Trump administration may include steel & aluminium in NAFTA autos rules: sources

The Trump administration seeks to include steel, aluminium and other basic materials under North American Free Trade Agreement (NAFTA) rules. The U.S. wishes to use NAFTA to boost these industries. The government wants to propose strict use of North American-made steel, aluminium, copper and plastic resins in the automotive sector.

Sources said that the U.S. rules of origin proposal would put these materials in the NAFTA auto parts tracing list for the first time. The list is a reference to verify the regional content level of vehicles and parts in order to qualify for tariff-free shipment within all three NAFTA countries.

U.S.negotiators has already submitted the proposal rules to Mexican and Canadian counterparts on Friday. Other sources added that the proposal includes raising the overall domestic value content for cars, trucks and large engines to 85% from the current 62.5% and a first-ever U.S.-specific content requirement of 50%.

However, there has been no official confirmation from the U.S. Trade Representative's office on this matter.

According to sources U.S. Commerce Secretary Wilbur Ross wants to repair all "loopholes" in the parts list that has allowed cheap auto parts from Asia and other regions to enter the United States.

The proposal is expected to boost to the steel and aluminium industries that is suffering due to cheap import.  The U.S. government has vowed to protect these industries from subsidized imports with national security reviews.

The proposed steel, aluminum, copper and plastics requirement would help vehicle and parts makers meet the higher thresholds. Auto plants in North America already largely use North American steel and aluminium, but it has not been included in the tracing list till date.

There is however an issue because Trump administration also wants the auto parts tracing list expanded to include many components in modern cars and trucks that did not exist when NAFTA was first negotiated in the early 1990s, such as sophisticated electronics that are imported from Asia.

Gains from tracing steel and aluminium would be offset by the higher overall content thresholds and the need to find other sources for electronics, said Kristin Dziczek, a trade and labor economist with the Center for Automotive Research in Ann Arbor, Michigan.

Dziczek and auto industry groups also said that the U.S. content proposal may backfire, with automakers and suppliers simply choosing to pay the 2.5% U.S. tariffs for passenger cars and opting to source more of them from China and other low wage countries in Asia.