After almost a year of negotiations, negotiators say this time they might actually reach an agreement. After bilateral talks, Mexico and the US begin to clear the path for a successful renewal of NAFTA. Although key issues still need to be resolved with Canada, parties agree that a treaty could be finalized by the end of August.
This, however, does not lift all the weight from Mexico. Potential tariffs and ongoing domestic contraction remain key hurdles for the country to keep growing its automotive industry.
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Mexico and the US Start Seeing Eye to Eye
Mexico and the US are said to be close to an agreement regarding automotive rules of origin and the sunset clause for the new NAFTA. There is willingness to finalize the treaty in August, says Juan Pablo Castañón, President of the Corporate Coordination Council.
Minister of Economy Ildefonso Guajardo traveled again to the US to continue NAFTA talks. Negotiators say 19 of the 30 chapters in the treaty could be close to completion.
This is the first negotiation since the beginning of the revision of the agreement on Aug. 16, 2017 where Canada is not present. Still, the agreement is expected to remain trilateral and negotiations with Canada are expected to resume this week.
Mexico opens position toward regional content based on salaries in software and highly sophisticated components to avoid a general standardization of salaries in North America, says Guajardo. Still, this could lead to job losses due to automation efforts according to Castañón.
Mexico’s Position Compromised
Countries affected by proposed US tariffs on vehicle imports organized a meeting in Geneva, Switzerland to come up with countermeasures.
Meanwhile, due to changes in OEMs’ global strategies, Mexico moves away from its goal to produce over 5 million light-vehicle units by 2020. The expectation now is barely above 4 million, says Guido Vildozo, Senior Manager, Americas Light Vehicle Sales Forecasting of IHS Markit.
Kia already implemented a strategy to lessen its dependence on the US market regarding Mexican production. According to Horacio Chávez, the company’s Managing Director in Mexico, the brand only exports 57 percent of its production in Pesqueria to the US, down from 85 percent at its peak.
Domestic sales remain on the low side. As of June 2018, there have been 14 months of sustained decreases in light-vehicle sales results.
The Baja California government, backed up by Sonora, Chihuahua, Tamaulipas and Nuevo Leon, asks Andrés Manuel López Obrador’s administration to make used-vehicle import regulation a priority.