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NAFTA Changes Dismissed by Canadian Suppliers

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A number of Canadian organizations involved in the automotive sector wasted no time in condemning U.S. demands on auto parts at the NAFTA negotiations, including a strict “Made In America” requirement that’s viewed as a non-starter by virtually every party involved in automobile production.

This story by the Canadian Press appeared in Automotive News Canada.

The proposals contain three ideas that automakers say would complicate production: requiring all cars sold without tariffs to include 85 percent North American content — up from the current 62.5 percent. The proposals also call for 50 percent U.S. content in all duty-free cars sold in the U.S. and an elaborate, detailed listing of parts that didn’t exist in 1994 when NAFTA was introduced.

Canada and Mexico, the two other members of the pact, strongly oppose both ideas. A Mexican source with direct knowledge of the talks called the auto content proposal “absurd.”

So impractical are the U.S. demands, the talk in the hallways at the conference site involves trying to decipher which of two objectives the Americans are trying to achieve: Sabotage the talks, or shock other parties into concessions.

Flavio Volpe, president of the Canadian Automotive Parts Manufacturers’ Association, and his organization said the proposal could create a perverse incentive: producers might simply shift away from North America, and hurt the entire continent.

The argument is that it’s easier to ignore the NAFTA rules and simply pay the U.S. 2.5 per cent import tariff. The union representing Canadian auto workers agrees. Unifor President Jerry Dias says the U.S. would never have the power to enforce the proposed changes because companies would just ignore it.

Scotiabank analysts agree the proposals would hurt their author. Car companies would have an incentive to move production away from the U.S. and Canada – either to Asia or Mexico – and pay a tariff rather than deal with the rules being proposed by the U.S., said its deputy chief economist Brett House.

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