Dr. Francisco Navarrete-Báez francisco.navarrete@univa.mx
Subject: 1) USA, Canadian & Mexican Automotive Industry from NAFTA Signature to Date 2) NAFTA Renegotiation 2018 3) Sceneries analysis
NAFTA/TLCAN/ALENA: Began January the 1 st. 1994
Why these three countries signed a Free Trade Agreement?
Japanese Threat (manufacturing) Working Structure (Toyota Model) R&D Union strength High Wages cost Manpower Unskilled Asian giant's wake Intensive Manufacturing System of Government
USA: Average Annual Growth (%) 25 20 15 10 5 0 1973-1982 1982-2000 2000-2005 High Tech Tec PC and Elect Devices Primary Metal Textile -5-10 -15 Source: Bureau of Economic Analysis. 2009
USA: Market Share Car Brands (%). 1951-1994 60 50 40 30 20 Ford GM CHRYSLER HONDA TOYOTA NISSAN 10 0 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 Source: Auto Wards & OICA 2010
USA: Cars and Trucks Production 1951-1994 16000000 14000000 12000000 10000000 8000000 6000000 Trucks Cars total 4000000 2000000 0 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 Source: Auto Wards & OICA 2010
National deficit Budget Manufacturing Taxation High Wage Cost Union strength Legal and Ecological Problems of the Industry Technology Transfer
Money Exchange ( Peso s Devaluation) External Public Debt increased Trade Protectionism (Imported Substitution)
Mexico: Public External Debt as GDP % 80 70 68.9 73.4 60 50 40 40.5 37.4 34.4 42.3 30 20 12.2 15.9 10 0 1980 1981 1982 1983 1984 1985 1986 1987 Source: NAFINSA (!1988)
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1992 1993 1994 Mexico: Cars Production 1979-1994 (Thousands) 1600 1400 1200 1000 800 600 Production Domestic Sales Export 400 200 0 Source: AMIA, AMDA & INEGI
100000 90000 80000 70000 60000 73266 69223 70520 64496 66482 58374 58994 60663 61792 56305 77704 80108 89734 90780 87595 84141 94977 96050 50000 40000 30000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Fuente: OICA. 2017
3.0% 2.5% 2.3% 3.8% 4.5% 4.7% 6.4% 29.7% China USA Japan Germany India South Korea Mexico Spain Canada Brazil 9.7% 12.9% Fuente: OICA 2017
Index Cost: Auto Parts International Manufacturing (2011) (USA=100.0) China 77.9 Japan Germany USA Australia UK Italia France Holland Canada 107.1 100.7 100.0 99.9 99.4 98.8 97.7 97.4 97.1 Mexico 88.8 Source: KPMG. 2011
Source: PROMEXICO 2016
millions of dollars Source: Asociación de Manufactureros de Partes Automotrices de Canadá (APMA) 2017
Planta Hermosillo Planta Chihuahu a Planta Ramos Arizpe Planta Ramos Arizpe Source: PROMEXICO 2017 Planta Tijuana Planta Saltillo Planta Saltillo Planta SLP Planta Guanajuato 2013 Planta San José de Chiapa Planta Aguascalientes Planta Puebla Planta Aguascalientes 2013 Planta El Salto Planta Salamanca 2013 Planta Morelos Planta Celaya 2014 Planta Silao Planta Toluca Planta Toluca Planta Cuautitlá n
Source: PROMEXICO 2017
Source: PROMEXICO 2017
Major Components Transmissions Injectors Sensors Fuel Motors Safety Systems Dashboard Low Development Process extrusion Die Casting High Strength Steel Steel casting External Plastic Chroming Body Parts Lower Parts: Tier 1 Pistons Carter Hoses Lowe Parts: Tier 2 Plastic Injection Stamping Machining
3300 3000 2700 2400 2100 3058 2256 2172 2961 2629 2711 2687 2532 2552 2572 2578 2082 2463 2068 2134 2379 2394 2283 2370 1800 1500 1490 1200 900 600 300 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: AMIA 2017
3600 3365 3565 3597 3773 3200 3001 3052 2800 2680 2400 2000 1600 2342 2045 2095 2167 1935 1841 1804 1684 1549 1575 1561 1452 1577 1359 1200 800 400 0 Source: AMIA 2018
