Pacific trade partners make progress on autos hurdle

Wed Sep 30, 2015 10:09pm EDT
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By Ana Isabel Martinez and Krista Hughes

ATLANTA (Reuters) - Negotiators trying to clinch a Pacific Rim free trade deal made progress toward resolving a key issue on Wednesday when Canada and Mexico signaled a willingness to open the North American auto market to more parts made in Asia, people briefed on the closed-door talks said.

The Trans Pacific Partnership, or TPP, which seeks to cut trade barriers and set common standards among a dozen nations reaching from Japan to Chile, has become snared over a small set of issues, including trade in autos and auto parts, since July.

The auto issue is crucial for Japan, whose automakers, led by Toyota Motor Corp (7203.T: Quote), depend on sales to the U.S. market and want flexibility in how and where they source auto parts.

The stakes are also high for Mexico, which has seen a boom in auto-related investment because of its proximity to the United States, relatively low labor costs and participation in the North America Free Trade Agreement.

Over the past two years, eight automakers, including Honda Motor (7267.T: Quote), Mazda (7261.T: Quote) and Nissan (7201.T: Quote), have opened or announced new auto plants or expansions of existing facilities in Mexico.

A previous round of TPP negotiations failed in July after Mexican officials objected to a proposal by Japan and the United States on autos concerning the "rules of origin" that determine whether a vehicle can be exported without tariffs.

Officials from Mexico and Canada were aiming for a 45-percent threshold for local content on vehicles, two people briefed on the talks said.

If part of a final trade deal, that would mean the majority of the vehicle could be sourced from outside the 12 countries participating in the TPP and still be sold in the United States - the bloc's largest market - without tariffs.   Continued...

A visitor walks under a logo of Toyota Motor Corp at the company's showroom in Tokyo February 4, 2015.  REUTERS/Yuya Shino