WASHINGTON, April 16 (Reuters) - U.S. businesses continue to offshore operations to Mexico despite the revamped regional trade pact that was meant to stymie that activity, U.S. Trade Representative Jamieson Greer said on Thursday, and the product rules of origin underlying the deal will be the focus of talks in Mexico next week.
"There is continued offshoring to Mexico. I am going to Mexico next week and I am going to speak with my counterpart, and I have already told him and we've already had conversations
about changing the rules of origin," Greer said at a congressional budget hearing.
"This is how we avoid the transshipment through Mexico, and it's how we make it tougher," Greer said, referring to how some exporters avoid a higher U.S. tariff by diverting goods through a country like Mexico with a low tariff rate on its U.S. exports.
Under the U.S.-Mexico-Canada Agreement on trade reached during President Donald Trump's first term, qualifying goods from Mexico enter the U.S. on a duty-free basis. The USMCA deal is currently under review, and Greer will meet with Mexico's Economy Minister Marcelo Ebrard in the second round of talks next week.
"I will say it's also important for us to have a tariff level that incentivizes compliance with those tougher rules," Greer said. "Because if our outside tariff level is low, people will just say I don't care about the rules, I'll just bring something in from Vietnam. That's why I am trying to have higher tariffs on the rest of the world, so that I can actually incentivize manufacturing in the U.S."
(Reporting by Dan Burns; Editing by Paul Simao)
