The Alliance of Automobile Manufacturers urged the Trump administration Monday to not push for a change to the rules for when a product can be labeled “made in America.”
The White House is seeking to toughen those requirements as part of the talks to renegotiate the North American Free Trade Agreement. The coalition of U.S. and foreign automakers warned that no vehicle could ever meet the heightened standard that the Trump administration wants.
“While we support the administration’s goal to modernize NAFTA to bring the agreement into the 21st century, we remain concerned by the current trajectory of the renegotiations,” Mitch Bainwol, president of the trade group, told the Senate Finance Committee on Monday.
The Trump administration is pushing to increase the percentage of an automobile’s inputs, such as parts and labor, that come from the U.S. or Canada to have a car be deemed to be “made in America.” Currently, 62.5 percent of a car has to come from the U.S. or Canada to meet the standard, but the Trump administration wants to increase that to 85 percent and to also require that at least half be produced in the U.S.
The fifth round of NAFTA talks are happening in Mexico City and are scheduled to conclude Tuesday. Canada and Mexico are resisting the Trump administration’s proposed changes, which would severely disrupt businesses that form part of the auto industry supply chain in their countries.
Bainwol argued strenuously before the committee that the existing rules were strict enough. “Taken in its entirety, [the administration’s] proposal is unprecedented and would have significant ramifications on our industry and the U.S. economy as a whole. No vehicle produced today could meet such an onerous standard. It is unlikely that any vehicle ever could, even if sourcing changes were made in an attempt to do so,” he said.
He added that phasing in the change over two years, as the administration seeks, would provide an additional shock because manufacturing has “long lead-time requirements for production changes.” Such a change would raise costs and therefore the prices of cars. That would depress sales, leading to a “cascading effect” as each element of the supply chain was forced to scale back.
The U.S. Trade Representative’s Office declined to comment on the testimony. It referred instead to remarks made by Stephen Vaughn, general counsel for the USTR, at the same hearing. “For a very long time, our NAFTA partners have enjoyed an agreement that is tilted in their favor. They do not want to give up that advantage, and we can understand why they feel that way. But our job at USTR is to represent the people of this country — and they deserve a better deal. We intend to do everything possible to get it for them.”
