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Ending NAFTA could cost U.S. up to 50,000 auto parts jobs -study

By David Lawder

WASHINGTON, Oct 12 (Reuters) - The U.S. auto parts industry
could lose up to 50,000 jobs if the North American Free Trade
Agreement is terminated and companies must pay higher tariffs to
ship products to Mexico and Canada, according to a new study set
for release on Thursday.

U.S., Canadian and Mexican negotiators are meeting in
Arlington, Virginia, this week for a fourth round to try to
revise the 23-year-old agreement, which allows the tariff-free
flow of vehicles and parts across the three borders.

U.S. President Donald Trump has criticized NAFTA for luring
U.S. manufacturing jobs to low-wage Mexico and has vowed to quit
the pact or revise it to reduce his country's $64 billion trade
deficit with its southern neighbor.

Ending NAFTA, however, would result in a full reversion to
tariffs under World Trade Organization rules, according to the
Boston Consulting Group study sponsored by the Motor Equipment
Manufacturers Association. The U.S. auto parts industry employs
about 870,000 workers.

Mexico and Canada would fare better because they previously
charged higher tariffs than the United States and would revert
to those levels. And with no trade incentive to manufacture in
the United States other than to avoid the 25 percent truck
tariff, more full vehicle production would migrate to low-cost
countries such as China, auto experts say.

Job losses could be as much as 24,000 if renegotiations lead
to requirements for content from North American and specifically
the United States, according to the study.

NAFTA negotiators face tough new U.S. demands to increase
regional content for autos to 85 percent from 62.5 percent, with
50 percent from the United States, according to people briefed
on the plan.

The rules of origin demands are among several conditions
that the U.S. Chamber of Commerce has labeled "poison pill
proposals" that threaten to torpedo the talks.

The auto parts study was conducted before these targets were
revealed.

Raising the automotive content thresholds and forcing
automakers to verify the North American origin of more
electronics and other parts now sourced from Asia would cause
some parts manufacturers to forego NAFTA benefits, said Ann
Wilson, the association's head of government affairs.

Instead, companies may ship in more products from low-cost
countries outside the region, paying U.S. tariffs ranging from
2.5 to 5.0 percent.

"Instead of encouraging more U.S. content, these provisions
will lead to less U.S. content," Wilson said.
(Reporting by David Lawder; Editing by Lisa Von Ahn)

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