Solutions to NAFTA impasse being floated
TRADE
WASHINGTON • NAFTA negotiations are approaching a new phase of talks after early rounds marked by acrimony, i nflexibility and f i ngerpointing. It’s the search for solutions.
Negotiators at an informal session in Washington this week are discussing ways to work around a main impasse of the talks so far, a U. S. demand on auto parts deemed unfeasible by Canada, Mexico and the industry.
Now, the other countries are asking the U. S. whether there might be a way to rework the proposal in a manner palatable to everyone, while still achieving America’s goal of bolstering domestic auto production.
It’s an effort to get a head start before talks enter a critical stage next year: Rounds are currently scheduled only into March; Mexico and the U. S. have na- tional elections thereafter and U. S. President Donald Trump has threatened to start the withdrawal process to get a quick deal.
One Canadian official said a spirit of problem- solving has permeated this informal round. “The mood has lightened a bit since the Mexico round (last month),” he said. “It was a bit acrimonious.”
The main goal this week is to start exploring solutions for the auto provisions, a key priority for a Trump administration elected on a promise to strengthen domestic manufacturing.
The Canadian side thinks that goal can be achieved by moving away from the traditional method of calculating the content of a car. For instance, the current NAFTA says a car’s pieces must be 62.5- per- cent North American to avoid a tariff and the U. S. called for a ramp- up to 85 per cent, plus a U.S.-specific 50-per-cent. But what if the formula were overhauled?
Canada is raising the idea of a new calculation that takes into account the full cost of a vehicle, including the most valuable components of modern cars — new digital technologies, lightweight composite materials and other intellectual property, for which the U. S. is a world-leading hub.
“Evaluating the entire value … rather than some of the components that are currently spelled out. ( Things like) digital inputs,” is how one official explained it. “It’s important to recognize that what goes into a car has changed since NAFTA was signed.”
The Center for Automotive Research in Michigan has estimated that while mild steel and high-strength alloys made up 80 per cent of a car’s materials in 2010, that fell to barely 60 per cent in 2015; will fall to barely 30 per cent in 2020; barely 20 per cent in 2030; and less than 10 per cent in 2040.
Canadian auto- parts representative Flavio Volpe called the tracing requirements in NAFTA a tool designed for the cars of 1994.
“I think we have to have a fresh look at the way that works,” Volpe said. “(So) can you devise a formula that captures the hundreds of billions of dollars currently being spent to meet advanced fuel- efficiency and safety regulations? If you can, then we can all negotiate the numbers (later).”