Trade Officials Warn: American Auto Jobs at Risk with USMCA Ruling in Favor of Canada, Mexico
Canada and Mexico won a challenge against the United States under the U.S.–Mexico–Canada Agreement (USMCA) that may cost American jobs in the auto industry and supporting industries, U.S. Trade Representative (USTR) officials warn.
This week, the U.S. lost its challenge under USMCA rules to prevent Canada and Mexico’s interpretation of the trade agreement’s content rules, effectively allowing more auto parts to derive from countries outside of North America.
To secure tariff-free status under USMCA, at least 75 percent of a vehicle’s parts must derive from North America.
Specifically, Canada and Mexico argued that USMCA rules should be interpreted to mean that if a core part of a vehicle has 75 percent regional content, then the percentage can be rounded up to 100 percent when weighing the entire vehicle’s regional content.
The U.S. argued that the 75 percent regional content requirement for core parts should not automatically allow automakers to round up the percentage for a vehicle’s regional content.
The ruling in Canada and Mexico’s favor, USTR spokesman Adam Hodge told Reuters, is “disappointing” and may result in “fewer American jobs.” The U.S. may also face retaliatory tariffs if officials do not comply with the ruling.
Representatives with the United Auto Workers (UAW), representing most of the nation’s auto workforce, said in a statement that such rulings spew distrust in trade agreements among working and middle class Americans:
We are deeply disappointed by the USMCA panel’s unfortunate decision which would, as a practical matter, allow automakers to reduce the amount of North American content needed to meet the auto rules of origin standard found in USMCA. [Emphasis added]
The roll-up provisions that automakers fought for are harmful to our members and undermines USMCA’s goal of bolstering the U.S. auto industry. In short, 70% should mean 70% — not 100%. Time and time again workers have been given empty promises, and this is a vital matter that directly affects jobs for workers here in the U.S. Undercutting the integrity of the rules degrades the confidence working people have in trade agreements. [Emphasis added]
Meanwhile, officials in Canada and Mexico celebrated the decision.
The ruling comes as American auto jobs continue to be outsourced to low-wage Mexico, despite USMCA, as a cost-saving measure for automaker executives. Most recently, multinational automaker Stellantis announced that it would be outsourcing more than 1,300 jobs at its plant in Belvidere, Illinois, sending them to Toluca, Mexico.
In 2019, USTR officials promised that USMCA would create 76,000 American auto jobs in the first five years of its implementation.
American manufacturing is vital to the U.S. economy, as every one manufacturing job supports an additional 7.4 American jobs in other industries. Decades of free trade, with deals like the North American Free Trade Agreement (NAFTA), have eliminated at least five million manufacturing jobs from the American economy and resulted in the closure of about 55,000 manufacturing plants.