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January 31, 2018

Mexico open to NAFTA vehicle rule changes

Mexico is open to changes to vehicle rules of origin as negotiators attempt to update the 1994 North American Free Trade Agreement (NAFTA).

Mexico is open to changes to vehicle rules of origin as negotiators attempt to update the 1994 North American Free Trade Agreement (NAFTA).

Under the current NAFTA, at least 62.5% of the net cost of a passenger car or light truck must originate in the US, Canada or Mexico to avoid tariffs. President Donald Trump’s administration wants the threshold raised to 85% with half the content made in the US, Reuters reported.

According to the news agency, Mexican economy minister Ildefonso Guajardo said, while Mexico’s automotive industry has expressed the desire to keep the current 62.5% regional requirement, “I have talked with them. I think we have to be realistic.

“I believe that North America can rethink the model … And I think it’s logical. Let’s be totally honest.”

The report added Eduardo Solis, head of Mexico’s main vehicle industry lobby group AMIA, had suggested not changing rules of origin, saying he needed to ensure North America’s vehicle industry remained competitive.

But Trump’s trade chief rejected a Canadian compromise plan to include expenses for engineering, research and development and other high value work to be counted in higher targets for North American content with the aim of safeguarding high paying jobs in the region. Mexico called it “innovative”, Reuters noted

Guajardo said the plan “deserves a deeper analysis to try to rescue from it all that is technically valuable”. He added it was predictable US trade representative Robert Lighthizer would deem the proposal unacceptable.

According to Reuters, Flavio Volpe, president ‎of the Toronto based Automotive Parts Manufacturers’ Association, suggested Lighthizer’s tough rhetoric was a negotiating tactic.

See also: NAFTA round breaks up in discord, but new round set

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