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Long IslandColumnistsDan Janison

Promise of the new Mexico auto deal may be less than meets the eye

Politicians are known for making premature declarations of victory. President George W. Bush proclaiming "mission accomplished" in Iraq in 2003 stands out as a famous instance.

The automobile trade deal President Donald Trump announced with Mexico last week has the markings of another claim of success in advance of results. For the moment, the accord joins the same list of incomplete projects as Trump's still-elusive North Korea nuclear deal and congressional health care "reform."

The limitations of the partial trade agreement surfaced almost as quickly as the American president could get his handlers to make the phones work for a long-distance tele-news-conference with Mexico President Enrique Peña Nieto.

The deal excludes Canada — that key third partner in the unpopular 1990s NAFTA pact, which remains in effect.

A bilateral deal between the United States and Mexico faces a higher vote threshold in Congress than one that includes Canada, since NAFTA "fast-track" authority, or 51-vote Senate approval, is believed to require a trilateral agreement. It remains to be seen what the latest flurry between the Trump administration and Canadian officials will produce.

If approved as outlined, the two-way Peña Nieto-Trump agreement, as announced, promises modest change for the U.S. auto trade. 

Not that its terms don't sound impressive to the uninitiated.

For one, so-called "rules-of-origin" requirements — a measure of North American content in these products — would go to 75 percent if import tariffs are to be avoided.

The current cutoff for a tariff has already been at 62.5 percent for 16 years. Raising the requirement to 75 percent would seem to affect only three out of dozens of car models currently assembled in Mexico, Bloomberg News reports. 

Of those three models, only the Nissan Versa sedan sells in substantial numbers in the United States, the news site reports, citing official National Highway Safety Administration "rules-of-origin" data.

The new Mexico deal also calls for 40 to 45 percent of an auto's content to come from factories paying more than $16 an hour if it is to avoid tariffs.

That's much higher than what Mexican workers usually get. But it was not immediately clear if this wage rule would include non-NAFTA content. That is, if the $16-an-hour statistic includes better-paid labor in Germany, Japan and South Korea — from which many components are shipped — the impact on wages on this continent could prove modest. 

Despite these qualifications, even Jared Bernstein, a member of President Barack Obama's economic team, sounded supportive. "It's easier (for the United States) to compete against workers being paid $16 an hour than $4," he told CNBC. "This one looks to go a lot further toward helping workers on both sides of the borders."

Trump called the partial deal "incredible" and "a really good deal for both countries." But at best, dismantling or even tweaking NAFTA remains an incremental work in progress.

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