US trade negotiators have floated a plan to introduce rules under a reworked Nafta that stipulate a certain amount of automotive production must be carried out in areas paying higher salaries, two sources familiar with the matter said.
Setting such wage requirements for the auto industry under the North American Free Trade Agreement could benefit the United States and Canada, whose trade unions say that lower Mexican pay has caused a drift in manufacturing capacity to Mexico.
The US plan aims to explore what percentage of output could be in areas paying higher salaries, and at what levels of remuneration the scheme could be targeted, said one of the two sources, who spoke on condition of anonymity.
Mexico’s government and its Nafta partners were all analysing the US idea, the source said.
The news follows a week in which hopes have risen that the United States, Mexico and Canada could be closer to brokering agreement on one of the thorniest issues surrounding renegotiation of Nafta — content levels for the auto industry.
Last week, industry sources said that the US had withdrawn a divisive demand that at least 50% of Nafta auto content should come from the US.
The wage idea was floated after that, the sources said.
The United States, which also wants to raise the minimum auto content threshold for the Nafta region to 85% from 62.5%, is exploring setting a wage floor at $15 per hour for the salary component, the second of the sources said.
However, if a deal is reachable, it would likely end up at a lower level than that, the source added.
Mexico’s economy ministry had no comment on the matter, a ministry spokesman said.
Alex Lawrence, a spokesman for Canadian Foreign Minister Chrystia Freeland, said it was a question for the office of US
Trade Representative (USTR) Robert Lighthizer “as to whether they are going to present something along those lines.”
A USTR spokeswoman could not immediately be reached for comment.
Freeland’s office said she would be meeting her Nafta counterpart Mexican Economy Minister Ildefonso Guajardo in Toronto to discuss the ongoing renegotiation.
Lighthizer on Wednesday expressed optimism that talks to modify Nafta could be wrapped up quickly, but a top Canadian official was more downbeat, saying much work remained.
“I think we are making progress. I think that all three parties want to move forward, we have a short window, because of elections and things beyond our control,” Lighthizer told CNBC television.
“But if there’s a real effort made to try to close out and to compromise... I’m optimistic that we can get something done in principle in the next little bit,” he said.
But chief Canadian negotiator Steve Verheul told reporters, “We’ve got quite a bit of work do yet,” and noted that Washington had not yet explained what it meant by an agreement in principle. Officials from the three countries are due to meet in the United States next month for the eighth round of talks.
Only six of the roughly 30 chapters have been closed and wide differences remain on topics such as dispute resolution and how much North American content should be contained in autos produced in the three Nafta nations, a file that Verheul said was still far from settled.
But Freeland later told reporters by phone she was “truly heartened” by some of the progress made on the autos question.
The United States last week dropped its insistence that all autos made in the three Nafta countries have 50 % US content.
That said, Canada and Mexico are still wrestling with a separate US demand that autos produced in the three member nations contain 85 % Nafta content, up from 62.5 % now.
“We don’t have a deal yet but we are working really, really hard,” said Freeland, who did not answer directly when asked about the merits of a deal in principle.
Verheul said there were “obviously some significant gaps on many issues,” citing the US positions on dispute settlement, government procurement and a sunset clause that would allow one party to quit Nafta after five years.
Canadian Prime Minister Justin Trudeau last week said a deal was likely while stressing the challenges posed by the Mexican vote and US congressional elections in November.
Chrystia Freeland, Canada’s minister of foreign affairs, speaks during a joint press conference in Mexico City on February 2. Freeland’s office yesterday said she would be meeting her Nafta counterpart Mexican Economy Minister Ildefonso Guajardo in Toronto to discuss the ongoing renegotiation.
