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Canada, Mexico lodge complaint over how U.S. interprets CUSMA auto rules

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Canada intends to sign onto Mexico’s complaint against the United States over its interpretation of rules of origin in the automotive industry, Trade Minister Mary Ng said on Thursday.

Mexico asked last week for a dispute settlement panel under the terms of the U.S.-Mexico-Canada (CUSMA) trade pact. It wants to clear up disagreements over how to apply automotive sector content requirements under the treaty.

The CUSMA, which replaced the North American Free Trade Agreement (NAFTA) in July 2020, says 75 per cent of a vehicle’s components must originate in the three nations to quality for tax-free status, up from 62.5 per cent under NAFTA.

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Mexico and Canada favor a more flexible interpretation of the regulations than the United States, which sought an overhaul of NAFTA in order to protect U.S. manufacturing jobs.

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“The interpretation that the United States adopted … is inconsistent with CUSMA and the understanding shared by the parties and stakeholders throughout the negotiations,” Ng said in a statement.

The panel should produce a report “in the summer of 2022,” the statement added.

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Mexican Economy Minister Tatiana Clouthier on Thursday welcomed Canada’s decision to join Mexico in its complaint against the U.S.

“Happy to hear this,” Clouthier wrote on Twitter. “The regional industry that has been developed for long time has to be defended.”

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