NAFTA auto proposal could backfire
U.S. proposal bad for its industry, Canada to point out
MEXICO CITY — Canadian negotiators intend to provide a briefing to their American peers on how their auto parts proposals would devastate the U.S. domestic industry, in an effort to reset one of the most difficult conversations looming over the renegotiation of NAFTA.
Multiple sources say that at the current round Canada will present information — not a counterproposal. And they expect that Mexico will also hold off presenting a counter-offer on auto parts, which is shaping up to be a key issue.
They say the countries are more likely to make progress at the current round in Mexico City on less controversial files, while saving the thornier ones for later in the negotiations, with auto parts decidedly parked in that difficult category.
A U.S. proposal at the last round drew a backlash from Canada, Mexico, the auto industry, and from dozens of American lawmakers who released a public letter blasting it.
The American proposal had four main components: insisting half of a car’s parts be from the United States to avoid a tariff, drastically increasing the amount of content required from North America overall, toughening the method for calculating the parts percentages, and insisting that companies implement all those changes within a year.
Some auto-parts representatives say that package is so unrealistic it would prompt companies to move production out of North America, build in Asia, and just pay the import tariff, which starts at 2.5 per cent for cars entering the United States.
The Canadian presentation comes after weeks of consultation with industry players. One of them is present at the talks in Mexico and he welcomes the Canadian approach. Flavio Volpe says the U.S. proposal never made commercial sense, and appeared designed to shock other countries’ negotiating parties.
So, he says, it’s logical that those other countries would try to reset the conversation — rather than engage on unrealistic terms.
“You turn around and say, ‘OK, guys, if we accept your proposal as your real intention, your real intention is hurtful to your own interests. Do you know that?’” Volpe said in an interview at the hotel where talks are being held through Tuesday.
“You want to hit us? You hit your own (sector) by 20 per cent — that’s ridiculous.”
The current round of NAFTA talks in Mexico City will include four days of discussions on rules of origin for different products, including auto parts.
The auto component is likely to come up Monday, a day before talks end.
Politicians will not attend this round.
After an acrimonious round in Washington last month, there has been an attempt to lower the political temperature of the process, and give negotiators space to work. For starters, the target deadline has been pushed back a few months, into next spring. Also, the three countries’ lead NAFTA ministers, Chrystia Freeland, Robert Lighthizer and Ildefonso Guajardo, will skip this round.
A union leader representing autoworkers agrees with Volpe, who represents the companies that make parts. Unlike the companies, Unifor leader Jerry Dias welcomes more stringent domestic content requirements.
Dias agrees the U.S. proposal, as designed, should not be the baseline for a discussion.
Dias asked: Why would Canada engage in a serious back-and-forth on auto parts as long as U.S. demands, like a 50 per cent American content requirement per vehicle, are seen as so impractical they’re being derided even within the United States?
After speaking with Canada’s negotiating team in Mexico, he’s confident they share his view. Different government sources have also confirmed that no major counterproposals on hot issues will be made at this round.