The North American Free Trade Agreement’s renegotiation was one of President Donald Trump’s core campaign promises. Right now, it appears all countries involved are quite close to sealing the deal.
Automotive News reported on Monday that the U.S., Canada and Mexico are confident that an agreement may be reached this month. However, negotiations still have several large issues to resolve. One of the major contentions remains U.S. auto production. The U.S. hopes to boost domestic auto production by governing how much regional content a car must have to qualify for NAFTA’s duty-free benefits.
Another major issue surrounds Mexico. The U.S. and Canada hope to see employees making higher wages build portions of the car, which threatens Mexico’s cheap labor. Specifically, Mexico would be faced with a proposal stating 40 percent of the value of certain cars must be made by workers earning at least $16 an hour.
Mexican autoworkers often make much less than $16 an hour. If Mexico agreed, it would drastically shift NAFTA, and potentially create a more level playing field for the U.S. and Canada when it comes to union wages.
According to the report, all sides must be very close to a final deal if the U.S. is calling for a May end date. That would give the U.S. Senate and House of Representatives time to advance the agreement through congress. However, the U.S. also has a tariff trick on the table.
If all sides cannot come to an agreement, the U.S. has threatened to include Canada and Mexico in its steel and aluminum tariffs. The taxes will go into effect on June 1.