The first three rounds of NAFTA negotiations passed and everything seemed to be going according to plan. Mexico, Canada and the US’ negotiators were reaching agreements rather quickly and for a moment, it seemed possible for negotiations to be over before the end of 2017. Sadly, all good things must come to an end.
Once talks moved on to more delicate topics such as rules of origin, disagreements were more evident. Seeking to right its trade unbalance with Mexico, the US presented a proposal to change NAFTA’s rules of origin not only in terms of regional content but also considering a specific US content percentage. According to statistics presented by US Secretary of Commerce, Wilbur Ross, from the OCDE, US’ content in Mexican imports dropped from 26 to 16 percent between 1995 and 2011. The statement was later disproved by Eduardo Solís, Executive President of AMIA, who stated that by 2016 between 37 and 39.5 percent of all content in North American automotive production came from the US, according to information from the US Chamber of Commerce.
Despite the refutal, the US is now proposing to raise regional content to 85 percent from the original 62.5 percent considered in the original NAFTA. Furthermore, the country is lobbying for 50 percent content coming exclusively from the US. The initiative has not played well with Canada’s and Mexico’s trade representatives, both of whom have stated their discontent regarding these new challenging negotiation conditions. “We have seen a series of unconventional proposals in critical areas that make our work much more challenging,” sayd Chrystia Freeland, Canada’s Foreign Affairs Minister. “We have seen proposals that would turn back the clock on 23 years of predictability, openness and collaboration.”
US Trade Representative Robert Lighthizer has openly critized Mexico and Canada for not accepting the US’ proposal as a way to regain trade balance. “We have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits. Now I understand that after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage,” he said. Yet, for Canada’s and Mexico’s representatives the proposal makes no economic sense. “It is a waste of time trying to design policy tools that will try to move 1,000 jobs from here to there,” stated Ildefonso Guajardo, Mexico’s Minister of Economy.
The data used in this article was sourced from Automotive News, El Economista, and the Office of the United States Trade Representative.