United States and Mexico Reportedly Close in on NAFTA Car Deal

The Mexican Economy Minister went to Washington, D.C. to help seal the deal.

via Getty Images

The United States and Mexico are close to a deal on rules about car sales under NAFTA, according to Bloomberg. 

Mexico and the U.S. have exchanged proposals and Ildefonso Guajardo, the Mexican Economy Minister, arrived in Washington, D.C. Thursday to further negotiations. 

A recent report from Reuters quoted Guajardo saying that negotiations have made progress on auto salaries. 

“Now what we are talking about is that a percentage of what is made in North America would be made in a high-salary zone,” he said. “What does this mean? That clearly, within the component of 100 percent of an automobile made in (the NAFTA zone), a percentage, it could be about 35 to 40 percent, is made in a high-salary zone," said Guajardo. 

In May, Mexico told the United States that it could possibly be flexible when it came to automotive wages and content. They were even open to possibly accepting a requirement of 20 percent of a car's value coming from higher-paid workers. 

But in order to accept that stipulation, they called for President Trump's negotiators to withdraw tougher demands. United States Trade Representative Robert Lighthizer said at one point that the proposal was not enough for the United States which asked that 40 percent of cars and 45 percent of trucks be made by workers earning at least $16 per hour. 

Offers on regional content were relatively similar. Mexico was willing to accept 70 percent of car components coming from NAFTA countries, an increase from the current 62.5 percent, whereas the U.S. called for 75 percent. 

Trump has threatened to impose sweeping new tariffs on imported vehicles as a possible attempt to pressure Mexico and Canada into making a deal that would help return manufacturing jobs to the United States. 

Trump blamed cheap production in Mexico for an increase in the outsourcing of U.S. manufacturing jobs. Proposals from the U.S. have focused on increasing salaries for Mexican car manufacturers and incentivizing U.S. companies to move production back to the states. 

The Canadian trade negotiator, Colin Bird, and head of the trade and NAFTA department of Mexico, Guillermo Malpica, are optimistic about the likelihood of a deal finally being met to renew NAFTA this week. They did, however, reiterate that the issues remaining in the talks are challenging.