U.S. and Mexico fail to resolve dispute on trade rules for light vehicles

WASHINGTON — The U.S. and Mexico failed to resolve a dispute over trade rules for cars during a meeting this week, threatening the goal of boosting regional manufacturing under their new trade pact.

U.S. Trade Representative Katherine Tai and Mexican Economy Minister Tatiana Clouthier discussed the topic Thursday afternoon in Washington but couldn’t reach a resolution, according to people familiar with the talks, who asked not to be identified speaking about a private matter. Canada also shares Mexico’s position in the dispute.

Tai told Clouthier that the U.S. “remains committed to the full implementation of the USMCA, including the strong auto rules of origin,” her office said in a statement Thursday, without elaborating. The pair “agreed to stay in touch in the months ahead,” it said.

The press office of Mexico’s economy ministry declined to comment. Clouthier was scheduled to hold a press briefing in Washington on Friday.

The conflict focuses on how to calculate the percentage of a vehicle that comes collectively from the three countries under the U.S.-Mexico-Canada Agreement, Bloomberg News reported last week. The deal took effect last July, replacing the North American Free Trade Agreement, or NAFTA, but the new so-called rules of origin are designed to be phased in over several years.

The U.S. insists on a stricter way than Mexico and Canada believe they agreed to for counting the origin of certain core parts including engines, transmissions and steering systems in the overall calculation, people familiar with the matter said last week. That makes it harder for plants in Mexico and Canada to meet the new threshold of 75 percent regional content, up from 62.5 percent under NAFTA, in order to trade duty-free, the people said.

For example, if a core part uses 75 percent regional content, and thus qualifies under that requirement for duty-free treatment, Mexico and Canada argue that USMCA allows them to round the number up to 100 percent for the purposes of meeting a second, broader requirement for an entire car’s overall regional content. The U.S., however, doesn’t want to permit rounding up, making it tougher to reach the duty-free threshold for the overall vehicle.

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