Canada joins Mexico in asking the US to review the T-MEC rules of origin for the automotive industry

A man works at an auto plant in Canada.Ben Nelms / Bloomberg

The rules of origin agreed for the automotive industry in the T-MEC have become the breaking point between Mexico, the United States and Canada.

The Canadian government has joined Mexico's request to review the interpretation of rules of origin for US car producers.

The Mexican economy secretary, Tatiana Clouthier, has made this decision known through her Twitter account.

"We are pleased that Canada has decided to join the request for consultations, which we requested on August 20," the official posted on her social network.

We are pleased that Canada has decided to join the request for consultations, which we requested on August 20, in relation to the interpretation that the US makes of the Rules of Origin of the automotive sector contained in the #TMEC.

- Tatiana Clouthier (@tatclouthier) August 27, 2021

The different interpretations that exist regarding the content of origin that apply to automobiles and auto parts have become the headache between Mexico, the United States and Canada.

Last week, the Mexican government launched the petition stating that there were differences between the US interpretation and the "more flexible" methodologies.

Luz María de la Mora, undersecretary of Foreign Trade of the Ministry of Economy in Mexico explained in recent days that the US interpretation could cause automakers to decide to leave the region due to difficult and expensive content requirements.

More information

• General Motors workers in Silao put the T-MEC to the test with the rejection of the official union

The point of the trade controversy centers on the methodology to measure regional content so that cars are traded duty-free. According to Bloomberg, the United States insists on a stricter method than Mexico and Canada believe they have agreed to for counting the origin of certain core parts, including engines, transmissions and steering systems, in the overall calculation. The T-MEC requires that, in order not to pay tariffs, 75% of automotive production in Mexico have components produced in the North American region, an increase of 62.5% required by the previous treaty. The T-MEC also asks that 45% of this production must be built by workers who earn at least 16 dollars per hour.

The request for consultations constitutes the first non-contentious stage of the State-State dispute settlement mechanism provided for in Chapter 31 of the T-MEC. The consultations must be held no later than 30 days after a country requests their completion and a period of 75 days to reach an agreement before a formal panel is requested to hear the arguments of the countries involved in the commercial dispute. .

The Canadian Government's decision to join Mexico in this commercial controversy adds to the tensions generated by the unprecedented rejection of the employees of a General Motors plant in the city of Silao (Guanajuato) regarding the collective agreement negotiated by the Confederación de Trabajadores de México (CTM), one of the largest labor unions in the country.

The vote against was made after the United States filed a complaint of labor rights abuses there and based on a new provision included in the T-MEC that allows the country to have labor representatives in Mexico to guarantee that the rules of the agreement.

As a result, the 6,000 employees at the plant will be able to elect a new union leader.

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