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  • Impacts of Potential U.S. Trade & Tax Policy Changes

    on Automotive Trade Within The Great Lakes Region

    Kristin Dziczek Research Director

    APRC Conference Toronto 17 March 2017

  • Today:

    • Trump & trade

    • NAFTA overview

    • Will auto jobs come back to the United States?

    • Other U.S. tax & trade policy proposals

    • Ontario-Michigan cooperation

  • TRUMP & TRADE

  • Trump & Trade

    ★ FIRST, I will announce my intention to renegotiate NAFTA or withdraw from the deal under Article 2205. ★ SECOND, I will announce our withdrawal from the Trans-Pacific Partnership. ★ THIRD, I will direct the Secretary of the Treasury to label China a currency manipulator. ★ FOURTH, I will direct the Secretary of Commerce and U.S. Trade Representative to identify all foreign trading abuses that unfairly impact American workers and direct them to use every tool under American and international law to end those abuses immediately.

  • NAFTA OVERVIEW

  • Brief NAFTA Automotive Trade Facts

     Top global vehicle producers:

    o U.S. ranks 2nd

    o Mexico ranks 7th

    o Canada ranks 10th

     NAFTA is a desirable global export base for automotive and parts:

    o U.S. has free trade agreements (FTAs) (20 countries)

    o Mexico has 17 FTAs with individual countries plus the EU (44 countries)

    o Canada has 12 FTAs with individual countries plus the EU (40 countries)

     40% of U.S. light vehicles exported in 2015 were shipped to NAFTA partners

     50% of U.S. light vehicles imported were shipped from NAFTA partners

     75% of the value of U.S. automotive parts exports were shipped to NAFTA partners in 2015

    (split roughly evenly between Canada and Mexico)

     51% of the value of U.S. automotive parts imports came from NAFTA partners in 2015

    (U.S. parts imports from Mexico represented three-quarters of these imports.)

    Sources: (U.S. INTERNATIONAL TRADE ADMINISTRATION, 2016); (WORLD INPUT-OUTPUT DATABASE, 2016) (WILSON C. E., 2011)

  • Share of Each Country’s Production That is Sold in the

    Same Country, 2015

    Source: IHS|Markit

  • U.S. Automotive Trade with Canada, 2011-2015 Imports and Exports for 3361 and 3363

    20152014201320122011

    California

    20152014201320122011

    Ohio

    20152014201320122011

    Indiana

    20152014201320122011

    Kentucky

    Source: U.S. International Trade Administration

    -

    10,000,000,000

    20,000,000,000

    30,000,000,000

    40,000,000,000

    50,000,000,000

    2015 2014 2013 2012 2011

    Michigan

  • U.S. Automotive Trade with Mexico, 2015-2011 Imports and Exports for 3361 and 3363

    -

    10,000,000,000

    20,000,000,000

    30,000,000,000

    40,000,000,000

    50,000,000,000

    2011 2012 2013 2014 2015

    Michigan

    2011 2012 2013 2014 2015

    Texas

    2011 2012 2013 2014 2015

    California

    2011 2012 2013 2014 2015

    Ohio

    2011 2012 2013 2014 2015

    Tennessee

    Source: U.S. International Trade Administration

  • North American light vehicle production didn’t change much

    with introduction of NAFTA

    -

    2,000,000

    4,000,000

    6,000,000

    8,000,000

    10,000,000

    12,000,000

    14,000,000

    1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

    U.S., Canada, and Mexico Light Vehicle Production: 1980-2016

    U.S. Production Canada Production Mexico Production

    Source: Ward’s Automotive

    NAFTA

    -

    500,000

    1,000,000

    1,500,000

    2,000,000

    2,500,000

    3,000,000

    3,500,000

    4,000,000

    1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

    Canada and Mexico Light Vehicle Production: 1980-2016

    Canada Production Mexico Production

    …but 2009 did change things

  • Mexican Automotive Wages are One-Eighth to One-Fifth the

    Wages Paid to U.S. Hourly Auto & Parts Workers

    5.64

    2.47

    $0

    $5

    $10

    $15

    $20

    $25

    $30

    $35

    $40

    2 0

    0 7

    2 0

    0 8

    2 0

    0 9

    2 0

    1 0

    2 0

    1 1

    2 0

    1 2

    2 0

    1 3

    Motor Vehicles

    Parts

    27.83

    19.91

    $0

    $5

    $10

    $15

    $20

    $25

    $30

    $35

    $40

    2 0

    0 7

    2 0

    0 8

    2 0

    0 9

    2 0

    1 0

    2 0

    1 1

    2 0

    1 2

    2 0

    1 3

    2 0

    1 4

    U .S

    . D

    o ll a rs

    /H o

    u r

    Motor Vehicles

    Parts

    Average Hourly Wages for Production and Non-Supervisory Workers in Motor Vehicle and Parts in Current USD, 2007-2013/2014

