Mexico readies for worst as 4th round of NAFTA talks open

Three people who were briefed on the matter said that the USA rules of origin proposal would put these materials on the North American Free Trade Agreement's auto parts tracing list for the first time.

Washington has dramatically increased tensions in talks to renew the North American Free Trade Agreement by proposing that the lifespan of any new deal be limited to five years, people familiar with the negotiations said on Thursday. Mexican sources denounced it as "absurd" and unacceptable, underlining the gaps between NAFTA's three members as they try to wrap up a deal by a year-end deadline.

Although sources briefed on the talks describe the mood as sour, Mexican and Canadian politicians say there is no question of leaving the table for now.

Business and farm groups say abandoning the 23-year-old pact would wreak economic havoc, disrupting cross-border manufacturing supply chains and slapping high tariffs on agricultural products. Other sources briefed on the talks said the proposal includes raising the threshold for overall North American value content for cars, trucks and large engines to 85 percent from the current 62.5 percent and a first-ever USA -specific content requirement of 50 percent.

Canada and Mexico want their companies to be able to bid on more US federal and state government contracts, but this is at odds with Trump's "Buy American" agenda.

Dziczek and auto industry groups say that the USA content proposal is likely to backfire, with automakers and suppliers simply choosing to pay the 2.5 percent US tariffs for passenger cars and many parts, sourcing more of them from China and other low wage countries in Asia.

Trump administration officials complain the current content rules are too lax and have allowed auto companies to build more autos in Mexico, where wages are much lower. They are also seeking to halt the shift of vehicle production and jobs to Mexico from the United States.

Meade's comments drove the peso to a almost five-month low of 18.92 against the dollar, a fall of more than 1 percent in the session.

The comments came as negotiators from the three countries meet in the United States for their latest round of what Trump vowed would be tough talks on a new version of NAFTA. With that in mind, he said he's warned USA trade representative Robert Lighthizer to tread carefully around the sector.


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