U.S. wants 4-year phase-in for higher NAFTA auto content thresholds

By David Shepardson and David Lawder

WASHINGTON (Reuters) – The latest U.S. proposal for updating NAFTA’s automotive rules would carry a four-year phase-in to meet a higher, 75 percent regional value threshold as well as new labor content rules requiring substantial work at hourly wages of at least $16.

A summary of the proposal, seen by Reuters and circulating among auto industry officials based on descriptions from Canadian and Mexican trade negotiators, would require the $16 wage on work comprising 40 percent of the value of light-duty passenger vehicles and 45 percent for pickup trucks.

The wage demand, pushed by U.S. Trade Representative Robert Lighthizer during intensive talks in Washington last week on modernizing the North American Free Tree Agreement, are aimed at preserving U.S. and Canadian auto production and putting upward pressure on Mexico’s low auto wages.

The Center for Automotive Research has estimated that Mexican auto assembly workers average under $6 an hour, with workers in parts plants averaging less than $3 an hour.

The U.S. proposal calls for overall regional value content to rise to 75 percent from the current 62.5 percent, but significantly lower than USTR’s initial 85 percent demand.

Automakers would get a four-year phase-in rate for light passenger vehicles, but only two years for pickup trucks, which are a key high-value product segment that USTR views as important for U.S. production.

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