Mexico has requested a dispute resolution panel be set up under the United States-Mexico-Canada Agreement (USMCA) to resolve differences with Washington in the interpretation of automotive content rules, the Mexican Economy Secretariat said Thursday, Jan. 6.
“Mexico believes that a panel decision will provide confidence to the automotive industry for the benefit of the region’s competitiveness,” the secretariat said in a press release.
The press release went on to say that the Mexican government believes that the U.S. requirements on automotive producers for calculating the regional value content of passenger vehicles, light trucks and their parts are “incompatible” with the USMCA.
The USMCA took effect on July 1, 2020, to replace the North American Free Trade Agreement (NAFTA), updating such aspects as labor and digital trade standards, and implementing stricter automotive content rules.
The new agreement raised required regional content to 75 percent of a vehicle’s value or components, up from 62.5 percent under the NAFTA agreement.
Mexico has claimed that U.S. officials are taking an unduly strict approach by not allowing “various methodologies” to calculate content.
Several Asian and European automakers have plants in Mexico and sometimes import components from outside North America.
In December, Mexico threatened legal action over proposed subsidies of up to $12,500 for purchases of U.S.-made electric vehicles.
The United States, meanwhile, is concerned the Mexican government is trying to favor its own state-owned electrical power plants through a proposed electricity reform being pushed by President Andrés Manuel López Obrador (AMLO) that prioritizes government-owned carbon-based energy sources over private clean energy options.
Mexico exports most of its automotive products to the United States, its main trade partner.