[CTC] TOO in opening NAFTA round

[Arthur Stamoulis]

Couple articles on ROO below…

https://www.nytimes.com/reuters/2017/08/19/business/19reuters-trade-nafta-origin.html <https://www.nytimes.com/reuters/2017/08/19/business/19reuters-trade-nafta-origin.html>
 
U.S. Did Not Detail Request for Auto Rules of Origin at NAFTA Talks: Source
By REUTERS
AUG. 19, 2017, 7:54 P.M. E.D.T.
WASHINGTON — In the opening NAFTA session of talks, the United States did not give precise details of how much it wanted to boost North American content for autos, a source directly familiar with the negotiations said on Saturday.

Robert Lighthizer, President Donald Trump's top trade adviser, this week said Washington wanted tougher rules of origin for autos, which determine how much of a vehicle must be built in the three NAFTA nations.

He also said the United States was seeking new measures to ensure "substantial U.S. content" for autos.

Companies wishing to take advantage of free trade in goods guaranteed by NAFTA must currently meet the 62.5 percent North American content requirement for autos and 60 percent for components.

But during the opening four-hour round of talks on rules of origin on Friday, the U.S. delegation did not give details of how much it wanted the requirements to be lifted by.

It also did not give a specific figure for what substantial U.S. content for autos could mean, said the source, who asked not to be identified because of the sensitivity of the matter.

U.S. officials said they could not confirm the source's account.

Agreement on a revised NAFTA agreement could pivot on the autos sector given its weight in trade.

The United States had autos and auto parts trade deficits of $74 billion with Mexico and $5.6 billion with Canada last year, both major components of overall U.S. goods trade deficits with its North American neighbors.

The United States, Canada and Mexico on Wednesday opened talks in Washington to modernize the North American Free Trade Agreement, which was signed in 1994. Trump has denounced NAFTA as a "disaster" that encouraged firms to shift production to Mexico.

Administration officials say strengthening the rules of origin for autos will help boost well-paid jobs in the United States as well as cut the trade deficit with Mexico, another key Trump goal.

Auto industry groups from Canada, Mexico and the United States are pushing back against the demand for higher U.S. automotive content, saying it would be too complex.

According to a schedule seen by Reuters, negotiators are due to continue discussing rules of origin on Saturday as well as Sunday morning.

Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland this week both said they were not in favor of specific national rules of origin within NAFTA.

"In the world of international trade, there is not a single precedent (for that), not in a bilateral or multilateral agreement," said Guajardo.

(Reporting by Anthony Esposito and David Ljunggren; Editing by Lisa Von Ahn and Mary Milliken)


https://www.wsj.com/articles/u-s-canada-and-mexico-wrap-up-nafta-first-round-1503259972 <https://www.wsj.com/articles/u-s-canada-and-mexico-wrap-up-nafta-first-round-1503259972>
 
U.S., Canada and Mexico Wrap Up Nafta First Round
Negotiations expected to continue in Mexico and Canada next month and the U.S. in October
By 
Sara Schaefer Muñoz and
 
Bob Davis
Updated Aug. 20, 2017 8:10 p.m. ET
WASHINGTON—Opening-round talks to remake the North American Free Trade Agreement revealed early fissures dividing the U.S. from Mexico and Canada, including a Trump administration proposal to require a “substantial” portion of autos and auto parts produced under the pact be made in the U.S.

The renegotiation of the trade deal <https://www.wsj.com/articles/what-u-s-wants-from-nafta-talks-1502622034>, which was one of President Donald Trump’s main campaign promises and a key pillar of his “America First” agenda aiming to revive U.S. manufacturing and reduce the country’s trade deficit, is likely to face many hurdles. Auto makers in all three nations generally oppose the stricter rules floated by the U.S. negotiator, and pro-business lawmakers in Congress don’t want the pact altered to restrict trade.
 
In the first-round talks, which concluded Sunday, the three countries said in a trilateral statement they had made “detailed conceptual presentations” of their positions and were working toward “an ambitious outcome” through a fast-paced schedule of negotiations <https://www.wsj.com/articles/nafta-flashpoints-issues-to-watch-as-the-talks-unfold-1502622001>.
Early tensions over areas such as the so-called rules of origin—a major issue for the automotive industry—signaled the tough bargaining that lies ahead as the three nations try to wrap up a deal by early next year.

The chief U.S. negotiator, Robert Lighthizer, came into the talks Wednesday saying the U.S. would insist on tightening the rules of origin, and adding a provision covering U.S. production, an idea quickly dismissed as unworkable by Mexican and Canadian officials.

