Our country achieved a 42.5% share in the total imports conducted by the United States in the first two months of the year; the new rules of origin of the USMCA have influenced this dynamism.
Mexico increased its market share in auto parts imports to the United States in the first bimester of 2024, compared to the same period in 2018.
Its slice of this market grew to 42.5%, from 38.2% six years ago, according to data from the United States Department of Commerce.
This result was achieved as the process of changing the rules of origin in the automotive sector derived from the United States-Mexico-Canada Agreement (USMCA), which came into effect in July 2020, progresses.
The comparison point of 2018 was considered because while 2019 was the year prior to the entry into force of this new free trade agreement, it was also an atypical year due to the Covid-19 pandemic, which began in late that year.
In the first bimester of the current year, Mexican exports of auto parts to the US market totaled $13.56 billion, an increase of 41.1% compared to the first two months of 2018.
Considering the entire market, imports of automotive parts to the United States amounted to $31.895 billion from January to last February, reflecting a growth of 26.7 percent.
The USMCA established stricter North American content requirements for tariff-free automotive trade (called “rules of origin”).
Mexico and Canada questioned the US interpretation of the rules of origin: the United States advocated for a stricter approach to calculating North American content, while Mexico and Canada argued that the three parties had agreed to a more flexible interpretation to help North American producers meet content requirements.
A USMCA panel ruled in favor of Mexico and Canada’s position, and the final report was made public in January 2023. The three countries have stated that they continue to work towards a resolution.
In the first bimester of 2024, Canadian auto parts exports to the United States grew by 16.8%, to $3.346 billion; meanwhile, shipments from China to that same market were $2.576 billion, a drop of 19.2%, on a year-on-year basis.
In auto production, the USMCA increases the Regional Value Content (RVC) from 62.5% set by the North American Free Trade Agreement (NAFTA) to 75%, with a new methodology and a gradual growth up to that rate by 2023.
As part of the changes, wage requirements were established stipulating that between 40 and 45% of the car’s content be made by workers earning at least $16 per hour.
Many of the rules of origin have not been fully implemented due to the phased-in (or gradual introduction) of requirements over a period of years.
From the perspective of the United States International Trade Commission (USITC), the full effect of the rules of origin is likely not to be evident until the agreement is fully implemented in 2027 or later.
For now, trends in production, trade, employment, and investment data examined from 2018 to 2022 show few signs of changes in the competitiveness of the US automotive industry after the entry into force of the USMCA.
For the USITC, production shutdowns likely occurred due to the Covid-19 pandemic and chip shortages, which were the main factors behind the decline in US vehicle and parts production in 2020 and 2021.
Other factors affecting the industry during 2020-22 include the industry-wide transformation towards electric and hybrid vehicles, which is changing the quantity, value, and type of various car parts in a finished vehicle, with implications for rules of origin.
eleconomista.mx