Chief Canadian NAFTA negotiator not expecting progress on auto content rules

Ivan Schwartz
September 24, 2017

The "scariest part" of NAFTA as it's now written is that autos and auto parts make up almost all of the US trade deficit with Mexico and Canada, Ross said on "Squawk Box".

"We see huge opportunities in the renegotiation of the NAFTA, and in those opportunities the possibility that we will be able to evolve a North American trade and economic partnership that is truly reflective of the 21st century", D'Aquino said.

Former Arizona Gov. Janet Napolitano thinks there is a deal to be had in the current renegotiation of NAFTA, if the deterioration of relations between the United States and Mexico doesn't get in the way of finding common goals.

As a third round of NAFTA talks begin this weekend in Ottawa, the Commerce Department released a study that showed the ratio of US content in motor vehicle imports from Canada and Mexico fell by more than eight percentage points between 1995 and 2011, while use of components from non-NAFTA countries - especially Asia - rose significantly.

However, U.S. President Donald Trump's high-profile running commentary and politicking over NAFTA would likely insulate members of Congress and the Senate from NAFTA as an election issue, he added. According to Commerce's report, released Friday, the OECD's "Trade in Value-Added" (TiVA) data, which covers the period of 1995-2011, shows the share of US -produced content in manufactured imports from Mexico and Canada declining from 26 percent in 1995 to 16 percent in 2011. A recent International Labour Organization (ILO) report shows that Mexican workers, like their US colleagues, suffered the most from Chinese competition, not each other.

When NAFTA was negotiated in 1994, it lowered trade barriers and allowed more-or-less free-flowing trade across North America's borders.

All speakers at the event agreed that an amended NAFTA will better serve the U.S., Mexico and Canada than walking away from the deal - as Trump has threatened he might do if he is not satisfied. The Commerce report, "U.S". While the USA imports more goods and services from Mexico annually than it is exporting to Mexico (commonly referred to as a "trade deficit"), Arizona experiences a $900 million economic benefit from the Arizona/Mexico trade equation.

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Flavio Volpe, president of the Canadian Automotive Parts Manufacturers' Association, said late on Friday he felt it was too early for detailed rule of origin proposals given that USA officials were still talking to the domestic industry.

Canadian negotiators have been waiting since the first round of talks in August for the United States to submit the country's negotiating demands.

"Rules of origin" are among the topics that are expected to be addressed in upcoming NAFTA negotiations. "I have no problem raising the rules of origin, but rules of origin in itself won't fix the problem because if they relocate auto-parts plants from Europe and Asia, they will just go to Mexico because their minimum wage is 65 cents an hour".

Canadian auto workers are supportive of higher North American content but they also want Ottawa to press for tougher labour laws in NAFTA to push up wages in Mexico. Auto-sector export growth to Mexico from Canada has picked up even more quickly, albeit from a smaller base.

That two-way trade, alone, supports 6 million U.S.jobs.

The Trump administration believes erasing the U.S.'s trade deficit - the amount that imports exceed exports - should be the country's top trade priority. If it's going to be a discussion about NAFTA, we have to talk about human rights violations to people that's occurring in Mexico, South America and all over this world.

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