Canada, Mexico ‎drawn into deal-breaking auto talks in Trans-Pacific negotiations

Canada and Mexico are joining forces to try to break a major logjam over Japanese autos at the Trans-Pacific Partnership talks, working to come up with a solution that preserves their respective vehicle assemblers and parts makers should a deal open North America to greater Asian imports.

Ottawa and Mexico City have been drawn deeply into a contentious issue at the Pacific Rim talks that held up a deal in Hawaii...: How much of an automobile must be manufactured within the 12 participating countries to avoid hefty import tariffs inside this proposed trade zone.

...Canadian negotiators showed up at the Maui talks to find that the United States had already cut a deal with Japan on how much vehicle content needs to come from Trans-Pacific Partnership (TPP) countries.

The Japanese are keen to draw on their existing Asian parts suppliers outside the new trade zone as much as possible.

Japan originally sought a content rule that allowed as little as 30 per cent of a vehicle to come from TPP nations, publication Inside U.S. Trade has reported, and the U.S. had wanted a higher bar of 55 per cent before compromising at a lower rate...

“The makeup of the rules of origin would have had certain exemptions which would have hurt the Canadian supply chain,” the source said, referring to parts makers in Canada that sell into the North American market. For instance, if a part exempted from content rules was also one that was made in Canada, it would mean Japan could import lower-priced parts from outside the TPP region, such as Thailand, at the expense of Canadian suppliers.

Canada is, in fact, at the centre of both major obstacles to a TPP deal that were cited by negotiators: the future of auto and dairy trade. The Canadian government has so far balked at significantly opening its sheltered dairy market to greater foreign imports; the U.S. is seeking new customers for its milk as it anticipates a deal would mean more New Zealand shipments aimed at American consumers...

This has been excertped from 5 August 2015 article by The Globe and Mail.