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NAFTA moves forward in 2018

By: Dr. Alejandro Díaz-Bautista, Economist (PhD).

– Automotive content rules in NAFTA.

The seventh round of NAFTA will take place from February 25 to March 5 in Mexico City.

Rules of origin is one of the most discussed topics in conversations. “The rules for automotive content, one of the most important and controversial issues of NAFTA, will be among the first topics addressed in the next seventh round of talks in Mexico,” said Dr. Alejandro Díaz Bautista, an economist and national researcher at the Conacyt as well as research professor at El Colegio de la Frontera Norte (El Colef).

The negotiators of the three countries, Canada, the United States and Mexico, plan to begin with the rules of origin, which determine how much geographic content a product must have in order to benefit from the NAFTA tariff exemptions.

In an attempt to revive US factories, the White House has proposed raising regional automotive rules of origin for passenger cars to 85 percent from 62.5 percent and adding a specific requirement from the United States.

The United States proposes that the changes are necessary to reduce a trade deficit with Mexico, which they say is the result of the companies having moved factories, maquiladoras and jobs south of the border to take advantage of Mexico’s cheap labor.

While Canada, in the last round of negotiations in Montreal, presented some new ideas on how to calculate the value of the regional content of vehicles, including the granting of more credit for driverless cars and electric vehicles, in addition to research work and development.

The United States, Mexico and Canada began to renegotiate the North American Free Trade Agreement in August 2017 at the initiative of President Donald Trump, who promised to negotiate a better trade agreement for the United States or withdraw it.

The talks, organized in rounds, have revolved between Washington, Mexico City, Ottawa and Montreal in the last six months. As the negotiation of the North American Free Trade Agreement (NAFTA) progresses, the level of complexity of the NAFTA also increases.

After the entry into force of the Free Trade Agreement, in January 1994, bilateral trade between Mexico and the United States grew enormously. In 2015, the figure for business between Mexico and the United States exceeded 532 billion dollars.

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