U.S. Huddles with Carmakers on NAFTA Deal

U.S. trade negotiators are working with the auto industry to find a fair way to adjust NAFTA’s local content rules, Bloomberg News reports.

Trade Representative Robert Lighthizer tells reporters he’s looking for a solution that will be palatable to everyone’s interests. He acknowledges that “autos are a huge part of the problem” in rebalancing the 24-year-old North American Free Trade Agreement.

Lighthizer also says the U.S. is willing to compromise on its demands about so-called rules of origin, which have stymied seven rounds of NAFTA negotiations to date. The rules dictate the level of local content required to allow cars made in Canada, Mexico and the U.S. to be shipped duty-free within the three-nation region.

The Trump administration has proposed hiking local content to 85% from the current 62.5%. The White House also demands that 50% of content come from the U.S., regardless of where in North America the vehicle is made.

Analysts say those changes would fundamentally upset auto industry supply chains and add costs. They also could make compliance so complex that carmakers will opt to simply produce at least some vehicles overseas and pay a simple import tax on them.

Lighthizer’s comments were sufficiently important to prompt Mexico to delay presenting its proposal on the issue. Bloomberg says Economy Minister Ildefonso Guarjardo says Mexico now wants to await the outcome of Lighthizer’s talks with industry leaders.