Mexico and U.S. appear close to deal on key auto content rules, as Canada remains on NAFTA sidelines
The two countries were to meet again on Thursday, again without Canada, while Canadian officials met in Ottawa Wednesday to plot out their strategy
Tom Blackwell
Published on: August 8, 2018 | Last Updated: August 9, 2018 12:19 PM EDT
With Canada remaining on the NAFTA sidelines for a third straight week, the U.S. and Mexico met for more trade talks Wednesday, and appeared close to a deal on the key issue of where car parts come from and how much the workers who make them are paid.
They are expected to turn next to a potentially thornier issue, U.S. demands for a sunset clause in NAFTA requiring it to be re-approved every five years.
Canada, Mexico and even some Republican members of Congress are strongly opposed, saying an automatic, five-year reset on the deal would spawn uncertainty and deter potential investment.
But details of what is happening behind closed doors came largely from second-hand accounts of the talks Thursday. As the Mexican delegation left the offices of the U.S. Trade Representative, virtually next door to the White House, they were uncharacteristically closed-mouth about the start of two days of talks.
The parties had been working through outstanding items, Economy Minister Ildefonso Guajardo said.
Could they reach a deal on automobile rules of origin by the end of the week? he was asked.
“Nothing is agreed until everything is agreed,” Guajardo said, using a stock phrase meaning the updated NAFTA has to be approved as a package, not not in pieces.
Jesus Seade, the trade negotiator representing Mexico’s new president elect, stayed quiet as the delegation strode away, reporters trailing behind.
It is unclear why they refused to talk about the nearly two-hour meeting with U.S. Trade Representative Robert Lighthizer, though sources say the low-profile Lighthizer has been irritated in the past by impromptu press conferences held by his counterparts after such sessions.
The two countries were to meet again on Thursday, again without Canada, while Canadian officials met in Ottawa Wednesday to plot out their strategy for when they are invited back to the table. That could happen as early as next week.
Two American sources who have received briefings on the talks — but are not authorized to talk about what they know on the record — confirmed Thursday there seems to be progress on key American demands about what goes into cars that enter the U.S. duty free under NAFTA.
Those requests by the U.S. are meant to counter the administration’s view that too much of what’s made under NAFTA is out-sourced to low-wage destinations, robbing Americans of good jobs.
Mexico seems to have tentatively agreed to the U.S. demands that 75 per cent of auto content be made in North America, and that 40-45 per cent, depending on the type of vehicle, be made by workers earning at least $16 an hour, said one source.
Some of the discussion now is on determining the tariff that would be applied to products — mostly made by European car manufacturers — that don’t meet those thresholds, said the person.
But there is a big caveat to that agreement, the source said. In exchange, Mexico wants the U.S. to at least water down its demand for a sunset clause, as well as take off the table both its proposal to scrap state-to-state dispute resolution, and to impose tariffs on some Mexican produce.
And none of it means anything in terms of a new NAFTA agreement unless the northern partner signs on as well, says another source familiar with the auto-related negotiations.
“Clearly, the Canadians need to be heard from tout suite, though I do not expect them to balk at this proposal,” said the person. “They should like this … (But) if they don’t agree to the full final deal, these auto (rules of origin) would be for naught — the premise is North American content and Canada would be left out.”
Canadian officials have suggested there is nothing unusual about the long stretch of bilateral negotiations excluding them, and are happy the other two countries have made progress.
But Lighthizer told U.S. senators recently that he hoped to strike a deal with Mexico soon, then use that as leverage to win “compromises” from Canada that have not been forthcoming to date.
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