Canada, US Getting Into Details of Auto Rules of Origin

Discussions of auto rules of origin are getting more specific as NAFTA talks continue, according to Canada's Foreign Minister Chrystia Freeland, who spoke to reporters outside the headquarters of the Office of the U.S. Trade Representative on April 25. "We are starting to get into a more detailed conversation, which is absolutely necessary, given the fiendish complexity of rules of origin for cars -- and I think it's a really good thing we're starting to dig into the details," she said. Some say that the U.S. has compromised very little on its higher rules-of-origin demands (see 1804230048), as U.S. Trade Representative Robert Lighthizer is not convinced by auto companies' complaints.

Ford's April 25 announcement that it will stop producing most cars for the North American market adds another wrinkle to the question of how high regional content requirements can go on cars before companies decide it makes more sense to pay the 2.5 tariff than comply. Trucks and SUVs, which Ford said will be 90 percent of its North American product line by 2020, are protected by a 25 percent tariff. Final assembly of the Ford Fusion, one of the cars Ford will discontinue, is in Mexico. The one car Ford is retaining, the Mustang, is assembled in Michigan.

Freeland deflected a question on dairy, which Congress members have been complaining about (see 1804170011). She reiterated her stance that Canada is not interested in connecting a Section 232 country exemption to tariffs on steel and aluminum to NAFTA. Canada and Mexico have temporary exemptions while NAFTA is being renegotiated. "Canada expects to have a full and permanent exemption from any quotas and tariffs," she said, adding that "as a country which, by law, is part of the U.S. military industrial base, under no circumstances can Canada be considered a [national security] issue under 232." Freeland and Mexico Economic Secretary Ildefonso Guajardo are continuing to meet with Lighthizer on April 26.