Representatives from Mexico, the US, and Canada met in Mexico City on Tuesday to sign the amendments to the US-Mexico-Canada Agreement (USMCA) that is likely to increase Mexico’s steel production. This new deal replaces the 25-year-old North American Free Trade Agreement (Nafta).
The amended agreement will allow the steel industry to integrate its production chain to increase the local steel content over a period of seven years and over 10 years for aluminum, Mexican senator Ricardo Monreal said during the meeting without disclosing further details.
Rules about the origin of content such as steel and aluminum for the automotive sector was one of the key topics of negotiation. The Mexican authorities did not disclose all details of the new agreement but said that the Mexican senate will approve the new agreement before December 15.
Authorities had agreed that 75pc of auto parts must be manufactured in Mexico, the US, or Canada in the last round of negotiations, a step up from the original Nafta agreement that required 62.5pc. The new agreement also indicated that between 40-45pc of the cars must be produced by workers being paid at least $16 per hour. The last deal had set up that automakers must purchase 70pc of the steel and aluminum they use to manufacture vehicles from the US, Mexican, or Canadian producers.
Mexico’s steel production fell by 3.6pc in October to 1.5mn mt. Automotive production in the country also fell by 16.3pc in October to 311,150 cars despite Mexico being one of the largest car producers and exporters in the world, according to figures from Mexico”s Automotive Industry Association.
In the first 10 months of this year, car production in Mexico fell by 2.5pc to 3.2mn cars, which represents a lower steel consumption to produce the units.
The national steel association (Canacero) welcomed the agreement and said that as an industry they are ready to work with the value chain in the development of competitive regional supply. The Business Coordinating Council, a private sector association in Mexico, also welcomed the new agreement and said that they will review the new text and evaluate in detail its implications for the country’s productive sector.
However, there is contradictory information regarding the new agreement, a source with one of the biggest Mexican steelmakers told Davis Index, adding that they will disclose the steelmaker’s position once the agreement is signed and all parties know the terms.
The meeting at the National Palace was attended by Mexico President Andrés Manuel López Obrador, the U.S. Trade Representative Robert Lighthizer, the U.S. White House adviser Jared Kushner, and Canadian Deputy Prime Minister, Chrystia Freeland.