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Industry Experts: Latest Proposed Changes to NAFTA Are Red Flag for Automotive Supply Chain

As the fourth round of negotiations between Canada, the United States and Mexico surrounding the North American Free Trade Agreement (NAFTA) conclude, the Detroit Regional Chamber, along with MICHauto and the Consulate General of Canada, hosted members of the Original Equipment Suppliers Association for an informative discussion on NAFTA’s potential impact on trade and economic growth for the U.S. and Canadian economies.

Anne Cascadden, trade commissioner for the Consulate General of Canada, said two of the biggest sticking points that are hindering negotiation efforts between the three countries revolve around the United States’ proposal that requires:

  • Any new agreement would sunset after five years and must be renegotiated
  • Rules of origin for automobiles would include 85 percent NAFTA-country product, up from 62.5 percent now, and 50 percent U.S.-made product in order to be exempt from tariffs

Cascadden said the U.S. proposal would greatly impact NAFTA supply chains. Specifically, steel, aluminum, copper, plastics, electronics, and other parts currently exempt would be required to come from North America for vehicles to qualify under rules of origin.

Other discussion participants included Ann Wilson, senior vice president of government affairs for the Motor and Equipment Manufacturers Association; Xavier Mosquet, senior partner for The Boston Consulting Group; and Christopher Sands, senior research professor and director of the Center for Canadian Studies at Johns Hopkins University.

In welcoming remarks, Chamber President and CEO Sandy Baruah said that Canada and Mexico are more in-tune with the economic ramifications of the United States’ potential withdrawal from the trade agreement, adding that any new agreement must first “do no harm” to the countries’ existing trade relationship. While not perfect, Baruah said NAFTA has been a major factor in North America’s competitiveness with the European Union.

Baruah has been a key voice regarding the NAFTA renegotiation and remains highly sought after for his expertise and insight at discussions in Michigan and Canada based on his current role at the Chamber and his past work in Washington, D.C.