Canada and Mexico were not planning to make counterproposals to US demands for tougher North American Free Trade Agreement (NAFTA) automotive content rules, but instead were to offer rebuttals and pepper US negotiators with technical questions yesterday, people familiar with the talks said.
Canada was to make a presentation arguing US demands would cause serious damage to the US as well as North American automotive manufacturing, a Canadian source with knowledge of the negotiations said.
The rebuttal was expected to come yesterday as negotiators resumed discussions on automotive rules of origin in the fifth round of talks to update the 23-year-old NAFTA between the US, Canada and Mexico.
Photo: Bloomberg
The administration of US President Donald Trump last month stunned its NAFTA partners by unveiling demands that half of the value content of all North American-built autos be produced in the US and that the regional vehicle content requirement be sharply increased to 85 percent from 62.5 percent.
The demands are aimed at meeting Trump’s NAFTA goals of stemming the flow of US automaking jobs to low-wage Mexico and reversing a US$64 billion US trade deficit with its southern neighbor.
“In terms of the automotive sector, the US’ proposal is insane,” a Mexican auto industry representative with knowledge of the talks said. “You cannot counterpropose such madness.”
The Canadian negotiating team’s presentation would “provide information about how the US rules of origin proposal for autos would damage the continental industry in general and the United States in particular,” a Canadian source said. “If you move the content requirement to 80 percent, or even to a number lower than that, it will hit the supply chains. You would then have to deal with potentially ill-equipped suppliers that are maybe more expensive.”
A spokeswoman for the US Trade Representative’s office on Sunday declined to comment on the talks.
Canadian Automotive Parts Manufacturers Association president Flavio Volpe also said Canada and Mexico would try to convince US officials that the proposals would damage North American competitiveness and lead to fewer auto assembly and parts jobs on the continent.
Volpe said that his group has been briefing Canadian negotiators on the effects of the US proposals.
Its analysis found that even if some assembly operations are returned to the US, these job gains would be more than offset by parts production moving to Asia and other low-cost production areas.
Many automakers and auto parts makers would simply forgo NAFTA free-trade benefits and pay the 2.5 percent US tariff on many components, he added.
His US counterpart, the Motor and Equipment Manufacturers Association, last month unveiled a study showing that the US would lose up to 24,000 auto parts manufacturing jobs from higher NAFTA content requirements and up to 50,000 if NAFTA is terminated.
The Mexican auto industry representative said the nation’s negotiators would likely ask more technical questions about the US automotive content demands during discussions yesterday and today.
The industry would not back down from its opposition to the US proposal, he added.
Another source close to the negotiations said Mexico and Canada consider the US proposal not viable and disagree with the concept.
“So we are not in a situation of being able to go over numbers. It is not about analyzing the figures that they put on the table and us returning with other figures,” the source said.
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