Opinion: New trade agreement puts auto industry first
Today, I’m going to Dearborn to visit the Ford Rouge complex, which has built cars, trucks and tractors nonstop for more than one hundred years. Ford Rouge has produced some of the most iconic American brands in history, from the Model A to the Mustang to the F-150. Even now, its 7,500 employees are developing the next generation of American cars using robotics, 3D printing and virtual reality.
From the earliest days of our administration, President Donald J. Trump has pledged to pursue “a new future of American automotive leadership,” and Ford Rouge is one of the more than 200 Big Three facilities in America that are building that future. But to secure American leadership in the auto industry well into the 21st century, we need to make sure American autoworkers compete on a level playing field. That begins by forging free, fair and reciprocal trade deals that put American workers and American jobs first — and we can start by passing the United States–Mexico–Canada Agreement into law.
Last year, the president negotiated the USMCA with two of our biggest trading partners because, as he’s said time and again, the North American Free Trade Agreement (NAFTA) is extremely out of date. It was negotiated more than a quarter of a century ago — before the age of the internet — and now several of its provisions function as a loophole that works against American interests.
For instance, under NAFTA, a car assembled in Canada or Mexico can enter the United States duty free, so long as at least 62.5 percent of its parts are built in North America. This provision did not do much to help U.S. auto production, and has since become a threat to maintaining American leadership in the auto sector. The original NAFTA listed specific parts that must be built on this continent to meet the 62.5 percent threshold, but any parts not on that list were assumed to have been built in North America.
As technology has advanced and the components of our modern cars and trucks have changed, this antiquated model has failed to keep up. Many of the auto parts that today we take for granted — like advanced batteries or computerized navigation systems — are deemed to be made in North America, when in reality they may be anything but. And because these auto parts add so much value to the car or truck, they go a long way toward helping companies meet the NAFTA’s 62.5 percent threshold. An advanced battery alone can be worth more than 30 percent of a vehicle’s value.
In other words, companies can buy a significant share of auto parts from China or Europe, assemble them into a vehicle in Mexico, and sell them into the United States duty free.
This loophole threatens to undercut American workers, their wages and the auto industry that built our middle class. And that’s why under the president's leadership, we’re going to stop it.
Under the USMCA, we will eliminate the ability to deem auto parts as North American and require at least 75 percent of a car to be built with parts genuinely made on this continent for it to be sold duty free in the United States. We also will require at least 70 percent of a vehicle producer’s purchases of steel and aluminum to originate in North America, and for the first time in our history, we will require at least 40 percent of a duty-free car to be made by workers earning at least an average of $16 an hour.
These “rules of origin” requirements will significantly increase demand for American auto parts. According to a study by the Office of the United States Trade Representative, if the USMCA goes into effect, over a five-year period automakers will invest $34 billion more in our country, U.S. auto suppliers will sell $23 billion more each year in auto parts, and the agreement will support 76,000 new jobs in the U.S. auto sector.
The USMCA will put in place the strongest labor protections for American workers in our history. The agreement’s labor chapter prohibits trade in goods produced by forced labor, requires Mexico to overhaul its system of labor justice and allow its workers to engage in collective bargaining, and includes strong provisions to address any violence against workers who exercise their rights. No longer will we allow our competitors to cut corners and undermine the good-paying jobs that put the American Dream within reach of millions of our citizens. From now on, we will insist on a level playing field — because on a level playing field, American workers can compete — and win.
The USMCA is a huge victory for America’s auto industry, but now that the agreement has been signed by the president, it’s got to be approved by Congress.
We’ve negotiated a deal that puts American jobs and American workers first. And now it’s time for Congress to do its job.
So I’m here today in the great state of Michigan to ask all America’s autoworkers to join us and urge your members of Congress to approve the USMCA — and approve it this year. It’s vital to ensure we continue a century of American automotive leadership, and the hardworking people of Michigan deserve nothing less.
Mike Pence is vice president of the United States of America.