Auto industry groups of the United States and Mexico agree that rules of origin, which demand that products must meet minimum NAFTA-region content to be tariff-free, shouldn’t be changed during the renegotiation of the North American Free Trade Agreement (NAFTA).
"Our position is that the trade agreement has been a success, and we shouldn't be touching something as important as the rules of origin," Eduardo Solis, president of Mexican automakers' industry group AMIA, told Reuters in an interview.
A similar answer gave Annemarie Pender, spokeswoman for the Association of Global Automakers, a group that represents Honda, Nissan, Hyundai and other major foreign automakers in the United States. "We believe the NAFTA rule of origin, which establishes the highest threshold of any free trade agreement the U.S. has ever negotiated, should remain intact," she said.
NAFTA's rules of origin, said Solis, have been key in creating value and integrating the auto industry in North America.
"We need to remain cautious and at the same time prepare the data that shows why NAFTA has been a success for the three nations," said Solis.
Speaking at an event in Mexico City with Canada's Minster of Foreign Affairs Chrystia Freeland, Mexican Economy Minister Ildefonso Guajardo also weighed in about the topic.
Guajardo warned that Mexico, the United States and Canada could "shoot ourselves in the foot" if they tweak rules too much and drive investment elsewhere, pointing to the example of televisions.
Under NAFTA, of the TV screens assembled in Mexico for export, only 32% of the content comes from North America and the rest from Asia. An "illogically ambitious" attempt to raise the regional content to say 90% could make it easier for companies like LG and Samsung to export whole TV sets and pay corresponding tariffs than to relocate production, he said.
On the other hand, U.S. Secretary of Commerce Wilbur Ross insists rules of origin need some tightening, arguing the mechanism has allowed material from outside the region to come in and benefit from all the taxes and tariff reductions within NAFTA.
Ross told CNBC that Chinese goods dumped in Mexico are finding their way to the United States. "Mexico's trade deficit with China is approximately equal to their trade surplus to us. It's not an accident," he said.
"It was a silly idea to let a lot of outside stuff in. The whole idea of a trade deal is to build a fence around participants inside and give them an advantage over the outside," he continued. "There's a conceptual flaw in that, one of many conceptual flaws in NAFTA."