WASHINGTON, March 15 (Reuters) - One of U.S. President Donald Trump's most protectionist trade advisers struck a more conciliatory tone with Mexico on Wednesday, saying he wanted the two countries and Canada to form a regional manufacturing "powerhouse" with stricter rules of origin.
White House National Economic Council Director Peter Navarro's comments on Bloomberg News helped boost Mexico's peso MXN= to nearly its highest level since Trump's election last November.
The comments indicate that Navarro, a strong voice behind Trump's calls during the campaign for steep tariffs on goods from Mexico and China to help reduce U.S. trade deficits, was now seeking to cooperate with Mexico to the benefit of both countries. Navarro said he wanted to strengthen manufacturing in the three countries through renegotiation of the North American Free Trade Agreement.
Navarro said the 23-year-old trade pact could be transformed into two parallel U.S. bilateral deals with Canada and Mexico, or a modernization of the current trilateral deal.
"We have a tremendous opportunity, with Mexico in particular, to use higher rules of origin to develop a mutually beneficial regional powerhouse where workers and manufacturers on both sides of the border will benefit enormously," Bloomberg quoted Navarro as saying. "It's just as much in their interests as it is in our interests to increase the rules of origin."
In automotive products, the biggest area of manufactured goods trade between the United States and Mexico, vehicles must have 62.5 percent North American content to qualify for NAFTA's tariff-free benefits. Navarro has said that rule allows North American manufacturers to use too many Asian parts.
Both Mexican and Canadian officials say they want to renegotiate and modernize NAFTA. Commerce Secretary Wilbur Ross said he would trigger notification to Congress to start the NAFTA renegotiation process by late March, with substantive talks beginning later this year.
The Mexican peso, which had fallen sharply after Trump's election on fears that trade between the two countries would be disrupted, had strengthened to below 19.5 to the dollar at midday.
With the Trump administration filling out with more voices on trade issues, it is unclear how much influence Navarro will have.
Ross has been designated to take a leading role on trade issues, while U.S. Trade Representative nominee Robert Lighthizer told senators in his confirmation hearing on Tuesday that he would have full statutory authority to negotiate trade deals.
Lighthizer, a veteran trade lawyer and former USTR official in the 1980s, said he would "sort out" differences within the administration over trade.