the subject. As quoted by The Wall Street Journal, General Motors CEO Mary Barra expressed concern about the shifting standards’ effect on U.S. competitiveness. that stiffer regional content requirements will harm U.S. competitiveness. “I need clarity, and then I need consistency,” Barra said. “Everything can be moved over time, but we also have to do it effectively, and we have to do it in a manner where we’re still competitive globally.”
Other areas of negotiation raised by the U.S. include broader agricultural access to Canadian markets (e.g., dairy products); and requiring Mexico to reduce its partiality for state-owned energy suppliers.
The ongoing discussions are expected to continue into July.