14000 12000 13024 12130 12799 12279 12006 11424 12114 11946 11989 11263 10780 10328 11661 12100 12198 11045 10000 8693 8653 8000 7762 6000 5731 4000 2000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: AMIA 2017
26000 21000 16000 11000 6000 1000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mexico Canada USA China NAFTA Source: Own development based on OICA. 2017
World Wide Automobile Volume Production Placed Comparison: 2000-2016 COUNTRY 2000 PLACED 2016 PLACED USA 1 ST. 2 nd. JAPAN 3 RD. 3 rd. CANADA 5 TH. 11 TH. CHINA 8 TH. 1 ST. MEXICO 9 TH. 7 TH. BRASIL 12 TH. 10 TH. INDIA 14 TH. 5 TH. Source: AMIA 2017
20 % 19.1 % 7.5 % USA Canada México 1 Source: KPMG 2013
30,000 28,118 25,000 20,000 15,000 10,000 12,198 9,204 2016 2004 5,000 6,062 2,082 4,228 2,885 3,597 2,370 2,157 1,816 4,488 0 Source: AMIA & OICA 2017
2200 1700 1200 700 200 2010 2011 2012 2013 2014 2015 2016 2017-300 Canada USA Mexico NAFTA Source: USA Bureau, Statistics Canada & INEGI 2017
Country Import Export Mexico 57,400 3,683 Canada 44,634 27,878 Japan 40,388 550 Germany 20,634 5,752 S. Korea 15,732 1,531 UK 8,594 1,624 Italy 4,778 163 Sweden 2,026 132 Slovakia 1,996 2 China 1,610 10,071 US Department of Commerce, 2017
Source: REFORMA/CNN/BLOOMBERG 2017-2018
70.0% 64.5% 60.0% 53.1% 50.0% 39.5% 40.0% 30.0% 27.0% 2000 2012 20.0% 10.0% 8.4% 7.5% 0.0% Mexico USA Canada Country 2010-2012 Mexico 132K USA 108K Canada 2K Generation of new jobs Source: ILO & INEGI 2013
About 14 million U.S. jobs depend on trade with Canada and Mexico Business: usd$1.2 trillion a year Under the current NAFTA, 62.5% of the parts in a car sold in North America must come from the region. And with 50% required from the United States It doesn't matter if the parts come from Canada, Mexico or the United States. They just need to be sourced from within the continent Trump's trade team wants to raise that threshold up to 85% The caveat: Trump's negotiators are proposing that half of auto parts sourced from North America come specifically from the United States. The rest would go to Mexico and Canada. Sunset Clause: Mexico s answer: that a U.S.-specific rule would be unacceptable. Canada s answer: "extreme proposals" that "we simply cannot agree to. Canada s proposal: including the Software Development as part of the 85%. Source: REFORMA/CNN/BLOOMBERG 2017-2018
What if.. About 14 million American jobs depend on trade with Mexico and Canada Killing NAFTA would cost 300,000 American jobs Killing NAFTA would cost 500,000 Mexican jobs Killing NAFTA would cost 100,000 Canadian jobs U.S. economic growth would be slower in 2019-1.5% (today is around 2.5%) Business investment growth would also slow Mexican peso would drop 8% Canadian dollar would decline 2.5% The ending NAFTA would push more Mexicans to seek work illegally in the United States Pick Up would pay 25% taxation tariff to United States Source: REFORMA/CNN/BLOOMBERG 2017-2018
What if.. Mexico can export vehicles within 2%-3% taxation tariff Due Mexico is 40% cheaper than the United States, the plants would continue in Mexico The Mexican Wage is 12 times cheaper, therefore the plants would remain in Mexico The Mexican Manpower is considered as High Standard The US and Canada plants would be competitive too Pick Up would pay 25% taxation tariff to United States Source: REFORMA/CNN/BLOOMBERG 2017-2018
Dr. Francisco Navarrete-Báez francisco.navarrete@univa.mx