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The Mexican government believes that the US proposal for tightening content rules for car manufacturing under the North American Free Trade Agreement is not viable. It also says that the proposal will likely cause serious damage to the auto industry in North America, according to a person familiar with the country’s views.

However, Mexico has not prepared or presented a counter-proposal. According the person, this is because the government sees the problem as one that goes beyond the levels that the US seeks. Additionally, it believes that the concept is unworkable. The person asked not to be identified since the negotiations are behind closed doors.

The US government, led by Trump, has tried to propose some major changes to NAFTA’s auto rules. It introduced a requirement, which asked that 50 percent of vehicles should be made in the US. It also proposed to increase the minimum amount of necessary regional content to 85 percent from 62.5 percent.

In a recent letter, the over 70 House Republicans and Democrats opposed this proposal, backed by the US auto industry, which has pushed back against the idea.

The current round of NAFTA negotiations is taking place in Mexico City. It is set to last until November 21. Meanwhile, US negotiators have given no signs yet that they’re willing to compromise on their proposal, which would automatically end NAFTA after 5 years, the person claimed.

Mexico and Canada, have already expressed their willingness to review the trade agreement every half decade, provided the evaluation will not lead to automatic termination.

Suspected Back-Down

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The Trump administration proposed the automatic termination provision during a negotiation round held in October. This followed Secretary of Commerce Wilbur Ross’ previous allusion to it.

Last Friday saw the release of an updated list of US negotiating objectives. In it, the US referred to “a mechanism for ensuring that the parties assess the benefits of the agreement on a periodic basis.” However, it did not specify the proposal for automatic termination.

As a result, speculations that the US may be turning its back on the demand have sprouted.

The office of the US Trade Representative declined to issue a comment regarding the concern, which centers on the US’ speculated withdrawal of its proposal for automatic termination mechanism within the agreement.

Mexico’s peso rallied to levels higher than 19 per dollar at the end of the previous week. Traders have bet that Mexican and Canadian willingness to support a NAFTA review could lessen a key disputed issue. The willingness may also pave the way to a compromise on a top US demand.

The peso slipped 0.1 percent to 18.9362 a dollar on Monday morning trading in Tokyo.

“No Signs of Flexibility”

A Canadian source who has knowledge of the talks said that if any progress was to be made, the United States “needs to show some flexibility and a willingness to do a deal.”

“We are seeing no signs of flexibility now,” added the person, who also requested to be anonymous due to the sensitivity of the situation.

 

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