U.S. Commerce study argues for tougher NAFTA origin rules
Reuters
Published Sep 22, 2017 10:04AM ET
U.S. Commerce study argues for tougher NAFTA origin rules
By David Lawder
WASHINGTON (Reuters) - Seeking to bolster its case for tougher rules of origin in the North American Free Trade Agreement, the Trump administration released a new study on Friday that shows U.S. value-added content is declining for manufactured goods imported from Mexico and Canada.
The Commerce Department analysis of recently released OECD trade in value-added data found that U.S. content in automotive imports from Mexico declined to 18.1 percent in 2011 from 26.5 percent in 1995. U.S. content in automotive imports from Canada declined to 26.4 percent from 34.9 percent over the same period.
At the same time, automotive value added content from non-NAFTA countries in Mexican auto imports rose to 29.5 percent from 13.2 percent. China has seen the fastest growth in that component, to 5.8 percent in 2011 from a scant 0.3 percent in 1995.
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 report comes as chief U.S. negotiator John Melle prepares to present new text proposals at the third round of NAFTA talks in Ottawa starting on Saturday, where he said "more challenging issues will start taking center stage."
These are expected to include rules of origin, a chapter in which the Trump administration wants more substantial U.S. content in autos, the main source of the $64-billion trade deficit with Mexico and the $11-billion deficit with Canada.
"If we don't fix the rules of origin, negotiations on the rest of the agreement will fail to meaningfully shift the trade imbalance," Ross said in an opinion piece about the study published in the Washington Post.
The administration has not yet revealed its rules of origin targets, but some auto industry lobbyists and executives expect the Trump administration to seek a regional automotive content requirement of 70 percent or more, and a U.S.-specific content requirement of at least 35 percent.
Overall, the study found that the U.S. content of manufactured goods from Canada dropped to 15 percent in 2011 from 21 percent in 1995, a year after NAFTA went into effect. The U.S. content in Mexican manufactured goods fell by more, to 16 percent from 21 percent.
At the same time, Ross said the study shows content from non-NAFTA countries was rising over the same period, suggesting the origin rules needed to more tightly restrict NAFTA access benefits.
Mexican officials have said that Mexican imports into the United States contain an average of 40 percent U.S. content, arguing that the United States benefits from stronger economic integration with Mexico.
Get The News You Want
"These data debunk the claim that U.S. content in the form of parts is so high that we shouldn't worry about headline gross-deficit figures," Ross said in his op-ed.
The study also singled out rising non-NAFTA content in basic metals imports from Mexico and Canada, pointing to possible demands for tighter origin rules governing these products.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.