Auto Groups Support Mexico and Canada on Origin Rules for NAFTA

Groups in the auto industry from the United States, Mexico and Canada have pushed back against the White House administration’s demand for higher automotive content in the U.S. in a modernized NAFTA or North American Free Trade Agreement.

With talks taking shape this week on Capitol Hill, automakers as well as parts groups from the three countries urged negotiators against the tightening of rules of origin, said the Mexican Automotive Industry Association’s President Eduardo Solis.

However, Robert Lighthizer a Trade Representative from the U.S. confirmed the fears in the industry that the Trump administration was seeking big changes to the rules to attempt to lower the trade deficit in the U.S. with Mexico.

Rules of origin, in particular on autos along with auto parts, must have higher NAFTA content as well as substantial United States content, said Lighthizer. Country of origin is to be verified and not deemed, added the U.S. representative.

Canada’s Foreign Minister Chrystia Freeland along with Mexico’s Economic Minister Ildefonso Guajardo each said they did not favor specific national rules of origin in NAFTA, which the industry is in agreement with.

The president of American Automotive Policy Council Matt Blunt said that his organization thinks a specific requirement would complicate greatly, the ability of businesses, particularly those that are small and medium to take advantage of NAFTA’s benefits.

The group represents automakers in Detroit including General Motors, Fiat Chrysler Automobiles and Ford Motor.

The comments made by Blunt were echoed by Canada’s president of Automotive Parts Manufacturer’s Association Flavio Volpe.

He said that anytime it is said that the list or a part of the list has to be from one specific country, all three countries will be hurt.

The U.S. had trade deficits for autos and auto parts with Mexico of $74 billion and with Canada of $5.6 billion. Deficits, Lighthizer has said could not continue any longer.

The mention by Lighthizer of tightening the verification requirements was referring to expanding the tracing list for parts, which is implemented to determine if companies meet the 62.5% content requirement for North America for autos and 60% for their components.

Devised during the early part of the 1990s, the tracing list has almost none of the most sophisticated electronics now found in the cars of today most of which are from Asia.

Including those on the new tracing list could force the suppliers to source the components from North American or be required to pay large tariffs for them.