Events and News

Text of Trans-Pacific Partnership Agreement Released

November 11, 2015

On November 5, the Obama administration released the text of the Trans-Pacific Partnership (TPP), a recently negotiated trade agreement between the United States, Japan and 10 other Asia-Pacific countries, setting the stage for a divisive fight in Congress.  China was left out of the TPP. The deal stipulates that only 45% of a vehicle will have to be sourced from within the TPP, down from a comparable 50%-plus level under the two-decade-old North American Free Trade Agreement (NAFTA) rules, which are credited with driving an auto industry boom in Mexico.

It sets a local sourcing threshold of 35 to 45% for individually traded auto parts.  The TPP rules mean that more than half a vehicle could be sourced from outside the 12 countries participating in the trade pact and still be sold in the U.S.—the bloc's largest market—without tariffs.  But they also offer two other ways to calculate local content. Including inputs such as administration, the threshold is 55%.  

Ford Motor Co. is urging Congress to reject the TPP because it doesn't include any measures to battle currency manipulation — where Asian countries, specifically Japan, work to keep their currency low against the dollar to make their products cheaper than U.S. products sold in Asia, undercutting U.S. manufacturers.