“While we expect some changes in the automotive supply chain, some to the benefit of the U.S. and some to the benefit of Mexico, overall this is a positive outcome for manufacturers.”
On December 10, 2019, the U.S., Mexico, and Canada formally signed an updated NAFTA following months of negotiations between the White House and Democrats in the U.S. House of Representatives led by Speaker Nancy Pelosi. This marks a major victory for President Trump, Congressional Democrats, and most importantly, manufacturers who have sought some stability after several years of uncertainty over trade with Canada and Mexico. PMPA is part of several coalitions who have pushed for an update to the 25 year old NAFTA and believes the new agreement will expedite commerce across all borders. While we expect some changes in the automotive supply chain, some to the benefit of the U.S. and some to the benefit of Mexico, overall this is a positive outcome for manufacturers.
The changes agreed to by Speaker Pelosi, labor leaders, the White House, and Mexico do not significantly alter provisions impacting autos on Regional or Labor Value content levels except one last minute provision requested by the White House that all steel for autos be “melted and poured” in North America (delayed for seven years, Mexico refused the same terms for aluminum).
Sources in Washington indicate the U.S. House of Representatives could vote to approve the new NAFTA on December 19, one day prior to departing for the Christmas break, and one day after voting to impeach President Trump. Senate Majority Leader McConnell indicated he will not schedule a vote until after the Senate concludes the impeachment trial, which many believe could begin around January 7, 2020 and last at least two weeks (President Bill Clinton’s Senate impeachment trial began on January 7, 1999…). This puts Entry Into Force (when the new agreement officially takes effect) still a few months away.
Major changes in the White House-U.S. House Democrats-Labor-Mexico update include:
- Creating rules of evidence for labor and environmental enforcement;
- New labor enforcement applies to all goods and services in Mexico and can apply penalties on goods with labor violations;
- A party cannot block dispute settlement panel from being formed;
- Creates an interagency committee to monitory Mexico’s labor practices;
- Unions may have attaches on the ground in Mexico but unclear if U.S. official or American labor representative may inspect Mexican facilities;
- Adds Multilateral Environmental Agreement language for all parties;
- New Customs verification system for fauna, flora coming from
- Mexico to ensure properly harvested;
- Removes requirement to provide at least 10 years of patent exclusivity for biologics;
- Content liability protections for internet companies maintained;
- Requires steel to be “melted and poured” in North America to meet standards for use in auto production (delayed seven years).
