The US and Mexico are nearing a deal on the key issue of autos content rules at talks to renew the North American Free Trade Agreement (NAFTA), Mexican and Canadian officials said on Wednesday.
Guillermo Malpica, head of the trade and NAFTA office for the Mexican government, said the US had “started showing more flexibility last week” on autos content and other topics at the negotiations.
“We are getting close” to an agreement on the so-called autos rules of origin, which dictate how much of a vehicle must be made in the three NAFTA nations to qualify for duty-free status, Malpica told reporters.
Canadian trade negotiator Colin Bird told an auto industry conference in Michigan on Wednesday that NAFTA negotiators are making progress on auto content rules and endorsed the concept of linking those rules to improving workers’ wages.
“Harnessing the power of trade agreements to promote higher wages is the kind of policy all three countries can get behind,” Bird said.
Speaking to local media on Tuesday, Mexican Minister of Economic Affairs Ildefonso Guajardo said that negotiators have made progress on auto salaries.
US and Canadian trade unions have said that more manufacturing has gravitated to Mexico due to the country’s low wages.
Mexico balked at the prospect of foreign intervention in salaries, but the debate has shifted, Guajardo said.
“Now what we are talking about is that a percentage of what is made in North America would be made in a high-salary zone,” he said. “What does this mean? That clearly, within the component of 100 percent of an automobile made in [the NAFTA zone], a percentage, it could be about 35 to 40 percent, is made in a high-salary zone.”
The Mexican peso spiked 0.2 percent to its strongest level of the day after news of progress on the autos element of talks, before slipping back.
Some analysts forecast that the peso would appreciate to below 18 per US dollar from its current level of 18.6 if there is a deal.
Bird and Malpica said they are optimistic about the possibility of reaching a deal to renew the NAFTA and are hopeful of progress when ministers from Mexico and the US meet this week.
In May, Mexico offered to raise the autos content requirement to 70 percent from a current 62.5 percent. The US is asking for the threshold to be 75 percent.
Malpica also said the US was still pushing for a sunset clause that would require the treaty to be reopened every five years.
Canada and Mexico strongly oppose the idea.
“Any one country being able to hold the agreement hostage every five years does not provide the certainty” businesses need to invest, Bird said.
Mexico and Canada support including in the main body of a renegotiated NAFTA provisions designed to set labor and environmental standards, Malpica and Bird said.
Those issues are addressed in side agreements to the current treaty.
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