    Sources: U.S. Department of Labor, Bureau of Labor Statistics;

    Mexico National Institute of Statistics and Geography (INEGI: Instituto Nacional de Estadística y Geografía); CANSIM

    35.37

    22.31

    $0

    $5

    $10

    $15

    $20

    $25

    $30

    $35

    $40

    2 0

    0 7

    2 0

    0 8

    2 0

    0 9

    2 0

    1 0

    2 0

    1 1

    2 0

    1 2

    2 0

    1 3

    Motor Vehicles

    Parts

  • Mexico is a Global Export Base for Autos and Parts

    13 FTAs, 44 Countries North American Free Trade

    Agreement (NAFTA)

    Colombia - Mexico

    Costa Rica - Mexico

    European Union - Mexico

    Nicaragua - Mexico

    Chile - Mexico

    EFTA - Mexico

    Israel - Mexico

    Northern Triangle - Mexico

    Uruguay - Mexico

    Japan - Mexico

    Peru - Mexico

    Central America – Mexico

    Note: Canada has FTAs with 40 countries; U.S. with 20 countries

  • Growth of Non-NAFTA Exports from Canada, Mexico & the

    United States: 2005-2023

    0.0%

    5.0%

    10.0%

    15.0%

    20.0%

    25.0%

    0

    500,000

    1,000,000

    1,500,000

    2,000,000

    2,500,000

    3,000,000

    3,500,000

    4,000,000

    4,500,000

    2 0

    0 5

    2 0

    0 6

    2 0

    0 7

    2 0

    0 8

    2 0

    0 9

    2 0

    1 0

    2 0

    1 1

    2 0

    1 2

    2 0

    1 3

    2 0

    1 4

    2 0

    1 5

    2 0

    1 6

    2 0

    1 7

    2 0

    1 8

    2 0

    1 9

    2 0

    2 0

    2 0

    2 1

    2 0

    2 2

    2 0

    2 3

    SH A

    R E

    O F

    N A

    FT A

    L IG

    H T

    V EH

    IC LE

    P R

    O D

    U C

    TI O

    N E

    X P

    O R

    TE D

    B EY

    O N

    D

    N A

    FT A

    N U

    M B

    ER O

    F LI

    G H

    TV EH

    IC LE

    S

    From Mexico From United States From Canada Share of NAFTA Production Exported Beyond NAFTA

    Source: IHS Markit and Center for Automotive Research

  • Canada, Mexico & U.S. Light Vehicle Capacity Forecast,

    2015-2023

    0

    2,000,000

    4,000,000

    6,000,000

    8,000,000

    10,000,000

    0

    2,000,000

    4,000,000

    6,000,000

    8,000,000

    10,000,000

    12,000,000

    14,000,000

    16,000,000

    2015 2016 2017 2018 2019 2020 2021 2022 2023

    U N

    IT S

    O F

    C A

    N A

    D IA

    N &

    M EX

    IC A

    N L

    IG H

    T V

    EH IC

    LE C

    A P

    A C

    IT Y

    U N

    IT S

    O F

    U .S

    . L IG

    H T

    V EH

    C IL

    E C

    A P

    A C

    IT Y

    United States Canada Mexico

    Source: LMC Automotive

    Utilization 95%

    94%

    98%

    Utilization 83%

    83%

    82%

  • Every Global Auto Production Region Has a Low-Cost

    Source of Materials, Parts & Components Share of Global Automotive Parts Exports (Total: $363B in 2014)

    Source: BACI International Trade Database; Visualization from MIT Economic Complexity Observatory

  • Automaker Investment Announcements 2009-2016

    Source: CAR “Book of Deals”

    Total North American Investment Announcements

    $116.5 billion

    Canada $6.7 billion (6%)

    U.S. $85.0 billion (73%)

    Michigan $30.3 billion (26% of North America)

    Mexico $24.7 billion (21%)

  • U.S. motor vehicle employment

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