U.S. Wants Automakers to Use More North American Parts on Cars


Mexico and Canada push back on NAFTA demands

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The United States has proposed more North American parts and steel in cars built under the North American Free Trade Agreement (NAFTA) during the latest round of negotiation talks with Canada and Mexico.

Reuters cites sources familiar with the talks, who say the mood is bad in the fourth of seven planned discussions regarding NAFTA. The U.S. previously proposed a sunset clause that would see the deal expire in five years. Both Canada and Mexico opposed that idea as well as the latest parts content demand that would require trucks, cars, and large engines to contain 85 percent North American parts content (up from 62.5 percent) and 50 percent U.S.-made parts, according to sources. President Donald Trump has railed against NAFTA since his campaign days, calling it an unfair deal that the U.S. must renegotiate or walk away from. According to Trump administration officials, current content rules don’t do enough to discourage automakers from using parts from China or other low-wage Asian countries.

Future site of Toyota’s plant in Guanajuato, Mexico

In addition to the increased regional parts content, the U.S. wants automakers to ensure North American steel, aluminum, copper, and plastic resins are used. Canada and Mexico say meeting these demands would mean disrupting the North American auto industry. The Trump Administration also hopes to stop vehicle production from leaving the U.S. for Mexico.

Upping regional content requirements would raise costs and would defeat the benefits of NAFTA’s tariff-free arrangement, according to auto industry groups. The U.S. Chamber of Commerce calls the demands “poison pill” proposals that will sink the deal.

Both Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto said they were committed to achieving a “win-win-win” deal. The talks are scheduled to run through October 17, and three more meetings are on the books.

Source: Reuters

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