Report: New NAFTA would hurt car sales, hike prices

Washington — Automakers would sell 140,000 fewer cars per year under President Trump’s proposed replacement for the North American Free Trade Agreement, according to a report released Thursday by the U.S. International Trade Commission.

Additionally, prices for small cars would increase by 1.61% and pickup prices would go up 0.37%, according to the report.

The findings contradict arguments from the Trump administration that the new pact with Canada and Mexico will increase the number of cars that are built in the U.S. Changes to the percentage of a car's parts that have to come from one of the three countries to qualify for duty-free treatment, known as rules of origin, "would lead to an increase in U.S. automotive parts production, partly offset by a small decline in U.S. vehicle production," the report said.

"These developments are estimated to result in a net employment increase of more than 28,000 full-time equivalent employees in the automotive sector," the report continues.

The findings come at a time when congressional approval of the proposed trade pact looks uncertain. Democrats, who now control the U.S. House, have clamored for negotiations to be re-opened in a bid to force Mexico to adopt stronger labor and environmental laws. USMCA supporters have argued that re-opening negotiations would risk exposing the trilateral agreement to political problems in Canada and Mexico. 

USMCA calls for increasing from 62.5% to 75% the percentage of a vehicle's parts that must come from one of the three countries to qualify for duty-free treatment.

It also requires that 40-45% of an auto's content be made by workers earning at least $16 per hour. Vehicles not meeting the requirements would be subject to a 2.5% duty. 

The Trump administration has argued the hourly requirement is tantamount to a U.S. requirement because Mexico autoworkers make a fraction of the proposed salary requirement. 

The Trump administration countered the report about the proposed USMCA with a study of its own that showed the pact will result in $34 billion in new automotive manufacturing investments in the U.S.; $23 billion in new annual purchases of U.S.-made automotive parts; and 76,000 jobs in the U.S. automotive sector. The Trump administration's report does not address the USITC estimate of reduced car sales.

Automakers expressed mixed reactions to the findings released Thursday by both studies about the USMCA. 

Matt Blunt, president of the American Automotive Policy Council, which lobbies for Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles, said in a statement the USITC report “underestimates the longer-term investments and increased U.S. auto parts sourcing that will be made in our sector as a result of the certainty and predictability the USMCA will deliver.

"In fact, billions of dollars in new U.S. investments have already been announced by FCA US, Ford and GM, as well as by EV battery manufacturers – even before the USMCA is in effect," Blunt said, adding that his organization's members are supportive of the new trade pact. 

 
The Alliance of Automobile Manufacturers, which lobbies for both domestic and foreign automakers, added: "While the automotive rules of origin in the new USMCA are more complex and come with added cost, USMCA incorporates many elements that have the potential to drive economic investment in the U.S. and create American jobs."

It said the USMCA's impact could be muted by tariffs on foreign steel and aluminum, and called for the elimination of duties on those metals from Canada and Mexico.

klaing@detroitnews.com

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Twitter: @Keith_Laing