MEXICO is warning that the U.S. interpretation of the revamped North American free trade agreement (NAFTA) that also includes Canada could push automakers to abandon the region due to cumbersome and costly content requirements.

Luz Maria de la Mora, Mexico’s undersecretary of economy for foreign trade, said that if the United States doesn’t come to an agreement with Mexico about the rules of origin of auto parts, firms could seek to move their business to countries with more favorable trade agreements.

The U.S.-Mexico-Canada Agreement (USMCA) deal replacing the NAFTA took effect last July with the new so-called rules of origin designed to be phased in over several years

“The USMCA may become inconsequential for trade in the auto sector in North America because firms may decide not to bother with even complying with the USMCA, because it becomes so costly, so cumbersome, and so difficult,” De la Mora said.

“It may not be worth their effort to really try to procure from North America, so why bother investing in North America.”

Last week, Mexico formally requested the beginning of consultations with the United States in order to settle a dispute over the U.S. interpretation of the way to measure regional content of a car made in North America to trade duty free.

The United States has a 30-day period to respond to Mexico’s request and a 75-day period to reach an agreement with Mexico before Mexico could potentially request that a formal panel hear arguments from the two nations.

(SD-Agencies)