Auto suppliers fear job losses if U.S. quits NAFTA

Frederick Owens
October 13, 2017

The CEO meeting ran in parallel to talks near Washington aimed at refreshing the 1994 agreement, with Mexico, Canada and businesses united in opposition to a number of radical US proposals they say would damage the North American economy.

Mexico's foreign relations secretary says his country won't accept "limited, managed trade", an apparent reference to demands for higher United States and regional content rules on products like auto parts.

Asked during his appearance with Trudeau whether NAFTA was dead, Trump said, "We'll see what happens".

During talks at the White House Wednesday, President Trump suggested the possibility of replacing NAFTA with a new U.S.

"It's a source of total uncertainty", said one of the NAFTA government officials familiar with details of the negotiations.

Trudeau later said he was optimistic that an agreement would be reached.

Trudeau was to travel to Mexico City after his trip to Washington to hold talks with Mexican President Enrique Pena Nieto. "We have to protect our workers and in all fairness, the Prime Minister wants to protect Canada as well as its people, so the agreement has to be fair for both countries". But some made-in-America hawks have pushed the Trump administration to advocate for an increase in the requirement to as much as 90 percent of autos to be made with parts that originated in the three countries in order to receive the exemption, or boost the percentage that has to come directly from the U.S. But Mexican leaders have also warned that talks must conclude early next year before their presidential election campaign gets underway.

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Mexico and Canada would fare better because they previously charged higher tariffs than the United States and would revert to those levels.

Ending NAFTA, however, would result in a full reversion to tariffs under World Trade Organization rules, according to the Boston Consulting Group study sponsored by the Motor Equipment Manufacturers Association. Those "could doom the entire deal", Thomas Donohue, the Chamber's CEO said October 11.

The United States is pushing for automobiles to include more USA -made parts as well as more content from Canada and Mexico overall. "There are several poison pill proposals still on the table that could doom the entire deal".

Current NAFTA rules require cars have at least 62.5 percent of their parts made in the U.S., Canada or Mexico. Under the United States proposal, America would require more to be made in the country and less sourced from other members of the block.

But there is still some uncertainty whether Trump is deploying tough negotiating bluster or is seriously considering scuppering the agreement.

Mr James Keith, a former U.S. ambassador and managing director for China and South-east Asia at Washington-based McLarty Associates, told The Straits Times that there is unlikely to be action on trade negotiations with Asian partners until Mr Trump completes a visit to South-east Asia and North-east Asia next month. "We have always understood that draining the swamp would be controversial in Washington".

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