Canada will complain about US measures in the auto sector, in a new sign of trade tensions

Canada will join a dispute against U.S for his interpretation of how free trade should be applied in the automotive industry on the continent, another sign of the erosion of ties between the two neighbors.

Canadian Trade Minister Mary Ng said her country would join Mexico in requesting a dispute resolution panel under the trade agreement between Canada, the United States and Mexico, TMEC.

Canadians and Mexicans want to resolve disagreements over how to enforce the automotive sector’s content requirements under the pact, which takes effect in 2020 and replaces the North American Free Trade Agreement (NAFTA).

They are also unhappy with the US’s proposed tax breaks for US-based electric vehicle makers because, they say, it could undermine the highly integrated US auto industry.

Under the TMEC, 75% of a vehicle’s components must originate in North America to qualify as duty-free, versus 62.5% under NAFTA.

Canada and Mexico favor a more flexible interpretation of the regulations than Washington, which sought a revision of NAFTA when Donald Trump was president to protect jobs in the industry.

“The interpretation that the United States adopted is inconsistent with the TMEC and the understanding shared by the parties and interested parties throughout the negotiations,” Ng explained, in a statement announcing the decision.

The passage of Ottawa was celebrated shortly after by the Mexican Secretary of the Economy, Tatiana Clouthier. “Together we will defend the competitiveness of this regional industry,” he argued.

The US Trade Representative’s office expressed confidence that its interpretation was consistent with the TMEC. The spokesman, Adam Hodge, said by email that the rules of origin were necessary to attract investment and create good jobs.

But Flavio Volpe, president of the Canadian Association of Automotive Parts Manufacturers, said the US approach could persuade automakers to use cheaper parts outside of North America and accept the 2.5% tariff the US would then impose on its vehicles. .

The biggest losers would be US companies that supply about 55% of all auto parts used in North American manufacturing, he told the Canadian Broadcasting Corp.