‘A lot of progress’ made on autos in TPP talks, Mexican minister says

• Mexican Economy Minister Ildefonso Guajardo says negotiators of a Pacific Rim free trade deal are very close to an agreement on autos and auto parts, but that a final accord would depend on other elements of the trade deal being discussed in Atlanta.

“We made a lot of progress in the auto issue but still we are pending in a couple of areas where we need to close,” Guajardo said Thursday. “We are ready. What we need is everything to fall into place at the same time.”

The Trans Pacific Partnership (TPP), which seeks to cut trade barriers and set common standards among a dozen nations reaching from Japan to Chile, has become snared since July over a small set of issues, including trade in autos and auto parts.

The auto issue is crucial for Japan, whose automakers, led by Toyota Motor Corp., depend on sales to the U.S. market and want flexibility in how and where they source parts.

Japan has been pushing to allow for the tariff-free movement of vehicles and auto parts that contain as little as 30-per-cent content produced in the countries that are part of the trade agreement. The risk is that Canadian autoparts makers will lose business to low-cost Asian pro- ducers that aren’t part of the trade deal, such as China, Vietnam and Thailand.

The stakes are also high for Mexico, which has experienced a boom in auto-related investment because of its proximity to the United States, relatively low labour costs and participation in the North America free-trade agreement.

A previous round of TPP negotiations failed in July after Mexican officials objected to a proposal by Japan and the United States on autos concerning the “rules of origin” that determine whether a vehicle can be exported without tariffs.

Canada left those talks dismayed by the surprise JapanU.S. agreement that would have upended auto-produc- tion, with tariffs eliminated on cars that primarily use cheaper parts from non-TPP countries like China.

Canadian Trade Minnister Ed Fast called the last proposal unacceptable. He added Wednesday that there has been movement since the failed round in July. “We have continued to make progress,” he said.

Two people briefed on the talks told Reuters that officials from Canada and Mexico offered support for a 45-per-cent threshold for local content on vehicles in discussions earlier this week.

“There is a lot of progress. A very small step to finish,” Guajardo told Reuters, when asked about the 45-per-cent threshold. “It’s very near to finish.”

That would give automakers a much freer hand on sourcing parts from Asia than they are allowed under NAFTA.