Michigan governor says North America free trade deal critical for US auto production

By David Shepardson

DETROIT, Jan 15 (Reuters) - Michigan Governor Gretchen Whitmer said Thursday it was critical for U.S. auto production that the Trump administration reach a deal this year to extend a North American free trade deal with Canada and Mexico and warned of China's rise as a major auto producer.

The trade deal, called the United States-Mexico-Canada Agreement, is up for review this year to decide whether it will be left to expire or another agreement will be worked out. President Donald Trump last year imposed 25% tariffs on autos imported from Canada and Mexico, while giving automakers credit for the use of U.S. auto parts, and earlier this week said the deal was "irrelevant" to the United States.

"This system only works if and when we are a good partner to our allies. When we fight our neighbors, however, China wins," Whitmer, a Democrat, said in a speech at the Detroit auto show. She said the United States should not abandon USMCA. "We should build on the best parts and make it even better... Is it perfect? No. But without our allies, we do not stand a chance."

She said Michigan faced competition for auto production. "We have to look at what we’re up against. In a word — China. China’s ultimate goal is complete vertical integration. From extracting metal and minerals out of the ground to handing customers the keys, China wants to dominate every part of auto manufacturing. They’re making major headway," she said.

Major automakers last month urged Washington to prevent Chinese government-backed automakers and battery manufacturers from opening U.S. manufacturing plants, warning the industry's future is at stake.

"China poses a clear and present threat to the auto industry in the U.S.," the Alliance for Automotive Innovation, which represents General Motors, Ford, Toyota Motor, Volkswagen, Hyundai, Stellantis and other major automakers, told Congress.

The Chinese Embassy in Washington criticized calls for protectionism and establishing trade barriers and said China has "abolished all market access restrictions on foreign investment in manufacturing and remains open to international car makers who can fully share in the dividends of China’s big market."

The Detroit Three automakers and others are heavily reliant on supply chains that include significant parts production in Mexico and Canada and all three produce hundreds of thousands of vehicles annually in both countries. The Detroit Three said the USMCA accounts "for tens of billions of dollars in annual savings."

Major automakers have urged the Trump administration to extend USMCA, saying it is crucial to American auto production.

A fully assembled vehicle requires nearly 30,000 parts. Producing all of them in the United States is impractical and, in many cases, impossible," Whitmer said. "There are zero vehicles on the road made with 100% U.S. parts."