UPDATE 1-Mexico seeks arbitration panel over auto rules dispute with U.S.

(Adds context, details backgrounds, adds U.S. reaction)

MEXICO CITY, Jan 6 (Reuters) – Mexico said on Thursday it had sought arbitration from a panel of experts to resolve its differences with the United States over the interpretation of rules of origin in the automotive industry, escalating a simmering trade row.

“Mexico believes a panel decision will give certainty to the auto industry, benefiting competition in the region,” the Mexican economy ministry said in a statement.

Mexico filed the arbitration request on Thursday after previously raising concerns with the United States, and a decision should be reached by the panel this year, it added.

The members of the panel, which Reuters had previously reported Mexico would call for https://www.reuters.com/business/autos-transportation/exclusive-mexico-seek-expert-panel-fix-auto-dispute-with-us-sources-say-2021-10-26, are still to be determined.

Mexico expects the panel to clear up disagreements with the United States over how to apply automotive sector content requirements under the United States-Mexico-Canada Agreement (USMCA), which underpins trade in North America.

The panel dispute puts the spotlight back on where autos are built in the region, a question that lay at the heart of former U.S. President Donald Trump’s drive to replace the North American Free Trade Agreement (NAFTA) with what became USMCA.

Adam Hodge, a spokesman for the U.S. Trade Representative, said the office was “reviewing Mexico’s request to establish a panel and remain confident that the U.S. interpretation of the automotive rules of origin is consistent with the USMCA.”

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

U.S. trade unions argue that jobs have migrated to lower-cost Mexican plants since NAFTA first took effect in 1994. (Reporting by Adriana Barrera and Dave Graham; additional reporting by David Shepardson in Washington; Editing by Aurora Ellis)