Mexico is opening the door to compromise on the key NAFTA issue of auto manufacturing, though it's unclear if the flexibility is enough to reach a deal with the U.S. and Canada, according to four people familiar with the talks.
In talks in Washington on Monday and Tuesday, Mexico for the first time indicated a specific level to which it's willing to raise North American automotive content -- 70 per cent, according to the people, who asked not to be identified discussing private negotiations.
While that's up from the current 62.5 per cent, it's unclear if it's enough to strike a deal because the U.S. has been calling for 75 per cent for the biggest components of cars. Mexico is also seeking to implement the changes more slowly than the U.S. wants -- over a period of a decade, according to two of the people.
The issue of auto wages remains contentious. While Mexican negotiators rejected a U.S. demand that almost half of every car be built by higher-paid workers, two people late Tuesday said the Mexican government left room for using some level of higher-wage production as a way to meet new NAFTA content criteria. Setting wages through NAFTA is controversial in Mexico's auto industry, and two other people on Tuesday said the Mexican proposal included no wage targets, underscoring the competing interests in the complicated talks.
President Donald Trump has blamed low-cost Mexican production for the outsourcing of U.S. manufacturing jobs south of the border, which was a key motivation for him to demand the 24-year-old pact be renegotiated last year. U.S. proposals have been oriented around increasing Mexican salaries and providing incentives for auto manufacturers to either move production back to America or at least stop investing so much south of the border.
The U.S. wage proposal "is likely to price Mexico out of the market -- by all accounts, Mexican negotiators are well aware of that," Phil Levy, a former senior trade economist in George W. Bush's Council of Economic Advisers who is now a senior fellow at the Chicago Council on Global Affairs, said in an interview with BNN Bloomberg television on Tuesday. "And that doesn't actually help any of the North American producers, so it doesn't seem like a terribly viable strategy."
The press office of Mexico's Economy Ministry and the press office of U.S. Trade Representative Robert Lighthizer declined to comment,.