MEXICO CITY -- Mexico’s economy minister said on Monday a successful retool of the North American Free Trade Agreement (NAFTA) would hinge on two or three complex areas that he called “elephants in the room,” just days before the next round of treaty talks in Canada.
Speaking at an event in Mexico City, Ildefonso Guajardo said the “elephants,” such as the U.S. trade deficit with Mexico and rules of origin, will determine the success of the trade treaty’s renegotiation. Rules of origin specify the percentage of components in a product that must be from the three NAFTA nations for it to qualify as duty free.
For automakers and their suppliers, rules of origin is an important aspect of the trade pact. Currently, 62.5 percent of a vehicle’s content value must come from the United Statess, Canada and Mexico to cross the border duty free. U.S. officials have has said they want to raise the regional-content threshold. U.S. Commerce Secretary Wilbur Ross wants more than 70 per cent of North American content in vehicles, a move supported by Unifor President Jerry Dias.
Some U.S. trade officials have also suggested a minimum requirement for U.S. content, to keep more local work and protect against greater use of imported Asian parts.
Asked by journalists if Mexico would accept national content rules that would require a portion of products to be made in the United States, the minister said the topic had yet to reach the negotiating table.
“We would analyze it, but I believe as of today there is no trade agreement that contains this type of clause,” he said.
Guajardo reiterated that Mexico was ready to modernize the agreement, which U.S. President Donald Trump has threatened to scrap, and to find solutions with the United States and Canada.
The areas Mexico is concerned about cover smaller companies, transparency and food safety.
“This challenge of resolving two or three un-traditional topics at the trade negotiation tables is what is going to determine if, at the end of the day, we’re going to have an agreement or not,” Guajardo said in a Forbes Mexico talk.
The third round of negotiations are due to take place Sept. 23-27 in Ottawa.
U.S. trade envoy Robert Lighthizer said on Monday negotiations with Canada and Mexico on modernizing NAFTA were moving quickly but it was too soon to know whether the sides will reach a conclusion before elections in Mexico and the United States.
“We’re moving at warp speed but we don’t know whether we’re going to get to a conclusion,” Lighthizer told an audience at the Center for Strategic and International Studies ahead of the next round of talks.
The sides have said they would like to conclude talks on revamping the North American Free Trade Agreement by early next year because of the Mexican vote and midterm Congressional elections in the U.S. in November 2018.