NAFTA talks move forward as US, Mexico find common ground on wages

7 August, 2018

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NAFTA renegotiations showed progress last week after Mexico accepted the United States’ proposal to include set minimum wages for the automotive industry as part of a modernized deal.

“What we’re talking about now is that a percentage of vehicles made in North America be made in a high-wage area,” Economy Secretary Ildefonso Guajardo said in a radio interview as reported by El Economista.

“What does that mean? Of 100% of cars made in NAFTA, it could be around 35% or 40% are made in a high-wage area,” he added.

In order to qualify for tariff-free status in the North American market, the United States is pushing for 40% of the content of cars and 45% of the content of pickup trucks to be made by workers who are paid at least US$ 16 per hour. That’s more than five times the US$ 3 per hour that many auto sector workers in Mexico currently earn.

Regarding the so-called rules of origin, the United States is asking that cars made in NAFTA countries have at least 75% local content in order to be exempt from duties while Mexico has offered to raise locals content levels to 70%. The current rate is 62.5%.

With regard to steel, aluminum and glass content, Guajardo ruled out that a 70% North American content rule could be applied — as proposed by U.S. Trade Representative Robert Lighthizer — but suggested that bonuses could be offered to manufacturers who met those levels.

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