U.S. pushes proposals on steel, autos rules: sources

OTTAWA/MEXICO CITY The U.S. wants to include steel in NAFTA’s tracing list and hike the share of a car that originates in America, moves that may increase costs and red tape for automakers, two officials familiar with negotiations say.

The steel proposal comes along with one of the Trump administration’s most highprofile demands so far in talks aimed at overhauling the North American Free Trade Agreement. The U.S. proposed late Thursday raising the so-called auto rules of origin to 85 per cent from the current 62.5 per cent, one official said, speaking on the condition of anonymity as discussions with Canada and Mexico are ongoing.

The rules govern what share of a product must be sourced within NAFTA to receive the pact’s benefits. President Donald Trump’s negotiators proposed adding a new, U.S.-only content requirement of 50 per cent, meaning it wants half of every car traded under NAFTA to be built in the U.S., the official said. The 85 per cent requirement would be phased in over multiple years, the official added.

Trump’s team also wants to add steel to the tracing list, two officials said Friday. The U.S. proposed vastly expanding the list to include textiles, aluminum and other metals, one official said. A spokesperson for U.S. Trade Representative Robert Lighthizer declined to comment.

Brett House, deputy chief economist at Bank of Nova Scotia in Toronto, said the rules of origin proposal would be a “potentially Pyrrhic victory” for Trump because automakers would just pay the U.S.’s 2.5 per cent tariff to import cars into the country rather than deal with the complicated set of rules for NAFTA.

If it were to come into force “what you would likely see is a lot of production being shifted either offshore or to Mexico rather than creating more jobs in the United States,” House said. “You wouldn’t see a big increase in U.S. employment and production.”