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Outlook is Stark Over NAFTA Negotiations

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Pessimism about the fate of NAFTA is mounting amid dismay that the U.S. wants to impose stringent new American content requirements on vehicles that are allowed duty-free movement across North America.

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

The U.S. is set to propose that cars and trucks must have at least 85 percent North American content and at least 50 percent specifically American content to qualify for duty-free status, according to a report by Inside U.S. Trade.

The rules of origin proposal is expected to be tabled this week in Washington during the fourth round of negotiations to rewrite the North American Free Trade Agreement.

Canada and Mexico have, from the outset of talks, been adamant that they won’t agree to a specific American content requirement that would bolster the U.S. industry at the expense of automobile and auto parts manufacturers in the other two countries. Canada’s automotive industry agrees.

Studies have found that Canadian-produced vehicles already contain 63 percent American content, while those produced in Mexico contain 40 percent, Volpe noted. But he said casting an American content requirement in stone would handcuff the industry’s ability to pivot to suppliers in other countries – including Canada and Mexico – should they be able to offer a better product at a better price.

The protectionist line on auto rules of origin comes after the U.S. tabled an equally unpalatable proposal on government procurement at the third round of negotiations two weeks ago in Ottawa. The U.S. is looking to severely restrict the ability of Canadian and Mexican companies to win contracts on government-funded infrastructure projects in the U.S.

A senior Canadian government official, not authorized to speak publicly on the matter, said Canadian negotiators will keep meeting and talking, even if it means repeatedly rejecting hardline American proposals.

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