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NAFTA vehicle rules stalled

Despite tough talk from the U.S. about the job-killing impact of NAFTA on its automotive sector, Canada's chief negotiator isn't expecting to see a detailed American proposal on the matter during the latest round of talks to rewrite the continental trade pact.

Rules of origin will be "a subject for discussion, but we're not expecting to see anything radically new at this point," Steve Verheul said Saturday.

Verheul made the comment as he arrived for the start of the third round of negotiations, the first at which Canada is playing host.

Concern has been mounting among trade experts that the year-end deadline for revamping NAFTA will be impossible to meet if negotiators don't start during this round to confront some of the most contentious issues, rules of origin prime among them.

The agenda for this round, obtained by The Canadian Press, shows rules of origin are to be discussed all day Tuesday and all day and into the evening on Wednesday.

A number of other contentious issues are also on the agenda for those days: agriculture, which will involve Canada's system of supply management for dairy and poultry, and labour standards.

Also on Wednesday, negotiators will focus on the arm's length trade dispute settlement mechanism, which Canada and Mexico call essential but the U.S. wants to scrap, and the controversial investor state dispute settlement mechanism, whereby companies can sue a government for allegedly discriminatory practices.

It remains to be seen if the U.S., which triggered the negotiations, will finally table detailed proposals on any of those issues. Canadian officials have said they don't expect any breakthroughs during the five-day session and suspect the U.S. will wait until closer to the end of negotiations to lay all its cards on the table.

Asked Saturday if he expects to see anything radically different on any file, Verheul said: "We'll really have to see. It's too early, I'm just walking in now."

Under NAFTA's current rules of origin, vehicles must have at least 62.5 per cent North American content to qualify for duty-free movement between Canada, the U.S. and Mexico.

At the opening round of negotiations in Washington last month, U.S. Trade Representative Robert Lighthizer pronounced that the North American content requirement must be raised and a specific American content requirement must be added, along with a way to verify that content.

But the U.S. has yet to provide any details.

Reports in the U.S. suggest the Americans are looking at raising the North American content to more than 70 per cent and adding a specific U.S. content requirement of anywhere from 35 to 50 per cent.

They are also looking to add steel and electronics, not currently covered by NAFTA, to the list of auto parts whose origin must be traced and accounted for under the content requirement.



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