Boy howdy, this article by The Associated Press is very telling.
First, it’s worth remembering that in the fine print of the USMCA deal, Mexico and Canada must comply with North American parts origination for anything they want to manufacture for sale into the United States. Meaning, all trade manufacturers must either create their component parts domestically, or purchase them from the U.S, Mexico and Canada. It’s the core point of the USMCA trade agreement.
Secondly, in an aspect exclusive to the U.S. part of the deal that President Trump and USTR Lighthizer insisted upon, if either Canada or Mexico are deemed to be non-compliant with the agreement, the USA can cancel/override any trade agreement Mexico or Canada have with another nation. It’s a heavy accountability hammer securing the gate into the massive USA market.
In an AP report today, Mexico is scrambling to find local or North American sources of parts and components, because President Trump is set to come into office and look at USMCA compliance. Apparently, Mexico has been using excessive amounts of Chinese component parts for goods being sent into the USA and Canada. Now they are quickly trying to source alternatives.
MEXICO CITY (AP) — Mexico has been taking a bashing lately for allegedly serving as a conduit for Chinese parts and products into North America, and officials here are afraid a re-elected Donald Trump or politically struggling Canadian Prime Minister Justin Trudeau could try to leave their country out of the U.S.-Mexico-Canada free trade agreement.
Mexico’s ruling Morena party is so afraid of losing the trade deal that President Claudia Sheinbaum said Friday the government has gone on a campaign to get companies to replace Chinese parts with locally made ones.
“We have a plan with the aim of substituting these imports that come from China, and producing the majority of them in Mexico, either with Mexican companies or primarily North American companies,” Sheinbaum said.
While Sheinbaum claimed Mexico had been working on that effort since the 2021 global supply chain crisis — when factories around the world were stalled by a lack of parts and particularly computer chips from Asia — it appears to be an uphill battle. Even the United States has faced big challenges in moving chip production back home despite billions in subsidies and incentives.
Mexico gained tens of thousands of jobs when U.S. and foreign automakers moved their plants to Mexico under the free trade pact to take advantage of much lower wages. But the idea that Chinese parts — or even whole cars — could be piggybacking on that arrangement to further hollow out the U.S. auto industry has enraged some people north of the border.
So Mexico is scrambling with private companies to get them to move parts production here.
“Next year, God willing, we are going to start making microchips in Mexico,” Mexican Economy Secretary Marcelo Ebrard said on Thursday. “Of course they’re not yet the most advanced chips, but we are going to start producing them here.” (read more)
It’s amazing how the results of a USA election can almost instantly change the behavior of multinational corporations and the governments’ they bribe.
However, it does lend a person to wonder why the Mexicans and Canadians didn’t have to worry about rule enforcement when Joe Biden was in office?
