Magna CEO Feeling ‘More Positive’ on NAFTA Negotiations

Feb. 16, 2018
CEO Don Walker said he believes the U.S. wants to use the renegotiated North American Free Trade agreement as a template for future trade deals with other countries and that is adding complexity to the discussions.

The head of North America’s biggest auto supplier says he’s feeling “a bit more positive” negotiators will clinch a new NAFTA deal after hearing from people in recent discussions.

“They were quite discouraged a couple of months ago but it seems that people are more hopeful that everybody understands how important it is to get this right,” Don Walker, chief executive officer of Magna International Inc., said in an interview Thursday in Toronto.

“If we do something to make ourselves less competitive, it’s going to be a lose-lose-lose.”

Walker said he believes the U.S. wants to use the renegotiated North American Free Trade agreement as a template for future trade deals with other countries and that is adding complexity to the discussions.

“That may be making it more difficult because there may be other issues they’d want to address if they’re talking about trade with places like China that they wouldn’t have to worry about with Canada and Mexico,” he said.

Preferential Treatment

About 55% of Magna’s sales come from the NAFTA region and the Aurora, Ontario-based company employs 29,000 people in Mexico, 25,000 in the U.S. and 22,000 in Canada. The company also has operations in Europe and Asia. Despite its huge presence on the continent, Walker isn’t a fan of U.S. President Donald Trump’s proposal to tighten content requirements for cars.

A typical vehicle gets preferential treatment under the pact if at least 62.5% of it comes from the U.S., Canada or Mexico. Trump wants to boost that to 85% with at least 50% coming from the U.S.

“If you go too high or it’s too difficult to meet the regional content for whatever reason then people will basically say, ‘I can’t meet it anyway, it’s too difficult, so I’ll pay the duty and I’ll ship the parts in from another country,”’ Walker said. “If it’s cheaper to ship in from outside, then everybody loses.”

Canada’s chief NAFTA negotiator, Steve Verheul, said Tuesday that the U.S. proposal on autos would actually “drive production offshore, out of North America,” the opposite of Trump’s stated goal.

Investment Delays

U.S. Trade Representative Robert Lighthizer has sounded upbeat lately, telling Trump on Feb. 13 in front of reporters that he was hopeful a deal could be reached. The seventh round of talks begins later this month in Mexico City.

Until Nafta is resolved, Walker said the automakers are going to delay major investment.

“I have to believe that while the NAFTA discussions are going on, big decisions on heavy investment, specifically by car companies, are probably being put on hold,” he said. “People don’t want to make big capital investment decisions and then find out a year down the road that things have changed.”

By Kristine Owram

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