International Trade and Global Business

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Foolish Fiddling with FTA's

October 13, 2017 4:01 PM

The Presidential administration’s desire to renegotiate the NAFTA’s substantial transformation provision covering auto parts is unlikely to achieve the goal of generating or preserving U.S. jobs.  Why? Because the culprit is not the amount of non-NAFTA content in traded auto parts, but robots and supply chain efficiencies that make cars cheaper to produce with fewer human workers. 

Even if Secretary Wilbur Ross succeeded in requiring more parts to be made in the U.S., which he recently announced a desire to do: one or more of these outcomes would likely happen:  an increase in jobs for robots, not humans; the entire auto part would be imported from Asia because they’re still cheaper even with the added duty; more expensive new cars for consumers; future foreign car makers will open factories elsewhere.
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