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January 30, 2018

NAFTA round breaks up in discord, but new round set

The latest round of NAFTA re-negotiation talks between government representatives of the US, Canada and Mexico, held in Montreal, has broken up with significant divisions and disagreements between the participants.

The latest round of NAFTA re-negotiation talks between government representatives of the US, Canada and Mexico, held in Montreal, has broken up with significant divisions and disagreements between the participants.

However, one positive sign is that the three countries have agreed another round of talks in Mexico City from February 26 to March 6 (making that the seventh round).

The NAFTA talks are taking place against a background of a strongly anti-NAFTA position from US President Donald Trump who has repeatedly criticised the agreement and said that it has to be re-negotiated or the US will pull out of it. Autos is a high-profile economic sector that has drawn the ire of Trump who has criticised car companies with low-cost manufacturing in Mexico, but who ship in large numbers to the US market.

US negotiators have proposed raising the minimum percentage of parts that must be made in the US, Canada or Mexico — from 62.5% to 85% — in order for manufactured vehicles to circulate freely between NAFTA countries. They also want 50% of parts to come from the US. Mexico and Canada are opposed to the US proposals.

A compromise suggested by Canada could boost NAFTA auto content, but instead of just counting the country of origin for mechanical parts, the Canadian idea would include intellectual property and emerging technologies in rules of origin for automobiles (which would likely inflate the percentage of US content given US dominance in auto industry tech and product development).

Mexico called the Canadian plan “innovative,” but US Trade Representative Robert Lighthizer said the Canadian idea would allow too many parts from China and other low-cost Asian countries to be included in the autos exempt from tariffs under NAFTA.

“The reality is, you’re going to have much, much less regional content, and that’s clearly fewer jobs for us, clearly fewer jobs for the Canadians and I believe, fewer jobs for Mexico,” he told reporters in Montreal, Reuters reported.

The talking – and arguing – resumes at the end of next month.

See also:

Detroit Big 3 lobby against NAFTA origin rules change

Canadian auto industry to ‘gear down’ in 2018

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