The U.S. has delivered one of its most high-profile NAFTA demands, proposing to boost how much American and regional content must be in cars and trucks to quality for duty-free access under the pact, according to an official.
The U.S. proposed late Thursday raising the so-called auto rules of origin to 85 percent from the current 62.5 percent, the official said, speaking on the condition of anonymity. The rules govern what share of a product must be sourced within NAFTA to receive the pact's benefits.
The U.S. also proposed adding a new, U.S.-only content requirement of 50 percent, meaning it wants half of every car traded under NAFTA to be built in the U.S., the official said. The U.S. also proposed phasing in the 85 percent requirement over multiple years, the official said.
"The NAFTA's rule of origin for autos is already the highest in any trade agreement in the world but the administration reportedly would like to raise it to 85 percent," U.S. Chamber of Commerce Senior Vice President for International Policy John Murphy said on Friday in a statement. "However, higher requirements for North American content would actually incentivize manufacturers to cease trading under the agreement and instead simply pay the low U.S. most-favored nation tariff (just 2.5%)."
Rules of origin will be negotiated in sessions Friday, Sunday and Monday during the fourth round of talks outside Washington. The auto sector has warned that a substantial change to rules of origin would upend supply chains and be costly for the industry.
A spokeswoman for U.S. Trade Representative Robert Lighthizer didn't immediately respond to a request for comment.
