The Agreement between Mexico, the United States and Canada (USMCA), which replaced the North American Free Trade Agreement (NAFTA) as of July 1, 2020, established new guidelines for the Regional Value Content (VCR) of vehicles manufactured in North America. In order to strengthen production in the sector, vehicle manufacturers had a period of three years to gradually increase the VCR of their units.
In the first year of implementation of the T-MEC, the VCR necessary to avoid tariff sanctions was 66%. Subsequently, in 2021, it rose to 69%, in 2022 it reached 72%, and for this 2023 it has increased to 75%. These new guidelines seek to encourage regional production and the use of components made in North America.
The controversy over the VCR methodology
Earlier this year, it was announced that Mexico and Canada had won a favorable ruling in a trade dispute with the United States. The dispute was resolved through a Dispute Resolution Panel under the USMCA, and the countries argued that the interpretation of the Rules of Origin to obtain the VCR, established by the United States, was incorrect and harmed some vehicle manufacturers. by imposing tariffs. The ruling was in favor of Mexico and Canada, which means that the interpretation of the rules must be corrected so as not to put the automakers at a disadvantage.
The Mexican Association of the Automotive Industry (AMIA) expressed its concern because an official position has not yet been obtained from the United States Government regarding the ruling issued in favor of Mexico and Canada by a USMCA Dispute Settlement Panel .
Despite this, Mexico has consolidated its position as the main supplier of auto parts for the United States, thanks to the T-MEC. In 2007, the Latin country represented 29.8% of the total imports of auto parts from the United States. For the first two months of this year, this figure has increased significantly, reaching 42.0% of total imports of auto parts in the United States.
This increase is largely due to Mexico’s geographic proximity and experience in the production of auto parts, which allows vehicle manufacturers in the United States to obtain high-quality components at competitive prices.
During the same periods, Canada maintained its participation in the auto parts market in the United States, with a share of 20.4% of total imports in 2007, a figure that for the current year decreased to 10.9%. On the other hand, China has seen a reduction in its participation in the US auto parts market, with percentages that went from 10.2% in 2007 to 7.9% in the first two months of this year.
Autoparts with higher production increases
The value of auto parts production in January and February of this year amounted to 18,651 million dollars, which represented an increase of 13.7% compared to the same period of the previous year and 17.4% compared to before the pandemic.
The components that have had the best performance in production so far are electrical parts with an increase of 23.1%, followed by engine parts with 9.2% and transmissions, clutches and their parts with 6.0%, according to data from the National Institute of Statistic and Geography.
Hoping for an increase in production, the National Auto Parts Industry (INA) forecasts that the workforce around this industry will reach 903,000 jobs by the end of the year, which would represent an annual growth of 2.9%.