Declining U.S. Content in NAFTA Imports Shows Rule of Origin Deficiencies

The share of U.S.-produced content in manufactured goods imports from Mexico and Canada has “eroded significantly” since NAFTA was implemented in the mid-1990s, according to a new Commerce Department report. Commerce Secretary Wilbur Ross said the report highlights the need to modify the NAFTA rules of origin to promote U.S. manufacturing and lower the U.S. trade deficit.

Using data from the Organization for Economic Cooperation and Development, the report states that the share of U.S.-produced content... in imports from Canada fell from 20.9 percent in 1995 (and 22.5 percent in 1998) to 14.7 percent in 2011, during which time East and Southeast Asia’s share rose from 4.8 percent to 6.4 percent (including an increase from 0.3 percent to 2.6 percent for China) and the EU’s grew from 4.6 percent to 5.6 percent.

This pattern is also seen in motor vehicles, the top U.S. import from its NAFTA partners, where the share of U.S. content fell from 18.7 percent in 1995 (and 20.2 percent in 1998) to 11.7 percent in 2011. The share of Canadian content fell from 20.3 percent to 10.1 percent but Mexico’s share increased from 7.4 percent to 13.1 percent. East and Southeast Asia’s share was up slightly from 33.8 percent to 34.1 percent but China’s share jumped from 0.6 percent to 7.3 percent and the EU’s share rose from 16.7 percent to 21.7 percent.

The report also finds that the share of total NAFTA (Canadian, Mexican, and returned U.S. value-added) content in U.S. imports of manufactured products declined from 27 percent in 1995 to 22 percent in 2011. China’s share grew from three percent to more than 15 percent but East and Southeast Asia’s share declined from 37 percent to 35 percent as a result of lower shares for Japan and, to a lesser extent, Taiwan...

This was exerpted from 27 September 2017 edition of Sandler, Travis & Rosenberg Trade Report.