What Does `Made In America' Mean?

There is a shadow hanging over the three-way talks now under way to fashion a North American free-trade zone.

The U.S. faces the possibility that foreign companies will exploit Mexico's low wages and lax environmental enforcement by merely assembling cars, television sets, and the like from foreign parts, and then ship them-duty-free-into the U.S. The answer to the problem, say American trade negotiators, is to require that 60% of the actual manufacturing work be done in Mexico in order for the goods to qualify for duty-free shipment north.

But a recent U.S. Customs Service audit of Honda Motor Co.'s transplant operations in the U.S. and Canada shows there is little agreement, even within the Administration, on how to interpret "rules of origin." Worse, the audit of Honda-the first by U.S. tax collectors of a foreign auto company that makes use of the preferential trade treatment accorded Canada-has taken two years and is stalled in confusion and bureaucratic recriminations.

It's no help that the U.S. Treasury Dept., which oversees Customs, has yet to issue final regulations governing rules of origin, although they are a critical element of the nearly three-year-old U.S.-Canadian Free Trade Agreement. Treasury hopes to fix some of the inconsistencies in the expanded trade talks that include Mexico. But the ambitious North American talks aren't going to wait for the slow rules-writers at Treasury-talks are proceeding with rules of origin one of the major negotiating issues. If members of the Bush Administration can't agree among themselves exactly what constitutes "Made in America," how can Washington's negotiators represent their country's interests effectively? Or at all?

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