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United States unveils proposal to boost autos content in NAFTA
November 22 2017, 01:32 | Irvin Gilbert
Trudeau, Pena Nieto reaffirm commitment to NAFTA after meeting
Mexico appears to be preparing for the worst as the fourth round of talks on the North American Free Trade Agreement open in Washington DC.
But the Americans also want a country-specific change that would increase USA content requirements to 50 per cent in the first year of the new deal. Mexican sources denounced it as "absurd" and unacceptable, underlining the gaps between NAFTA's three members as they try to wrap up a deal by a year-end deadline. Trade between the United States, Canada and Mexico has quadrupled under NAFTA, now topping $1.2 trillion a year.
It contains three ideas that automakers say would complicate production: requiring all cars sold without tariffs to include 85 per cent North American content, 50 per cent USA content and an elaborate, detailed listing of parts that didn't exist in 1994 when NAFTA was introduced.
The U.S.is said to have made the proposal to ensure the pact, which also includes Mexico and Canada, stays up to date.
American negotiators want Canada to be "more transparent" about its supply management system for dairy, according to a source with direct knowledge of the NAFTA talks.
US President Donald Trump has said the pact has cost American jobs.
The chamber, the most powerful US business lobby, has also warned that the proposal would cost jobs, since automakers and parts suppliers would likely forgo NAFTA benefits and simply pay the 2.5 percent USA tariff for imported cars and many parts.
Trump administration officials complain the current content rules are too lax and have allowed auto companies to build more autos in Mexico, where wages are much lower.
"A strong North America can only come from a strong Mexico, a strong Canada, and a strong United States", he said.
His remarks and the tension around NAFTA helped push the peso down 1 percent against the US dollar to a five-month low.
Mexican Finance Minister Jose Antonio Meade, seeking to downplay any setbacks in the latest round of negotiations, said on Friday that tension in the talks was only natural. With that in mind, he said he's warned US trade representative Robert Lighthizer to tread carefully around the sector.