Proposed TPP rules of origin regulations for automotive still in dispute
The voices of North American automotive supply chain integrants protesting proposed TPP rules of origin regulations get louder.
As discussed in previous blog posts dealing with this subject, one of the sticking points that has caused major delays in the forward progress of negotiations toward concretizing the Trans-Pacific Partnership free trade accord has been the proposed TPP rules of origin for the automotive industry. The Trans-Pacific Partnership (TPP) is aimed at creating a free trade zone in which the participating nations will derive commercial benefit from:
- lower tariffs on trade between partners;
- uniform intellectual property protections;
- standardized labor and environmental laws;
- built-in investor-state dispute settlement mechanisms.
As of 2014, twelve nations have been party to ongoing negotiations. They include:
- New Zealand
- United States
Progress on ending negotiations successfully has been held up, however, by a dispute between Mexico, Canada, the United States and Japan over the proposed TPP rules of origin for the automotive industry. Until recently, both Mexican and Canadian negotiators assumed that local content requirements for automobiles and auto parts would reflect the 62.5% required under the NAFTA, but were dismayed to find out that the United States had cut a side deal with Japan under which content percentages required would be significantly less. Japanese car makers are seeking to structure the terms of the TPP in a way that will allow them to integrate primarily Thai and Chinese suppliers into their supply chains without tariff or duty recourse.
In a recent meeting on the proposed TPP rules of origin regulations, both Canadian and Mexico auto and auto parts manufacturers expressed that they would possibly be amenable to accepting a 50% local content requirement, but, since that meeting, members of another key link in the supply chain have spoken up on the issue.
The steel manufacturers in Mexico, the United States and Canada have urged their governments to employ the same rules of origins regulations and local content rules that are applied to trade under the NAFTA, that being a local content requirement of 62.5%. As is the case under the terms of the North American Free Trade Agreement, this percentage applies to passenger vehicles and light vehicles. The percentage applied to auto parts, however, is slightly lower at 60%.
The steel manufacturers’ request was recently submitted to the top economic officials in the three countries involved including: Mexico’s Idlefonso, Guajardo, Mike Froman of the United States and Ed Fast, Canada’s Minister of International Commerce.
It is speculated that the parties will meet again during the coming week to resolve the issue of proposed TPP rules of origin regulations for the automotive industry in a way that will address the concerns of all parties.