Wednesday, August 29, 2018

How the U.S.-Mexico Pact Could Turn Tables on China

When President Donald Trump announced a trade pact with Mexico to replace the North American Free Trade Agreement, attention immediately turned to Canada. But it’s in China – which wasn’t mentioned – that the greatest impact could be felt.

In abandoning Nafta, the U.S. appears to be moving toward a single trade bloc that might also embrace Canada. The Mexico accord tightens rules of origin on automobiles, so that 40 percent to 45 percent of their content must be made by domestic companies whose workers earn at least $16 an hour. This limits the scope for assembly in Mexico with Chinese components, favoring higher-value parts from manufacturers covered by the agreement.

The origin requirement is clearly aimed at countries that either trans-ship or use Mexico as an assembly center. The announcement says the “new rules will help ensure that only producers using sufficient and significant United States and Mexican parts and materials receive preferential tariff benefits.” Taken with certification for local producers and particular rules for textiles, it does look as if the draft had China partly in mind.

Other aspects appear to target concerns about China more directly. The section on intellectual property addresses national treatment of copyrights, clauses on common names and trademark protection – all long-standing U.S. issues with Beijing. As anyone who has walked through a Chinese street market knows, lookalike versions of famous brands, and thousands of “Apple” stores, are commonplace.

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