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Top NAFTA goal is changing 'rules of origin,' trade rep says

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U.S. Trade Representative Robert Lighthizer is leading the U.S. efforts to renegotiate the North American Free Trade Agreement between the U.S., Canada, and Mexico. (AP Photo/Manuel Balce Ceneta)

U.S. Trade Representative Robert Lighthizer told Congress Wednesday that the top goal for the renegotiations of the North American Free Trade Agreement was to update the "rules of origin" for determining where products such as cars are manufactured.

Lighthizer did not sound confident that the Trump administration would be able to get that done, however. The seventh round of talks on the 1993 trade deal among the U.S., Canada, and Mexico are underway in Mexico City.

"We are focusing our efforts on tightening rules of origin for products imported into the United States from Canada and Mexico for which we have significant trade imbalances, like automobiles and automotive parts. Our proposals seek to strengthen the rules of origin for such products, and make them more enforceable through stricter tracing requirements, to ensure that they contain considerable regional, and U.S specific, content," Lighthizer said in the 2018 Trade Policy Agenda and Annual Report.

Lighthizer said the other top goal was to limit provisions of the deal that encourage U.S. companies to outsource their operations to foreign countries. "The point of a trade deal is to create increased opportunities for market efficiency, not to encourage foreign investments that are otherwise not viable," he wrote.

He did not indicate that much progress had been made in either area, though, writing, "If we succeed with these core objectives, a renegotiated NAFTA would certainly prove a fairer deal for all Americans."

Reuters reported Tuesday that the USTR official handling the rules-of-origin issue, Jason Bernstein, returned to Washington soon after the current round of talks began and that USTR officials have been meeting privately with auto industry executives.

The Trump administration has used the NAFTA talks to push for raising the standard for cars and trucks to be declared "made in America" to require that 85 percent of the components come from North America, up from the current standard of 62.5 percent, and that at least half of the components come from the U.S. The proposal has received the cold shoulder from Canadian and Mexican officials, who say such a change would harm their economies by disrupting the auto industry supply chain, which is spread across the continent.

Eduardo Solis, the head of Mexico’s automotive industry association, told reporters in Mexico City the government there had made no new counterproposal to the U.S. request. “All there is is the original U.S. proposal, which we’ve said is totally unacceptable,” Solis said.

The talks are further complicated by an upcoming Mexican presidential election as well as the U.S. midterms in November. Chris Spear, the president of the American Trucking Associations, told the Washington Examiner Wednesday that it likely will be apparent in March whether a new NAFTA deal is in the works or if the talks get punted into the next year. March is "mission critical," he said.