Auto parts changes top U.S. NAFTA priority

COMMERCE SECRETARY TO MOVE QUICKLY ON NEGOTIATIONS

Donald Trump’s new point man on trade negotiations has shed some light on key goals in revamping the North American Free Trade Agreement, hinting Friday that priority No. 1 involves more automobile parts sourced close to home.

The newly confirmed U.S. commerce secretary told a television interviewer he intends to move quickly on NAFTA negotiations and wants to be aggressive on traderelated issues to spur domestic manufacturing.

Wilbur Ross was asked what he considers the most egregious parts of the current agreement, and the first thing he mentioned was interpreted by several observers as a reference to the formula for calculating car-part imports.

“First of all, I think the rules of origin were far too lenient (in NAFTA),” Ross told CNBC.

“Rules of origin means how much goods can come in from countries outside NAFTA — and yet get all the benefits of absolution from tariffs .... I think those can be tightened up quite a bit.”

It’s still unclear whether his rule-tightening talk is aimed at the U.S.’s neighbours, designed to limit imports within the continent — or at intercontinental trade, and limited imports from more distant suppliers in Asia.

But he appeared to provide a clue about how he intends to do it.

Ross at one point referred favourably to an aspect of the Trans-Pacific Partnership — a now-dead deal he opposed, and which would have allowed more Asian car parts tariff-free into North America.

There were some good things in the TPP that tightened rules, he said.

To observers, that could mean he wants to change the formula for calculating rules of origin. Because while the TPP was designed to increase the percentage of auto parts imported from Asia, it also promised producers a more stringent formula to calculate domestic content.

North American auto workers fumed about TPP lowering the domestic content requirement by 17.5 per cent. On the other hand, the deal offered a half-dozen pages of new definitions for what qualified as domestic content.

One big unknown is whether Ross might press for a sub-regional rule of origin — one that insists that, to avoid a tariff, a certain percentage be sourced from the United States.

One observer says Ross is an expert on these rules, as a billionaire investor in various industries including car parts. Eric Miller says he expects there will be winners and losers from these changes, even within Canada.