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U.S. explore the pay factor in the NAFTA Auto Rules: Sources



MEXICO CITY (Reuters) – US negotiators have presented a plan to introduce rules under a revised NAFTA, which stipulates that in areas with higher salaries, a certain amount of motor vehicles must be produced.

Flags of Canada, Mexico and the US are seen before a joint press conference on the completion of the seventh round of NAFTA talks in Mexico City, Mexico on March 5, 201
8. REUTERS / Edgard Garrido

Setting such wage requirements for The North American Free Trade Agreement's auto industry could benefit the United States and Canada, whose unions say that lower Mexican wages have led to a shift in production capacity to Mexico.

The US plan aims to investigate what percentage of production could be in areas paying higher salaries, and on what level of compensation the system could be targeted, said one of the two sources, which under the condition of Anonymity spoke.

Mexico's government and its NAFTA partners have all analyzed the US idea, it said.

The news follows a week in which hopes have risen that the United States, Mexico and Canada may be closer to reaching consensus on one of the most sensitive issues surrounding the renegotiation of NAFTA – regional content levels for the auto industry.

Last week, industry sources said the US had withdrawn a divisive claim that at least 50 percent of NAFTA car content should come from the United States.

The wage idea was then published, it said.

The United States, which also intends to increase the minimum threshold for auto content in the NAFTA region from 62.5 percent to 85 percent, is currently investigating the establishment of a lower wage limit of $ 15 an hour on the salary component, the second source said ,

However, if a store is reachable, it would likely end up at a lower level than the source added.

Mexico's Ministry of Economic Affairs had no comment on this matter, a spokesman for the ministry said.

Alex Lawrence, a spokesperson for Canadian Foreign Minister Chrystia Freeland, said it was a matter for US Trade Representative Robert Lighthizer's office "whether they will present anything in this direction".

A USTR spokeswoman declined to comment.

A Washington-based car industry representative said companies were still trying to understand the concept, but it could be another way to demand some US production.

"It certainly seems geared to putting pressure on Mexico to raise wages, and it's also designed to discourage Mexico's auto exports," the representative said.

The demand for higher tariffs for some activities would make it more difficult for Mexico-built vehicles to qualify for duty-free NAFTA access than is the case in the United States or Canada where wage rates are higher.

"It could have many of the same challenges that the original US proposal had, if not more," the official said, adding that automakers were against proposals that increase costs and hurt the global competitiveness of North American auto production.

Freeland's office said it will meet with its NAFTA counterpart, Mexican Minister of Economic Affairs Ildefonso Guajardo, in Toronto on Friday to discuss the ongoing renegotiations.

U.S. President Donald Trump has turned against jobs that are migrating from the United States to Mexico and threatens to terminate the trade agreement if it can not be revised to his liking.

Advances in auto rules have fueled the optimism that the three sides, trapped for months in sluggish conversations, can "come to an agreement" in the coming weeks.

No date has yet been agreed for another formal round of talks, sources said. Mexico said earlier this month that the talks were tentatively scheduled for April 8 in Washington.

Reporting by Dave Graham; Additional reporting by David Ljunggren and David Lawder; Arrangement by Andrea Ricci and Susan Thomas


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