Mexico Economy Minister Ildefonso Guajardo is in Washington, D.C. this week to meet with U.S. Trade Representative Robert Lighthizer to continue high-level NAFTA talks. This week the two countries will focus on auto rules of origin and the inclusion of a sunset clause.
Over the past two weeks, the U.S. and Mexico have moved to close an additional ten chapters of the agreement. As they move into the third straight week of negotiations, negotiators will push to update the agreement’s rules of origin for autos and wage requirements. The U.S. has pushed to include tougher rules regarding what percentage of the car needs to be built in NAFTA countries to avoid tariffs. The U.S. has proposed increasing that percentage to 75 percent, from 62.5 percent, as well as requiring that a portion of those autos be made in factories that pay at least $16 per hour.
This week’s meetings will also include discussing a sunset clause. The U.S. has strongly pushed for a provision that would automatically terminate the agreement if all three NAFTA countries do not agree to renew it every five years. Mexico has strongly opposed the idea of a sunset clause in fear that it would hurt investment in Mexico and the global competitiveness of North America.
Negotiators are working to achieve an agreement in principle in time for the current Mexican administration to sign an agreement. President-elect Lopez Obrador takes office in December, and U.S. law requires a strict timeline of congressional notice that would require finalizing negotiations this month if a new agreement is to be approved before end of year.
While recent negotiations show significant progress, several important issues remain unresolved, including seasonal restrictions on agriculture trade. The U.S. has proposed creating a seasonal window for agricultural products that would restrict imports from Canada and Mexico and impose a tariff on products based on volume and the time of year.
While the U.S. has discussed the idea of creating a bilateral NAFTA agreement with Mexico, Mexican officials insist that Canada be part of the final agreement. Canada did not participate in the past two weeks of negotiations on bilateral U.S.-Mexico issues. In the meantime, Canadian trade officials have conducted high-level strategy discussions in preparation for the resumption of trilateral NAFTA negotiations.