Vehicles assembled in the three NAFTA countries already contain 75-per-cent North American content, so changing the rules of origin in a new deal to higher than the existing requirement of 62.5 per cent makes little sense, the Bank of Nova Scotia says.
Auto-parts sourcing within the North American free-trade agreement has remained stable despite the emergence of Asia as a large exporter of auto components, providing one example of how the trade deal has benefited the region and should remain in place when it comes to the auto sector, Carlos Gomes, a Bank of Nova Scotia economist who specializes in the auto industry, said in a report.
"There is no need to tighten further NAFTA's rules of origin for the auto sector," Mr. Gomes wrote.
The United States announced as negotiations began on a new NAFTA deal last month that one of its key objectives is to obtain stronger rules of origin for duty-free shipment of vehicles and parts within North America and put in place a minimum amount of U.S. content for all vehicles assembled in the three countries.
So far, U.S. negotiators have not specified the changes they are seeking to the rules of origin or notified Canada and Mexico of their specific demand for U.S. content in vehicles.
Vehicles made in Mexico contain about 40-per-cent U.S. content, he said. Industry estimates show that U.S. content in Canadian assembled vehicles could exceed 55 per cent.
Mr. Gomes said Chinese auto-parts exports to North America have grown at a slower pace than that country's shipments to the European Union.
Auto-parts exports from North America have outpaced overall global auto-parts exports over the past decade, he noted.
He also pointed to the growth of electronics in vehicles in recent years, about 40 per cent of which are imported from outside North America.
"Tightening NAFTA's rules of origin on automobiles, either by raising the NAFTA-wide threshold or by introducing a U.S.-specific content requirement, wouldn't bring the production of these components back," he said.