Globe and Mail, Toronto

Mexico car makers seek 50% regional content in TPP trade deal

Reuters

17 August 2015

A 12-nation Pacific trading bloc must guarantee that half the content of cars is locally made within the group, and be close to that for auto parts, according to top Mexican auto industry officials, as negotiators seek to bring the talks to a close.

Failure to agree with Mexico on rules for car-making was a key stumbling block when negotiators fell short of a deal for the Trans-Pacific Partnership (TPP) at the end of July.

Mexican officials have expressed confidence an agreement can be reached in coming weeks, but car manufacturing remains a sticking point and upcoming elections in Canada this year and the United States in 2016 risk complicating matters.

The head of AMIA, the Mexican automakers association, said the content of vehicles, engines and transmissions had to be sourced “at least 50 percent” from within the bloc to ensure the principal beneficiaries of the deal were member countries.

“A lower rule would allow more input from outside the region to be brought in,” AMIA president Eduardo Solis said late Friday.

Mexico is trying to agree to TPP auto terms that are close to rules for the North American Free Trade Agreement, which stipulate that 62.5 percent of the net cost should be local.

Still, some flexibility is needed because Asian countries prefer using the transaction price of a vehicle as the principal yardstick, an official close to the talks said.

Working on the basis of net cost alone, a figure of about 50 percent could be feasible, the official added.

Officials negotiating the TPP, which would stretch from Japan to Chile and cover 40 percent of the global economy, missed out on a deal at July talks on the Hawaiian island of Maui, but trade ministers said they were confident an agreement was within reach.

The regional content of auto parts has also been at the center of the tug-of-war. Oscar Albin, executive president of Mexico’s National Autoparts Industry (INA), said a 30 percent limit proposed by Japan was far from acceptable.

“With Europe we have signed up to 40 percent, so 40 percent or 45 percent could be an acceptable level,” Albin said.