NAFTA Renegotiations Begin, Automakers Worried Over Rules of Origin

The first round of the North American Free Trade Agreement renegotiations begins on Wednesday. U.S. President Donald Trump, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau have planned to meet in Washington, D.C. on August 16th and stay through the 20th to discuss trade policy. Afterward, NAFTA debates will be led by U.S. Trade Representative Robert Lighthizer, Canadian Foreign Minister Chrystia Freeland, and Mexican Economy Minister Ildefonso Guajardo.

While this all began as a Trump campaign promise to renegotiate a better deal for the United States (or abandon the trade agreement entirely), it has evolved over the last six months into an opportunity to modernize NAFTA policies. There’s no firm deadline for the three countries to reach an agreement, but Mexico is pushing for the process to wrap up before its presidential campaign begins in earnest in February.

The United States has said its primary goal for the talks is shrinking its $64 billion trade deficit with Mexico, as well as its $11 billion deficit with Canada. It also wants to strengthen NAFTA’s rules of origin, eliminate Chapter 19 trade dispute mechanisms, and stop currency manipulation among trading partners — even those that apply less to North American partners.

Automakers and suppliers have been clear they want ensure fluid movement of product between countries and are opposed to tightening the rules of origin, especially as they relate to vehicle parts.

“In terms of the rules of origin, the overall goal is to address concerns about doing more to incentivize and create more manufacturing and more manufacturing jobs in the United States,” an unnamed U.S. official told Reuters in an interview. “I think each country expects benefits for itself from those rules of origin, and I think that’s what you’re seeing reflected in our objective statement.”

U.S. Senator John McCain publicly cautioned the Trump administration not to force “new barriers that could harm our ability to trade with our closest neighbors.”

“I urge the administration to pursue an outcome that does not pick winners or losers, but further promotes the free flow of trade with Mexico and Canada that has and will continue to boost our economy,” said McCain.

Canada’s primary sticking point is the elimination of Chapter 19. Freeland has even gone so far as to suggest her country could walk away from the talks if the U.S. insisted on eliminating preexisting mechanisms to resolve trade disputes between the three NAFTA participants.

Speaking on Tuesday, prior to a meeting with Guajardo at the Canadian embassy in Washington, Freeland said she looked forward to a “productive, constructive conversation.” Meanwhile, Guajardo said he wanted to exercise caution.

“I have always said a negotiator cannot be an optimist. He has to be a realist with a positive approach,” he told reporters.

[Image: NAFTA Secretariat]

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