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Federal Register / Vol. 86, No. 213 / Monday, November 8, 2021 / Notices export.50 Between 1990 and 2017, the percentage of automobiles manufactured in Mexico for export increased from 34
percent to 84 percent.51 Since 2010, moreover, automobile manufacturers announced more than $24 billion in investments in Mexico, including more than $6.5 billion in investments from Japanese firms, more than $5.7 billion in investments from German firms, and more than $1.1 billion from South Korean firms.52
The rise of Mexico as a major automobile producer has contributed to the gradual decline of U.S. automobile production, as the U.S.-made share of automobile production in North America, which was 78 percent in 1990, dropped to 64 percent in 2017, as
Table 3: Share of North American Automobile Production 1985 1990 1995 2000

2005

2010

2015

2017

Canada 13.95 15.55 15.87 16.99 16.65
Mexico 3.16
6.54
6.15 10.89 10.20
United States 82.89 77.91 77.98 72.13 73.15
Source: Wards Intelligence InfoBank includes foreign-owned production.

17.32
18.89
63.79

13.01
19.42
67.58

12.80
22.99
64.20

2. Offshoring of Automobile Parts With the transition away from vertical integration in the global automotive industry, automobile parts manufacturers have been under systematic pressure from automobile producers to lower prices. In response, suppliers explored different ways to cut costs and, soon after NAFTAs implementation, they began supplementing and eventually replacing significant domestic production with near shore production in Mexico.
Consequently, U.S. imports of automobile parts from Mexico increased rapidly. In 1990, U.S. imports of automobile parts from Mexico were valued at $4.5 billion, accounting for 14
percent of total U.S. automobile parts imports. By 2004 a decade into NAFTA U.S. imports of automobile parts from Mexico rose to $23.4 billion, accounting for almost 30 percent of total automobile parts imports.57 And in 2017, U.S. imports of automobile parts from Mexico reached $55.3 billion in total, accounting for 37 percent of overall U.S. imports of automobile parts.
Eleven percent of U.S. automobile parts lotter on DSK11XQN23PROD with NOTICES2

shown in Table 3.53 Some analysts expect the share of production in the United States to drop to below 60
percent by 2020 under the existing NAFTA rules.54
Although Canadas share of North American production remained relatively stable, going from 14 percent in 1985 to 13 percent in 2017,55
Canadas production volume is expected to rise in the near-term as a result of Canadas 2016 Comprehensive Economic and Trade Agreement CETA with the EU, which immediately eliminated the EUs tariffs on Canada-made automobile parts which had ranged up to 4.5 percent and phases out tariffs on automobiles over seven years.56

49 World Trade Organization, Tariff Download Facility, http tariffdata.wto.org/.
50 Department of Commerce, Census Bureau;
Wards Intelligence InfoBank.
51 Swiecki and Menk, The Growing Role of Mexico in the North American Automotive Industry, supra.
52 Id.

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imports in 2017 came from Canada, and imports from Canada and Mexico together accounted for 48 percent of total U.S. imports in 2017. Of the remaining 52 percent of U.S. automobile parts imports in 2017, 13 percent originated from the EU and 36 percent were imported from Asia, including Japan, South Korea, and China.58
According to ProMexico, an export promotion division of the Government of Mexico, close to 90 of the global 100
tier-1 parts suppliers have operations in Mexico.59 Although some of the investments are for low value, laborintensive goods like wire harnesses, Mexico has also attracted automotive supplier investments for higher value goods. For example, Mexico has expanded its powertrain production numbers over the past several years and, from 2012 through 2015 alone, engine production in Mexico has increased by over 31 percent, from 2.8 million to 3.7
million engines, and is estimated to have grown to 4.2 million units in 2018.60
Furthermore, automotive producers have increasingly chosen Mexico as a Intelligence InfoBank.
and Menk, The Growing Role of Mexico in the North American Automotive Industry, supra.
55 Wards Intelligence InfoBank.
56 Sara Lewis, Canadian, EU Auto Industries Welcome Trade Pact, WardsAuto, Feb. 24, 2017, https www.wardsauto.com/industry/canadian-euauto-industries-welcome-trade-pact.

place to locate R&D centers.61 GM, Ford, Toyota, Volkswagen, Nissan, and numerous automobile parts companies already conduct significant R&D activity in Mexico. U.S. industry considers university graduates in Mexico to be just as skilled for R&D work as graduates in the United States.62 With the tendency of automobile producers to locate R&D
facilities near assembly plants, Mexico is expected to become a growing market for engineering jobs and an alternative market to the United States. As R&D and its related skilled workforce shifts from the United States to Mexico, the loss of specialized skills and production knowhow within the United States impedes the ability of American-owned manufacturers to access a skilled workforce and advance technologies that are critical for maintaining Americas ability to project power globally and respond in a national emergency.

53 Wards
57 Department
54 Swiecki
58 Id.

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of Commerce, Census Bureau.

59 Swiecki and Menk, The Growing Role of Mexico in the North American Automotive Industry, supra.
60 Id.
61 Id.
62 Id.

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In addition to low production costs, low tariffs on Mexican automobile exports due to the broad reach of Mexicos numerous Free Trade Agreements FTAs made it possible for the country to emerge as a prime manufacturing and export base not only within North America, but globally as well. Exports from Mexico to 46
countries are exempt from automobile tariffs, including the 10 percent tariff the EU applies to imported passenger vehicles.49 The domestic Mexican market for new automobiles is relatively small, less than 10 percent the size of the U.S. automobile market, and the growth of automobile production in Mexico correspondingly includes a large share of automobiles manufactured for