February 19, 2018

Mexico's finance minister isn't apprehensive a couple of 'plan B' for NAFTA

26 January 2018, 07:05 | Katie Chavez

The decision by Cuevas head of the Senate’s foreign relations committee represents a win for Lopez Obrador as he seeks to oust the ruling PRI

The decision by Cuevas head of the Senate’s foreign relations committee represents a win for Lopez Obrador as he seeks to oust the ruling PRI

Latest Status: The U.S., in its latest list of objectives, said it was only seeking "a mechanism for ensuring that the parties assess the benefits of the agreement on a periodic basis", making no mention of a sunset clause.

Canadian officials put forward an informal proposal Wednesday that would overhaul the entire NAFTA formula for calculating content: instead of just counting the country of origin for mechanical parts, it would include intellectual property and emerging technologies - which would inflate the percentage of USA content given American research dominance.

OTTAWA-How much is North-American-enough? He said he plans to talk to U.S., Canadian and Mexican officials who will be doing the negotiating to make sure they know his point of view.

Trump has threatened several times to yank the US from the deal, which allows tariff-free trade among the three countries.

The pushback comes as negotiators are meeting in Montreal in a sixth round of talks aimed at modernizing the 1994 treaty.

"They agreed on the need to make some progress", said the source, who spoke on condition of anonymity because of the sensitivity of the negotiations. Canada is using Chapter 19 to mount challenges of US tariffs on softwood lumber. US officials welcomed the proposal and indicated they would look at it closely, according to two people briefed on the talks.

Canada is open to discussing a periodic review of NAFTA, but not a hard and fast "sunset" clause proposed by the U.S.

The proposal from Canada is created to shift the conversation away from American demands for greater US and North American content for vehicles to qualify for duty-free movement across borders-a demand derided by the industry as destructive to North American competitiveness.

Jerry Dias, president of Unifor, Canada's largest private-sector union, said talks on autos are headed in the right direction.

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Nafta talks on the automotive industry revolve around the US demand to hike the rules of origin, which govern what share of a vehicle must be made in the three countries to be traded freely within the zone. "I kicked the Mexicans out... and I made Canada come to negotiate a new deal, and that would resonate". A spokeswoman for U.S. Trade Representative Robert Lighthizer declined to comment. Currently, cars must have 62.5 percent of their content made in the three-country trading bloc to avoid customs duties, but there is no country-specific content requirement.

"We'll see what happens", he told CNBC during an interview at the World Economic Forum in Davos, Switzerland.

Guajardo said negotiators needed to listen to what Trump had promised to achieve in NAFTA reform, and try to interpret that in a way that did as little damage as possible. Even if Mexico does regain its pre-NAFTA power to tax United States pork by 20 percent, actually doing it means making its own citizens pay 20 percent more for pork, which doesn't seem like a popular move.

The North American auto industry has repeatedly warned the Trump administration that tightening the rules of origin on cars' content too much could backfire and send some production overseas.

Perhaps responding to those warnings, Trump's message on NAFTA now has become more mixed - at times suggesting that a good deal will emerge from the new negotiations while occasionally continuing his long-standing disparagement.

"Let us work on plan A", Anaya said.

He said a new NAFTA needs to recognize the real threat is posed by Chinese auto manufacturers, who, he said, are poised to supply cars to the North American market that are much cheaper and well made. (The remaining 11 nations are now moving forward with the agreement without the U.S.) Despite that, Canada could well agree to terms similar to those it accepted on dairy in the new NAFTA talks, Johnson said.

Trudeau did meet with Israeli Prime Minister Benjamin Netanyahu on the sidelines of the WEF Wednesday, but the Canadian media travelling with the PM did not receive a customary notification in advance.

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