May 8, 2018 / 5:49 PM / 17 days ago

Mexico pitches auto proposal as NAFTA talks grind on

WASHINGTON (Reuters) - Mexico has launched a counterproposal to U.S. demands to toughen automotive industry content rules under the North American Free Trade Agreement (NAFTA), officials said on Tuesday, as ministers again pushed for a deal to rework the 24-year-old accord.

FILE PHOTO: Production Associates inspect cars moving along assembly line at Honda manufacturing plant in Alliston, Ontario March 30, 2015. REUTERS/Fred Thornhill/File Photo

Canadian, Mexican and U.S. officials hailed progress on revamping NAFTA on Tuesday, but there was no sign of a major breakthrough after more than eight months of negotiations.

Canadian Foreign Minister Chrystia Freeland, U.S. Trade Representative (USTR) Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo held separate meetings in Washington, and hopes for a deal hinge on the three sides’ ability to update rules for the automotive sector.

Guajardo said Mexico’s negotiators had discussed the Mexican auto sector proposal during a “productive” meeting with Lighthizer. But he gave no indication the three were nearing a common position that would work for the respective industries.

“Each one faces a different challenge. So we are trying to accommodate the different positions,” he said, adding that “everything is still on the table” regarding autos.

Retooling auto industry rules is the central plank of the Trump administration’s push to make changes to NAFTA that bring more jobs and investment to the United States.

The latest U.S. proposal includes raising North American auto content to 75 percent from the current 62.5 percent over four years for light vehicles, but the Mexican auto industry has rejected that as “not acceptable.”

The U.S. proposal would also require that 40 percent of the value of light passenger vehicles and 45 percent for pickup trucks be built in areas with wages of $16 per hour or higher, which would create difficulties for lower-cost Mexico.

Mexico instead has pitched a plan to raise the auto content threshold to 70 percent, according to four people familiar with the matter. It foresaw a gradual 10-year phase-in for pickups and light vehicles, one of the sources said. It also contained a flexible salary-related component, according to a fifth person.

Mexico’s Economy Ministry had no immediate comment on the details of the proposal the sources set out.

One industry source close to the negotiations said the plan had not met with U.S. approval.

Freeland met Lighthizer and told reporters she had held “good, constructive” talks with the U.S. team and that discussions focused on auto rules of origin.

FILE PHOTO: Newly assembled vehicles are seen at a stockyard of the automobile plant Toyota Motor Manufacturing of Baja California in Tijuana, Mexico, April 30, 2017. REUTERS/Jorge Duenes/File Photo/File Photo

“We are definitely making progress. I am not going to predict the day, hour and minute that we will be finished. We are certainly very, very hard at work,” she said.

Freeland also said that Canada was looking for a “good deal, not just any deal,” on NAFTA and that her government would take the time required to reach that objective.

Talks were expected to continue on Wednesday.

AUTO TUSSLE

U.S. President Donald Trump initiated the talks to revise the 1990s-era trade agreement, threatening to dump NAFTA if it cannot be changed to his satisfaction.

Trump blames NAFTA for causing U.S. manufacturing jobs to be moved to Mexico. The pact’s supporters say the integration of North America has helped U.S. industry be more competitive.

Luis de la Calle, a former Mexican trade official, said the U.S. auto proposals were “backward-looking” and aimed at traditional carmaking. They did not reflect how the industry increasingly relied on high-tech electronics, he said.

Moreover, Trump’s ambition to push for a deal that favored the United States but not Canada and Mexico was “grotesque and unacceptable”, he told Mexican radio.

High-level discussions over NAFTA have intensified since Lighthizer in early March floated the idea of agreeing a deal in principle in a matter of weeks. But there has been no clear sign of a conclusive breakthrough on the most contentious issues.

With a presidential election less than two months away in Mexico, time is running out to strike a quick deal.

Canadian Foreign Minister Chrystia Freeland speaks with reporters after meeting with U.S. Trade Representative Robert Lighthizer to discus NAFTA autos negotiations in Washington, D.C., April 25, 2018. REUTERS/David Lawder

Major differences remain between the three on several U.S. demands, including autos, the future of the pact’s dispute-resolution mechanisms and a U.S. proposal for a sunset clause that could automatically kill the deal after five years.

Reporting by Anthony Esposito; Additional reporting by Ana Isabel Martinez, Dave Graham, Sharay Angulo and Frank Jack Daniel; writing by Dave Graham; editing by Grant McCool, Chizu Nomiyama and Cynthia Osterman

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