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MEXICO CITY: Mexican industry is exploring revising trade rules to ensure US workers benefit from a renegotiated North American Free Trade Agreement (NAFTA) to address head-on US President Donald Trump’s biggest beef with the treaty.
With talks due to start next month between the US, Mexico and Canada, Mexican officials have stressed the need to craft a new deal that would strengthen the region against competitors, particularly in Asia.
Trump has threatened to ditch NAFTA if he cannot rework it to the benefit of the US, arguing it has fueled a trade deficit with Mexico and cost thousands of US jobs.
Mexican officials say a revamped NAFTA must further integrate the region and are awaiting US negotiating objectives, due to be published on or around Sunday.
They point to sectors like autos, where US inputs make up some 40 percent of the value of products imported into the US from Mexico, while Chinese exports contain only 4 percent, according to the US Center for Automotive Research.
“If we integrate further and make Mexico more competitive versus China ... even if our exports rise, US jobs will rise, because when we export (to the US), they are exporting too (via US content),” said Jaime Serra, a former trade minister who led the initial NAFTA negotiations for Mexico.
However, mindful that Trump needs to be able to claim a more obvious win from the shake-up, they are also looking at rules governing how much of a product is made in the region.
NAFTA rules of origin stipulate that to qualify for tariff-free access, some products need to be sourced to a certain degree regionally. Cars, a recurring point of attack for Trump, must meet a threshold of 62.5 percent.
Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby, which is coordinating the private sector’s role in the renegotiation, said they may explore domestic content rules on certain products.
The Mexican electronics industry wants to increase regional production of some components to reduce reliance on Asia, said Cesar Castro, vice president of electronics industry group Canieti.
To boost North American output, Canieti is considering a proposal that could see regional content in certain products raised from 5 percent to 50 percent over 10 years, Castro said.
If Mexico’s arguments fall flat, however, and Trump threatens to impose punitive tariffs on Mexican-made goods, the sizeable US surplus in services with Mexico could end up as a bargaining chip.