American, Canadian and Mexican officials are signaling they have cleared a roadblock on auto-industry issues that have been some of the thorniest in talks to overhaul the North American Free Trade Agreement.
U.S. Trade Representative Robert Lighthizer struck a conciliatory tone on Wednesday in testimony before Congress on the auto proposal, which includes the U.S. demand that a revised Nafta require light vehicles to contain 50% U.S. content to cross U.S. borders duty-free.
Mr. Lighthizer told members of the House Ways and Means Committee the U.S. auto proposal—widely seen as the most contentious issue in the negotiations—is meant to draw more manufacturing jobs back to the U.S., especially from Mexico. He added Canada likely has a similar objective, since its manufacturing sector has lost capacity to lower-cost jurisdictions such as Mexico.
“Our hope is we get something that some of the large manufacturers will find useful,” Mr. Lighthizer said. As for talks among the three Nafta countries on autos, “we are trying to work our way through that,” he said. “And I think we are in a position where we are starting to converge.”
A breakthrough on autos could put the parties on track to reach a deal as early as next month, people familiar with the talks say, before a likely stall in the run-up to Mexican elections in July and U.S. midterm elections in November.
On Tuesday, Canada’s ambassador to the U.S., David MacNaughton, told reporters in Washington that U.S. officials appeared to have softened their approach on autocontent rules.
“They put some interesting ideas on the table…which were actually quite creative. To which we sort of said, ‘Yeah, we can work with that,’ ” Mr. MacNaughton said in remarks to the Canadian Press news agency, confirmed by the Canadian embassy.
“Did we get to somewhere where you could shake hands and say, ‘We’ve got a deal?’ ” he said. “Absolutely not. But I took it as being a positive thing that they had another way of getting at that issue.” Mr. MacNaughton said the ideas build on proposals Canadian officials presented in January to broaden the definition of what could be counted toward U.S. content, including items such as software, technological components, and raw materials like steel. He also said the recent American proposals could help the U.S.
achieve its goal of safeguarding auto production there, potentially without a strict American-made content requirement for every car. A senior Mexico official this week also pointed to a more compromising tone on the auto issue, saying the parties were weighing proposals that don’t necessarily require national content. Mexico’s Economy Minister Ildefonso Guajardo plans to meet with Mr. Lighthizer before Easter and ahead of the next round of talks, tentatively scheduled for April 8, one Mexican official said.
Mr. Guajardo said last week that rules of origin for the automotive sector would have to change in the renegotiation of Nafta. Current rules aren’t sustainable, he said, as they were defined nearly 26 years ago based on 1992 model cars. Negotiating parties have expressed concerns that Mexico’s July presidential vote could alter the pace of talks.
At the end of the latest round of Nafta talks in Mexico earlier this month, Mr. Lighthizer said officials from the three countries had “a month or a month and a half or something” to get an agreement in principle. Mr. Guajardo said last week that the three countries need to reach a deal by the end of April, or they might extend talks until late 2018 because of the Mexican and U.S. votes.
Leftist nationalist Andrés Manuel López Obrador, the presidential candidate who currently leads Mexican polls by a wide margin, warned on Tuesday that negotiations shouldn’t conclude before July’s election. He named a former World Bank economist who once represented Mexico at the World Trade Organization to lead the country’s Nafta negotiating team should he win the election.
The Trump administration might also want a quick end to the Nafta talks in view of Thursday’s announcement on trade actions against China, according to one trade analyst. The U.S. “will need all its trade resources on China and not on fighting North America,” said Eric Miller, global fellow at the Washington based Wilson Center.
—Santiago Pérez contributed to this article.
Growth in the number of Americans employed in the auto industry has slowed while U.S. imports of vehicles and parts have risen.
U.S. auto and parts workers, change from previous year
BY PAUL VIEIRA AND WILLIAMMAULDIN