undergroundnewsroom.com April 22, 2018

NAFTA talks in Canada could result in energy agreement with Mexico

24 September 2017, 12:57 | Gordon Grant

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U.S. Commerce Secretary Wilbur Ross has frequently criticized NAFTA's rules of origin as a "back door" for Chinese auto parts to enter the United States through Mexico and Canada and that the trade pact's benefits needed to be restricted to its members.

The American Apparel & Footwear Association (AAFA), an alliance of ten business groups representing firms from across the Canadian, Mexican and United States textile and apparel supply chain, has urged the North American Free Trade Agreement (NAFTA) negotiators to preserve tariff preference levels (TPLs) during talks as these help keep operations competitive.

The agenda for this round, obtained by The Canadian Press, shows rules of origin are to be discussed Tuesday and Wednesday morning.

"As I have been saying since the day I got elected to Congress, not only NAFTA, any trade deal that we have must include strong, enforceable provisions to address currency manipulation, the mother of all trade barriers, which is critical for Michigan's economy and the domestic auto industry", she said. "That is going to change under President [Donald] Trump, and rules of origin are just the beginning".

United States trade representative Robert Lighthizer, Canadian foreign affairs minister Chrystia Freeland and Mexican secretary of the economy Ildefonso Guajardo lead the respective teams.

Flavio Volpe, president of the Canadian Automotive Parts Manufacturers' Association, said late on Friday he felt it was too early for detailed rule of origin proposals given that USA officials were still talking to the domestic industry.

These data debunk the claim that USA content in the form of parts is so high that we shouldn't worry about headline gross-deficit figures.

Auto-industry officials estimate that there is between 60 per cent and 70 per cent USA content in Canadian-assembled vehicles. But tightening the NAFTA content requirement wouldn't necessarily result in those components being made in the U.S.

"Since 2011, the USA position vis-a-vis Canada has improved materially from numbers that are already wrong", Mr. Volpe said.

Roughly 75 per cent of the value of all auto parts used in North American-built vehicles is sourced within NAFTA, well above the 62.5 per cent threshold required for finished automobiles to move duty-free between NAFTA countries. NAFTA supporters assert that the USA content in cars assembled in Canada and Mexico is particularly high and that therefore our $70 billion-plus trade deficits with our NAFTA partners are not worrisome. Exports added $50 - representing 36% of the $140 average value of a hog - to every USA hog marketed in 2016, when $5.9 billion of US pork was exported. "He knows that the majority of the parts that go into a Canadian-built auto, including steel, come from the United States".

The National Pork Producers Council says since NAFTA implementation, USA trade with Canada and Mexico has more than tripled, growing more rapidly than US trade with the rest of the world.

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Negotiators are meeting in Ottawa this weekend to kick off the third round of renegotiations of the North American Free Trade Agreement.

Another potential source of conflict between Canada and the U.S.in these talks is Canada's "real red line": Chapter 19, the dispute resolution mechanism.

A second government official, speaking on background, says talks at this point are where Canadian negotiators had anticipated.

"But the one rule with trade negotiations is they always take longer than expected", he said.

One literal barrier that could derail a deal is President Donald Trump's border wall, which Napolitano called "a political symbol and the wrong political symbol because it signifies that the United States somehow wants to wall itself off from Mexico".

"I think there has to be because you can't keep on going and not doing anything". An average auto worker probably makes a little over $2 an hour.

If we don't fix the rules of origin, negotiations on the rest of the agreement will fail to meaningfully shift the trade imbalance. They're talking about America first, they're talking in a very protectionist way about the American economy.

"This data certainly gives the Canadian negotiators a road map in a sense of priority for the Canadian public", Shachi Kurl, executive director of the Angus Reid Institute, told The Globe.

Meanwhile, Canadian Prime Minister Justin Trudeau reiterated his wish to push for new NAFTA chapters on gender equality, indigenous rights and labor protections. In 2016, USA farmers exported more than $38 billion of products to the two nations, or 28 percent of all US agricultural exports. Trade between the USA and Canada is balanced, with the US having a surplus in services and a deficit in goods trade.

OTTAWA-Despite Canada's different view on climate change from that of the United States - namely, that it is real - Environment Minister Catherine McKenna is optimistic that progress can be made on the Liberal government's goal of bringing tough environmental rules into the heart of a new NAFTA.

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