Pacific trade pact negotiators move closer to deal on rules for autos

Japan, the United States, Mexico and Canada are moving closer to a deal on rules for the automotive industry in a landmark Pacific trade deal, a leading obstacle to agreement on the 12-nation pact, officials briefed on the talks said on Wednesday.`

Although two-day talks between negotiators from the four nations on auto trade did not reach a final agreement, ministers were readying for meetings in Atlanta next week for a final push to get the deal over the finish line.

The United States has not confirmed the meeting of top trade officials from the 12 nations in Atlanta. But Canadian Trade Minister Ed Fast told Canadian Broadcasting Corp he would be in Atlanta next week and would make sure the Trans-Pacific Partnership, which will cover 40 percent of the world economy, would be in the country’s best interests.

“If Canada is not part of the TPP, our whole auto industry will be at risk, because we will lose lots of opportunities to expand our markets within the Asia-Pacific region … we are looking to include clauses that would safeguard our industry,” he said, declining to give details.

Canada, the United States, Mexico and Japan have been working to resolve an impasse over how much local content is needed before cars can be traded duty-free, one of the issues which blocked a deal at the last TPP ministerial meeting in July.

Mexico and Canada, partners with the United States in the 20-year-old North American Free Trade Agreement, have built automotive supply chains based on a threshold of 62.5 percent local content, and objected to having a much lower threshold in the TPP, which they feared would favor Asian auto parts makers such as Thailand.

An official close to the TPP negotiations said the auto talks in San Francisco were productive and progress was made in narrowing gaps on the outstanding issues.

“While agreement on a  landing zone was not reached, the four parties took an important step forward and agreed to continue their work in the near future,” he said.

Another official cautioned there was still a long way to go, but a third said the plan was to come to an agreement in Atlanta, where ministers would meet from Sept. 30 until Oct. 1 or Oct. 2. All four parties are committed to coming to an agreement but there are no final figures yet, the third source said.

A low local content threshold would mean that Japanese carmakers such as Toyota Motor Corp (7203.T) could source inputs from fellow Asian nations and still qualify for duty-free imports to the United States under the TPP, which is set to scrap tariffs of 2.5 percent on cars and 25 percent on light trucks, likely phased out over 20 or so years.

U.S. unions want the threshold be at least as high as NAFTA and rise to 75 percent. Auto parts makers in Canada and Mexico have said the minimum must be 50 percent.

(Reporting by Reuters bureaus; Writing by Krista Hughes; Editing by Tom Brown)