Mexico invokes TMEC panel to resolve differences with the US in the automotive sector

Mexico requested to establish a dispute settlement panel within the framework of the renewed trade agreement with United States and Canada (T-MEC), to resolve a “difference of interpretation” with Washington on rules of origin of the automotive sector, reported the Government.

The panel requested by Mexico will seek to determine that the interpretation and application by the United States of the provisions of Chapter 4, referring to the automotive rules of origin, as well as the uniform regulations of the T-MEC, “are incorrect,” detailed the Mexican Ministry of Economy in a statement.

“The United States imposes requirements on automotive producers that are incompatible with the T-MEC in order to calculate the Regional Value of Content (VCR) of passenger vehicles, light trucks and their parts,” underlined the Economy office.

The Mexican argument maintains that the automotive appendix to the treaty grants automobile producers different methodologies that allow them to consider parts and components not originating in North America in the calculation of the VCR, and that with this the vehicle is considered originating in order to obtain the benefits tariffs of the T-MEC.

“The United States does not agree with that position and does not allow automobile producers to benefit from these methodologies,” claims the Ministry of Economy in the document.

The firm believes that the decision of a panel “will provide certainty to the automotive industry for the benefit of the competitiveness of the region.”

Once the request is submitted, the members of the panel will be appointed and a procedural calendar will be issued. The decision should be known this year, according to the deadlines established by the T-MEC, the secretariat added.

Washington announced last Tuesday that it had beaten Canada in a dispute over Canadian milk quotas, in the first dispute resolved under the T-MEC.

The panel is a new phase of a dispute that began on August 20, when Mexico requested to hold consultations with the United States to resolve its disagreements regarding the automotive rules of origin, one of the thorniest points in the long renegotiation of the treaty promoted by former US President Donald Trump.

The consultations, which lasted 75 days, were not enough to resolve the controversies.

The regional automotive industry is considered the jewel in the crown of the multibillion-dollar commercial exchange between Mexico, the United States and Canada, which reached around US $ 1.2 trillion in 2019, prior to the impact of the COVID-19 pandemic.