U.S. Trade Representative Jamieson Greer, right, and Mexican Economy Minister Marcelo Ebrard speak in Mexico City in an April 20 file photo.Raquel Cunha/Reuters
U.S. President Donald Trump’s negotiating team is demanding that all North American-made autos contain at least 50 per cent U.S. content, firing the opening salvo in a battle over the future of the pact governing continental trade.
American and Mexican negotiators hunkered down in Mexico City this week to start a review of the U.S.-Mexico-Canada Agreement, and the U.S. announced plans for two further rounds of bilateral talks that do not include Canada.
Intergovernmental Affairs Minister Dominic LeBlanc, meanwhile, is planning a trip to Washington as soon as next week.
In the Mexico City meetings, U.S. officials demanded that the deal be changed to require at least half of the materials and components in vehicles made in the USMCA zone come from the U.S. in order to qualify for preferential tariff treatment under the deal, said Pedro Casas, chief executive officer of the American Chamber of Commerce of Mexico, a business group briefed on talks.
The U.S. also wants the required amount of North American content overall to be set at 82 per cent, he said.
Currently, USMCA requires 75 per cent of auto content come from North America and contains no U.S. content provision. There are, however, requirements that 40 per cent to 45 per cent of vehicle components come from factories paying an average wage equivalent to US$16 an hour, giving the wealthier U.S. and Canada an advantage over lower-income Mexico.
The fact that the U.S. is now laying out formal bargaining positions represents a new, more serious phase of talks, Mr. Casas told The Globe and Mail. “Finally, there are proposals. That’s a good start. We are entering a phase of negotiations where it’s going to be placed in black and white.”
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Mr. LeBlanc’s office confirmed that the Minister, who is Prime Minister Mark Carney’s point-man on Canada-U.S. issues, will be in D.C. soon, but said most details are still under wraps.
“Planning is underway regarding Minister LeBlanc’s next trip to Washington, D.C. Further information regarding exact dates, as well as engagements while in the U.S. capital, will be shared in the near future,” his spokesperson, Gabriel Brunet, said in a statement.
The office of Jamieson Greer, the U.S. Trade Representative, announced two further bilateral negotiating rounds with Mexico: one on June 16 and 17 in Washington and another in Mexico City the week of July 20.
Mr. Greer’s office said the talks this Thursday and Friday focused on “automotive rules of origin, steel and aluminum, and economic security,” while the next round would take up agriculture and “a level playing field.”
Mr. Greer skipped the Mexico City talks, leaving one of his deputies, Jeffrey Goettman, to lead them. Running the Mexican side of the discussions was Economy Minister Marcelo Ebrard.
Canada and Mexico are getting hammered by Mr. Trump’s global trade war, particularly his tariffs on autos, steel and aluminum. But both countries have so far not agreed to the sorts of deals that the United Kingdom and other U.S. trading partners have, in which those countries accepted economically punitive conditions in exchange for Mr. Trump lowering tariffs.
U.S. President Donald Trump participates in a Cabinet meeting at the White House this week.Jacquelyn Martin/The Associated Press
Talks last year between the U.S. and Canada ended abruptly when Mr. Trump walked away from the bargaining table in October over an Ontario government anti-tariff advertisement featuring Ronald Reagan.
Now, it appears tariff discussions will be rolled into the USMCA review. The deal was negotiated on Mr. Trump’s orders eight years ago to replace the earlier NAFTA but the President has disregarded it to impose tariffs and has mused about ending it entirely.
Brian Kingston, head of the industry group that represents the Canadian units of automakers Ford, General Motors and Stellantis, said adding a U.S. content requirement and increasing North American content rules – just a few years after the current system was adopted with USMCA – would put the industry in Canada, the U.S. and Mexico at a major disadvantage.
“Companies can’t turn on a dime and change their outsourcing and supply agreements,” he said in an interview. “It will make North America-based manufacturing uncompetitive. If the rules are too stringent, it could become more cost-effective to build a vehicle in Japan, export it to North America and pay a tariff. That would be a bad outcome for Canada, Mexico and the U.S.”
According to calculations by Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, Canadian-build vehicles already contain an average of about 50 per cent U.S. content.
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When or if Canada will join the negotiations is unclear. Mr. LeBlanc spoke earlier this week with Mr. Greer.
Brian Clow, former prime minister Justin Trudeau’s advisor on U.S. relations during the USMCA negotiations, said in an interview that the Americans appear to be trying to replicate a strategy they used late in those talks, during which they negotiated bilaterally with the Mexicans, reached agreement and then put pressure on Canada to sign onto the deal.
In the end, however, the pact mostly required concessions from Mexico while leaving much of the previous NAFTA system intact.
“Just because they are talking without us doesn’t mean we should panic and freak out and rush back to the table, because that would be a position of weakness,” Mr. Clow said. Still, he said it was a good sign that Mr. LeBlanc appeared to be engaging with the Americans.
One industry source in Mexico said that Mexican negotiators would like Canada to be at the talks because the two countries are aligned on major issues, such as opposition to U.S. content requirements, and Mexico feels weaker when negotiating with the U.S. bilaterally. The Globe and Mail is not naming the source as they were not authorized to speak publicly on the negotiations.
Mr. Carney and Mexican President Claudia Sheinbaum have made a concerted effort to work more closely together over the past year. Mr. LeBlanc in February led one of Canada’s largest-ever trade missions to Mexico, and Mr. Ebrard earlier this month headed a reciprocal visit to Canada.
Mr. Ebrard was tight-lipped after the negotiating session. “We are on our way to achieve this revision,” he said in a video posted to social media. “Have a very good weekend.”