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szdaily -> World Economy -> 
NAFTA talks enter critical week as US still pushing hard line
    2018-05-08  08:53    Shenzhen Daily

TALKS to update the NAFTA trade deal enter a make-or-break week Monday, as ministers from Canada, the United States and Mexico seek to resolve an impasse in key areas before elections in Mexico and the United States complicate the process.

Discussions in Washington will center on rules of origin, which govern what percentage of a car needs to be built in the North American Free Trade Agreement region to avoid tariffs, the dispute-resolution mechanism and U.S. demands for a sunset clause that could automatically kill the trade deal after five years.

Mexico will hold its presidential election July 1 and the front-runner, leftist Andres Manuel Lopez Obrador, says he wants a hand in redrafting NAFTA if he wins.

“We have a window of opportunity in the next two or three weeks ... considering two things: where the talks are now and the political calendars” in Mexico and the United States, said Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby.

Sources close to the talks have suggested there is a creeping feeling of uncertainty and pessimism going into the new round because of gridlock on the most critical issues.

At the heart of the NAFTA revamp is U.S. President Donald Trump’s desire to retool rules for the automotive sector in order to try to bring jobs and investment back north from lower-cost Mexico. Despite months of talks on the issue, the sides remain far apart. A round of talks among Canadian Foreign Minister Chrystia Freeland, Mexican Economy Minister Ildefonso Guajardo and Lighthizer scheduled for last week was canceled to allow consultations with the Mexican car industry and for the American to go on a trade mission to China.

Mexico’s main auto sector lobby has described the latest U.S. demands, which include raising the North American content to 75 percent from the current 62.5 percent over a period of four years for light vehicles, as “not acceptable.”

“The positive momentum on the rules of origin appears to be counterbalanced by the opposite movement on labor wage treatment proposals,” said Flavio Volpe, president of Canada’sAutomotive Parts Manufacturers Association.

The U.S. proposal also would require that 40 percent of the value of light-duty passenger vehicles and 45 percent for pickup trucks be built in areas with wages of US$16 per hour or higher.

That is seen as a hard pill to swallow for Mexico, where the Ann Arbor, Michigan-based Center for Automotive Research has estimated auto assembly workers average under US$6 an hour, and auto parts plants workers average less than US$3 an hour. Critics also say it would create a bureaucratic nightmare of paperwork.(SD-Agencies)

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