New NAFTA auto rules would work as a multibillion-dollar tax, adding tons to the cost of a car

New NAFTA auto rules would work as a multibillion-dollar tax, adding tons to the cost of a car

- in Economic

A new study predicts this proposals, if passed, could ultimately hurt car product sales

WASHINGTON — New NAFTA rules could raise the cost of a car by plenty of dollars, act as any multibillion-dollar tax, and ultimately hurt revenue as consumers keep his or her wallets shut, a new study forecasts.

The study by the Center with regard to Automotive Research attempts to predict the impact of proposals into consideration as the three North American places huddle in a marathon negotiating time in Washington to try obtaining a deal.

Negotiators are refining an offer that would insist that every auto include more North American sections; use primarily North American stainlesss steel; and favour production inside high-wage jurisdictions, meaning the You.S. and Canada.

The examine calculates that at least Forty six vehicle types currently produced on the continent would are not able to meet these new requirements, a dramatic increase in the number of items that fail to comply with existing NAFTA regulations.

The companies making these automobiles always have a choice: comply with a NAFTA rules, or pay the contract price, which is 2.5 % for a light vehicle in america, 6.1 per cent with Canada.

The study offers a large estimate, with a range of effects. It finds that Twenty-five to 87 per cent of vehicles currently sold in this U.S. would don’t meet the standard and could wind up paying a contract price.

“Tariffs (would) add at least a US$2.1-billion to US$3.8-billion tax regarding U.S. consumers,” explained the study, released Thursday.

“This tariffs would add between US$470 and US$2,200 to the expense of these particular vehicles … (and) the actual result would be an estimated loss of 59,000 to 150,000 annual U.S. lightweight vehicle sales.”

Ford Aim compact cars are offered on sale at a dealership in Dallas.

Scott Olson/Getty Images files

The group behind the study is funded by the auto industry, governments, unions and other organizations. The study was requested by Trade Leadership Coalition, an industry-funded group.

But its findings are consistent with the view of Jeff Rubin, a good senior fellow at Canada’azines Centre for International Government Innovation and a former leading economist at CIBC World Markets.

He states that under the current NAFTA many types win: consumers with much less expensive cars, car companies utilizing higher profits, and Asian auto workers with greater salaries than Mexicans throughout other sectors.

The losers underneath the current NAFTA, he says, are vehicle workers in the U.Ohydrates. and Canada, where employment has dropped, and, Rubin states that, the auto sector faces some sort of long-term terminal decline.

He’s undecided the new NAFTA rules will change this.

He said it’s a no-brainer for companies trying to decide whether to fine-tune practices to comply with the new rules. He figures submission with NAFTA might add all 5 per cent to the cost of a car or truck, versus the tariff of 2.5 per cent for light cars sold in the U.S.

“If I was a shareholder on (auto-parts-maker) Magna, or GM, I know some tips i would be telling management to complete — which is, instead of tripling wage expenses (in Mexico), pay the contract price,” Rubin said.

“Ultimately GM and also Magna are going to do what’s in the interest of their shareholders. And now the best interest would be keep the production in Mexico, spend the money for low wage rate, and pay the 2.5 per-cent tariff.”

As long as the tariff remains low, Rubin added how the new NAFTA will be “a paper tiger.”

However, it would be “a totally diverse ball game,” if the countries boost their tariff, he says, disagreeing that it would make paying the higher cost of compliance the better alternative and steer production back in the U.S. along with Canada.

“It would be a total game-changer.”

But within the current proposal, with no switch the signal from the tariff level, Rubin sees the new NAFTA as producing a Couple of.5 per cent added taxes on cars and no betterment in the lives of Canada and American workers — a state of affairs that “isn’t going to deliver a single job back to the particular U.S.”

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