Showing posts from May, 2018

The wage factor in NAFTA negotiations - a potential deal breaker

NAFTA renegotiations have run into rough weather over the twist given by USA by trying to introduce a wage factor into the negotiations over auto sector. Apart from rules of origin requirements, USA wants that at-least 30% of content by partner countries should be made by workers who earn more than the median wages for workers in the auto sector in US.  This is new and preposterous. It could be the dealbreaker. It might be better to face a non NAFTA trade barrier of 2.5% over complying with this provision. The median wages in USA for auto workers is almost 8 times that in Mexico on an average. In addition, there would be the burden of accounting and bookkeeping to comply with the provision.  These types of requirements are usually designed for dealing with developing countries who prove too hot to handle for the domestic sector in developed countries. Recall the child labour free certifications, carbon footprint requirements, wood certification for legality and so on. These