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The officials, speaking to Reuters on the sidelines of NAFTA
talks here, said strenuous lobbying efforts on behalf of the
industry were starting to sink in with some key members of the
Trump administration.
Automakers and their suppliers are worried that the U.S. demands
will cause the 24-year-old North American Free Trade Agreement
to collapse, or render its tariff-free benefits unusable. Either
outcome would wreak havoc on supply chains that have auto parts
and vehicles regularly crisscrossing North American borders
Industry trade groups have estimated that a full reversion to
World Trade Organization tariff levels would cost the industry
some $10 billion a year and cause the loss of up to 50,000 U.S.
auto parts jobs.
The Trump administration, which blames NAFTA for killing off
U.S. manufacturing jobs, wants the requirement for the value
content, or net cost, of autos sourced from the three NAFTA
countries boosted to 85 percent from 62.5 percent for
tariff-free trade.
It also insists that 50 percent of the content of every vehicle
produced in the region come from the United States, an option
that Canada and Mexico have dismissed as unworkable.
In a bid to keep the talks alive Canada is now suggesting that
North American content in autos - known as rules of origin -
should be calculated to also include the value of software,
engineering and other high-value work, which currently is not
counted toward the regional content targets
The plan got a boost from Fiat Chrysler Automobiles Chief
Executive Sergio Marchionne on Thursday, who called it a
"defensible" concept and a "step in the right direction."
"Within the structure proposed by the Canadians, there appears
to be the beginnings of a solution to this problem," Marchionne
said on an earnings conference call.
Canadian officials say their U.S. counterparts have asked a
series of questions about how the plan would work. It is unclear
how U.S. Trade Representative Robert Lighthizer will react to
the plan when he arrives in Montreal on Sunday.
The current round of talks in Montreal is the penultimate in the
negotiations to update NAFTA.
"I think I'm more optimistic now than I have been in quite some
time, because we have an opportunity here for having a true
dialogue on what a 21st century rule of origin for NAFTA might
look like," said Ann Wilson, senior vice president of government
affairs at the Washington-based Motor and Equipment
Manufacturers Association.
The industry fears that if North American content demands are
set too high, manufacturers will simply forego NAFTA's
tariff-free access and pay low 2.5 percent U.S. tariffs on parts
and passenger cars produced outside the region. The result could
be less automotive production in the United States, not more,
industry representatives say.
"We're very appreciative of the Canadians putting forth some
fresh new ideas. It's a positive signal and hopefully a shift in
the talks," said Jennifer Thomas, vice president of federal
government affairs at the Alliance of Automobile Manufacturers,
Thomas, noting that U.S. domestic sales were expected to decline
after a seven-year run that set records, added, "We're kind of
bracing for a downturn and we don't need to have any additional
burdens further harming the industry."
John Bozzella, president of the trade group Global Automakers,
said executives had pressed senior White House officials about
the importance of NAFTA.
"I think those meetings have been impactful. They have gotten
key players within the administration thinking about how the
industry can remain competitive going forward in a way they
hadn't before," he said.
Flavio Volpe, president of Canada's Automotive Parts
Manufacturers Association, said the Trump administration would
not be selling out its base by agreeing to focus on the value of
high-tech in autos.
"The science in specialized steel is as space ages as it is in
app writing for vehicle operation. They're smart enough to know
they do really well in both," he told reporters.
(Reporting by David Lawder and David Ljunggren; Editing by
Leslie Adler)
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