Mexico City — Rules for automotive content, one of the most contentious issues in the North American Free Trade Agreement (Nafta), will be among the first tackled at the upcoming seventh round of talks in Mexico City.
On February 25, Negotiators from the US, Canada and Mexico plan to begin on rules of origin, which govern how much geographic content a product must have to benefit from Nafta tariff exemptions, according to a draft agenda obtained by Bloomberg News. The issue is set to receive more than 20 hours of discussion, among the most of any topic, according to the schedule, which has not been released publicly because talks are held behind closed doors.
In a bid to revive US factories, the White House has proposed raising the regional automotive rules of origin for passenger cars to 85% from 62.5% and adding a US-specific requirement of 50%. The US says the changes are to reduce a trade deficit with Mexico, which it says results from companies moving factories south of the border to take advantage of cheaper labour.
Vehicle makers warn the proposals would up-end supply chains. Canada at the last negotiating round in Montreal put forward some fresh ideas on how to calculate the value of regional content in vehicles, including giving more credit for driverless and electric cars, plus research and development work. US Trade Representative Robert Lighthizer called the Canadian proposal on cars "vague" and argued it would reduce the share of a vehicle made within the region.
Mexico’s automobile association, AMIA, opposes a higher content rule for cars, Economy Minister Ildefonso Guajardo has signalled a recognition that the rules probably need to be strengthened to reach a deal.
The US, Mexico and Canada began renegotiating the Nafta agreement in August at the initiative of President Donald Trump, who has promised to negotiate a better deal for the US or withdraw. Talks, organised into rounds, have rotated between Washington, Mexico City, Ottawa and Montreal over the past six months.