The Thorniest NAFTA Issue

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The following article was published in the Journal of Commerce on Oct. 5, 2017.

By Philip Sutter, director of strategic analysis, Global Trade Management, Livingston International

With three rounds of the NAFTA renegotiation now in the books, negotiators are no closer to a successful completion of a revised agreement. While much of the media focus has been on a web of thorny issues such as labor standards and dispute mechanisms, what is often missed is the real sticking factor —  automotive rules of origin.

Taking the negotiators at their word in their Trilateral Statement on the Conclusion of the Third Round of NAFTA Negotiations, progress on other matters, such as on the small and medium-sized enterprises chapter and the competition chapter, has been speedy.  However, as Canada’s Foreign Minister, Chrystia Freeland put it, these are the easy “bread and butter” issues.

And while issues such as labor standards and investor dispute settlements will no doubt remain contentious, they are unlikely to stir the level of negotiators’ resolve the way rules of origin will. As Canadian Finance Minister Michael Wilson once put it: “Rules of Origin are very, very complex. You don’t want to know about them. They’re terrible things to deal with.”

What makes the automotive rules of origin so special?