How The New North American Trade Deal Will Affect The Automotive Industry

Oct 3, 2018
Originally published on October 3, 2018 7:37 pm
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ARI SHAPIRO, HOST:

Many people in the U.S. auto industry are breathing a sigh of relief this week. The new trade deal between the U.S., Mexico and Canada ends months of uncertainty. If it's approved by Congress, it will spare carmakers from some of the tariffs that they had feared. Ann Wilson is senior vice president of the Motor & Equipment Manufacturers Association, which represents more than 1,000 companies that make auto parts here in the U.S. Thanks for joining us here on ALL THINGS CONSIDERED.

ANN WILSON: Thank you, Ari. Glad to be with you.

SHAPIRO: To begin with, will you just describe for our listeners what your member companies make and where you are in the auto-making supply chain?

WILSON: So our members make the vast majority of the content for new vehicles, and we also manufacture parts and components for maintenance and repair.

SHAPIRO: And how much was on the line for you in this trade agreement? Were you holding your breath to see what the details would be?

WILSON: Well, our industry has actually done quite well under NAFTA. We've actually been able to grow our supply chain in North America. We've been able to grow manufacturing jobs in the United States. But it counts in all three countries being part of the agreement. So we were very pleased - relieved that all three parties were able to come to an agreement this weekend. We are cautiously optimistic that the terms of the agreement will work for the industry and for the American public.

SHAPIRO: When you look at the details of the agreement, can you tell how it compares to NAFTA for you?

WILSON: Well, there's going to be an increase in the amount of North American content that will be required for parts to travel through the three countries. We're going to have to call it the U.S.-Mexico-Canada agreement - but travel through North America without having to pay tariffs. There's going to be a requirement for more North American steel and aluminum. So all of that will impact our members. And in addition, there's going to be some new administrative costs that are going to be required. One of the concerns we have though are there's some new tariffs out there right now on steel and aluminum, and we'd like to see Canada and the United States address that before they finalize this agreement in the end of November.

SHAPIRO: So on the one hand, there won't be tariffs for material crossing Canada, U.S., Mexico borders. On the other hand, the steel and aluminum tariffs that were of concern to your industry have not gone away.

WILSON: No, they haven't. I think one of the things we have to keep in mind is they have been a particular burden to smaller manufacturers. Many of these smaller manufacturers are only in the U.S. And some of our members have seen the cost of their steel purchases rise almost 50 percent. So this is a significant increase. It's particularly of concern between Canada and the United States. We'd like to see those two countries roll up their sleeves, use the same energy they used to conclude this new NAFTA and be able to come to some kind of agreement on steel and aluminum tariffs.

SHAPIRO: I know that there's a lot of relief in the auto industry now that the uncertainty is gone. But how does this compare to the old rules under NAFTA? Is it an improvement? Is it worse?

WILSON: Well, I think from the United States' perspective, one of the things the United States was able pull through was the increase in U.S. content. And for some of our suppliers and some component manufacturers, this is going to be a challenge. There's no doubt about that. I do think that we're going to see more steel, more aluminum that's from North America in our vehicles. The biggest concern our members are going to have is the administrative costs. And we're going to have to work really hard with all three parties to minimize those costs because the consumers aren't going to get any value out of it. And that's going to be our next real challenge as we move forward with the agreement.

SHAPIRO: Ann Wilson is senior vice president of the Motor & Equipment Manufacturers Association. Thanks for speaking with us today.

WILSON: Thank you. It's a pleasure. Transcript provided by NPR, Copyright NPR.