>> Once approved, this will be a new dawn for the American auto industry and for the American auto worker.>> A new trade pact between the US, Canada, and Mexico hailed by President Trump at the White House, promises significant changes for car manufacturers.>> There are also strong provisions to enforce what's called the rules of origin requirements.
>> Rules of origin requirements mean that for the first time, starting in 2020, at least 30% of the value of a vehicle must be done by workers earning an average wage of at least $16 an hour. That proportion rises to 40% in 2023. But while 16 bucks an hour is far higher than the wages in a Mexican auto plant, the rule doesn't guarantee a sudden shift in manufacturing back to the US.
That's because a significant part of the value of a car doesn't come from the factory floor. Reuters Washington correspondent, David Lauter.>> The industry itself, I think, is pretty relieved by the rules, the way that they shook out, because they really don't have to tear up their existing production platform in North America.
They may be able to substitute some of the higher value activities such as, engineering, software, various design, even sales and marketing towards the value of that vehicle. While they keep some of the lower value, bent metal kinds of parts in Mexico, or even from Asia, and other countries outside the region.
>> And while Trump cast the deal in these terms.>> It will transform North America back into a manufacturing powerhouse.>> The ultimate outcome may be more modest.>> Some of this is partially aimed at preserving existing jobs in the United States, as opposed to growing them. Detroit is full of highly paid car engineers.
So rather than seeing those jobs migrate to Mexico, or some other region in the world, this provides an incentive to keep those jobs in the United States. The rules could also have an impact elsewhere. Some analysts warning that requiring more of a car be made with more expensive labor, could mean higher price tags at the dealership.
Shares of the Big Three automakers rose Monday after the news.