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Impasse Remains on TPP Auto Rules of Origin

Tuesday, September 15, 2015
Sandler, Travis & Rosenberg Trade Report

One of the few remaining issues in the Trans-Pacific Partnership negotiations remains unresolved after discussions in Washington last week. Officials from the U.S., Japan, Canada and Mexico met in an effort to finalize rules of origin for automobiles and automotive parts but came away with no agreement. Takeo Mori, Japan’s lead auto negotiator, said the talks were “very productive” but declined to provide further details.

According to press reports, the U.S. and Japan agreed over the summer on a TPP rule of origin that would require 45 percent of finished automobiles, and only 30 percent of automotive parts, to originate within the TPP region to qualify for duty-free entry under the TPP. U.S., Canadian and Mexico auto parts groups responded that they are “supportive” of a 50 percent content rule for finished vehicles but said a final rule for auto parts should be “reflective of any final agreement for motor vehicles.” They added that an “inadequate content rule for parts” could negatively impact “a dynamic automotive supply chain that benefits the Canadian, U.S. and Mexican economies through employment, economic output, and an industry that today accounts for 20% of all trade across the three NAFTA markets.”

Sens. Rob Portman, R-Ohio, Sherrod Brown, D-Ohio, and Debbie Stabenow, D-Mich., went further, telling U.S. Trade Representative Mike Froman in a recent letter that “the NAFTA rules of origin should be the starting point for the TPP.” Those rules specify 60 percent content for light vehicles and 62.5 percent for auto parts. The three senators urged Froman not to “accept competitors’ offers that would confer an advantage on producers whose primary supply chain is located in countries outside the TPP.”

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