Mexican and Canadian companies have dramatically reduced the number of American-made components they include in the products they then ship into the U.S., according to a new study released Friday that the Trump administration says is the latest evidence that NAFTA has been a bad deal.
Free-trade advocates have long argued that just looking at Mexican imports is a distorted way of evaluating the North American Free Trade Agreement, saying that a large percentage of a car imported from Mexico, for example, is made up of American components.
The data, though, show that the amount of U.S. parts in imports from Canada dropped by nearly a quarter over the last two decades, while the U.S. parts in Mexican imports were cut by more than a third. The analysis is from the Organization of Economic Cooperation and Development (OECD), a club of major economies.
“The declining share of American parts and components in imports from Mexico and Canada is all the more reason for us to take a fresh look at NAFTA,” said Commerce Secretary Wilbur Ross. “The assumption was that American manufacturers of intermediate goods were big beneficiaries from trade with NAFTA, but with their share declining, American companies are not benefiting nearly as much as once believed.”
He said it was even more alarming that the analysis only covered through the year 2011, the latest year that data was available.
“The trend of Mexico and Canada using more non-U.S.-made parts and components may mean even more bad news for American producers,” Mr. Ross said.
President Trump campaign on pulling the U.S. out of NAFTA to save America’s rapidly declining manufacturing sector. He agreed to attempt a renegotiation after taking office but has said he is ready to quit the trade deal if it can’t be rewritten to his satisfaction.
Critics of nixing NAFTA say the U.S. has as much to lose as gain, especially in border states and economic sectors such as agriculture that have thrived under the deal.
The new OECD analysis showed the share of U.S.-produced content incorporated in manufactured goods imported by the United States from Mexico fell from 26 percent in 1995 to 16 percent in 2011, a decline of about 38 percent.
During that time, the share of Chinese content in Mexican products imported by the United States increased from 0.3 percent to 6 percent, and the share of content from all non-NAFTA sources increased from 14 percent to 27 percent.
The numbers were similar for Canada.
The share of U.S. parts and components in imports from Canada fell from 21 percent to 15 percent between 1995 and 2011, while the share of Chinese content increased from 0.3 percent to 3 percent and the share of content from all non-NAFTA sources increased from 12 percent to 21 percent, according to the data.
• S.A. Miller can be reached at smiller@washingtontimes.com.
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