At this early stage of the talks, it is difficult to measure the depth of the disagreement. Opening rounds generally set the tone and schedule for negotiations. The U.S. has yet to release specifics on some of its most controversial positions, including measures to reduce the U.S. trade deficit, prevent currency manipulation, favor U.S. companies in government contracts, known colloquially as Buy America, and rework rules governing arbitration panels.

Discussions continue within the administration about how to accomplish those goals without harming U.S. companies, U.S. and industry officials said.

“The lack of U.S. clarity represents a risk [for Canada and Mexico], and they are trying to prepare for any eventuality,” said Eric Miller, a global fellow at the Woodrow Wilson Center’s Canada Institute.

Mr. Lighthizer focused early on what are known as rules of origin requirements, which govern what portion of a product must come from within the bloc to qualify as tariff-free <https://www.wsj.com/articles/nafta-talks-open-with-spat-over-how-to-resolve-tariff-conflicts-1502875802>. In his opening remarks last week, Mr. Lighthizer noted that in the auto sector alone, the U.S. has a $68 billion deficit with Mexico and thousands of American factories workers have lost their jobs.
To create more U.S. manufacturing jobs, he suggested that the pact should set a standard not only for higher content from the three Nafta countries, but also for U.S.-specific content, a demand that drew early resistance from the trading partners Mexico and Canada. They fear that the changes would raise costs and put their auto sectors at a disadvantage.

“National content is not used in any commercial agreement in the world, because it puts too much rigidities to the companies,” Mexico’s Economy Minister Ildefonso Guajardo told Mexican radio after returning home Saturday from the talks.

Canada’s Foreign Minister Chrystia Freeland has also voiced opposition to the idea of national content <https://www.wsj.com/articles/canada-wants-to-make-nafta-more-progressive-1502716293>, though she and Mexican officials have noted the U.S.’s tough stance was expected heading into negotiations.
As with other proposals, the U.S. hasn’t yet provided a brief or text with details on how it would change the rules of origin. The U.S. is expected to provide details on all of its Nafta positions by the third round of talks next month in Canada. The second round will take place in Mexico City from Sept. 1 to 5. Currently 62.5% of autos and major auto parts shipped within the three Nafta countries must be produced in Mexico, Canada or the U.S. to qualify for duty-free shipment.

The U.S. proposal could amount to an opening bid, and it could also generate opposition in Congress, which would have to approve a final pact, especially if significant parts of U.S. industry bring their lobbying firepower to the issue.

“These sorts of country specific requirements would just add to the cumbersome nature of rules of origin compliance,” said Matt Blunt, head of the American Automotive Policy Council, which represents the Detroit auto makers.

Mr. Blunt said that Mr. Lighthizer is a “a very smart person, and he may be laying out some negotiating parameters.”

One way to tackle the rules of origin, said trade experts, would be to include in the calculations the advanced electronics used in vehicles. For instance, regional or U.S. content could be revised to include research and development of vehicle software conducted by companies in the U.S. or North America, even though the electronics are manufactured in Asia.

But it is far from clear that the U.S. would be satisfied with cosmetic changes to the content calculations. Mr. Lighthizer on Wednesday said Mr. Trump “is not interested in a mere tweaking of a few provisions and a couple of updated chapters.”

The U.S. feels that its most significant leverage in the talks is Mr. Trump’s threat to withdraw from Nafta if the U.S. doesn’t get the changes it wants. North American trade is far more significant to the Canadian and Mexican economies than it is for the U.S.

Mexican negotiators say they are prepared to scrap Nafta rather than accede to demands they consider harmful to their economy.

On auto trade, while labor groups have long called for stricter rules on which products qualify for duty-free treatment, auto makers in all three nations oppose tighter rules of origin. The companies warn that stricter rules could affect their supply chains in unpredictable ways, perhaps even driving production overseas.

Meanwhile, a group that represents U.S. manufacturing businesses and supports Mr. Trump’s trade policy praised Mr. Lighthizer’s plan.

“The administration should reject fears of supply-chain disruption asserted by the import lobby,” said Michael Stumo, chief executive of the Coalition for a Prosperous America. “Successful trading nations like China and Germany ‘disrupt supply chains’ intentionally, working to increase their domestic supply chains at the expense of foreign suppliers.”

—William Mauldin and Santiago Perez contributed to this article.

Write to Sara Schaefer Muñoz at Sara.Munoz at wsj.com <mailto:Sara.Munoz at wsj.com> and Bob Davis at bob.davis at wsj.com <mailto:bob.davis at wsj.com>
Appeared in the August 21, 2017, print edition as 'Tension Builds At Nafta Talks.'
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.citizenstrade.org/pipermail/ctcfield-citizenstrade.org/attachments/20170821/e89d5eea/attachment.htm>