Representatives from Canadian, Mexican and the U.S. are in the deepest weeds within NAFTA negotiations and some of the proposals are flat out nuts.

Within the auto-sector the “Rules of Origin” continue to be one of the biggest sticking points.  The U.S. position is that 80% or more of a vehicle made in the U.S., Mexico or Canada should be made from parts from the U.S., Mexico or Canada, ie. North America.  Canada and Mexico are trying to argue for lower North American content because they want more Asian/Chinese parts in American automobiles. [Reuters Link]

On its face their position is ridiculous.  Canada and Mexico are not arguing for more Canadian and Mexican content; they are arguing for more Chinese content.  The U.S. is arguing for more North American content.  Canada and Mexico want to support China’s economy; the U.S. wants to support Canada, Mexico and the U.S. economy.   Let that sink in for a moment.

In an effort to enhance their ridiculous position, Canada and Mexico have come up with a proposal that is, well, bananas. Can/Mex want the United States to tax vehicles made in Canada and Mexico.  Stop. Re-read that.  Yes, that is correct.  Canada and Mexico want Chinese parts so badly, they are arguing for the U.S. to tax American (NAFTA) automobiles.

Nuts.

The reasoning is simple -albeit twisted as hell- and goes back to the fatal flaw in NAFTA as it exists.  Canada and Mexico have created economic models within their multinational corporate manufacturing processes where they import parts from China, Asia and Europe – assemble them – then ship those goods duty free into the U.S. market.

Canada and Mexico are used by European, Asian and Chinese companies as a backdoor into the U.S. where they can avoid tariffs.  This is part of their business model.

In an effort to attempt to find agreement with U.S. Trade Representative Robert Lighthizer, Canada (Freeland) and Mexico (Guajardo) have proposed that their auto industry be treated as an import and apply the 2.5% trade tariff customary for imported automobiles.

Well, what the hell good is NAFTA, a trilateral trade agreement, if we are going to treat Canada and Mexico as countries needing import duties?   This is nonsense.

Canadian News –  NAFTA negotiating teams will keep bargaining through the weekend in an effort to get a deal by early May.

The political ministers leading the process are currently leaving Washington, but will be back next week.  Foreign Affairs Minister Chrystia Freeland calls it a perpetual negotiating round.  She said the talks continue to focus primarily on automobiles, which she describes as the heart of the new agreement.

Sources say negotiators are now extremely close to an agreement on that issue and are discussing fine details. (link with video)

Meanwhile, U.S.T.R. Lighthizer is considering pulling out of NAFTA if an agreement on principle can be reached.  That strategy forces to congress to sign-on to the renegotiated trade deal or face allowing NAFTA to end.

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