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Auto parts to be focus of next round of NAFTA talks

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Canada's marquee proposal for this month's high-stakes round of NAFTA negotiations will involve modernizing auto-parts rules, say sources familiar with the plans, which hinge on making progress on a long-standing irritant in order to propel the troubled talks forward.

"We have been doing some creative thinking," Foreign Affairs Minister Chrystia Freeland said Thursday prior to the start of a Liberal cabinet retreat in London, Ont.

"We've been talking with Canadian stakeholders, and we have some ideas we're looking forward to talking with our U.S. and Mexican counterparts about.... If there's goodwill on all sides, we could have a great outcome in Montreal."

That's where talks are scheduled to resume Jan. 23, and where multiple sources inside and close to the Canadian government -- speaking on condition of anonymity, given the sensitivity of the matter -- say autos will be a central component of that so-called creative thinking.

Freeland and U.S. Commerce Secretary Wilbur Ross agreed during discussions this week that auto parts need to be a priority in Montreal, the sources say.

Canada is hoping to win U.S. support for an idea that might achieve its key goal of ensuring American content in cars, while limiting disruptions to current supply chains.

The idea is that the rules for calculating domestic content need a revamp, with research into new fuel sources, batteries, lightweight materials, cameras and wireless technology taking up an ever-larger share of a car's value.

Canada will suggest that the traditional standards for calculating car parts is outdated, and leave out increasingly important intellectual-property contributions where the U.S. is a world leader.

It's not yet clear whether Canada will make its pitch in a formal document or raise it in conversations, with the goal of updating the proposal with U.S. and Mexican input. The idea was already being discussed informally between the countries at a mini-round in December, one source said.

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