Canada: GAME ON - USTR Releases Objectives for NAFTA Renegotiations

Last Updated: July 26 2017
Article by Geoffrey C. Kubrick

On July 17, 2017, the United States Trade Representative ("USTR") released a summary of objectives for the United States in NAFTA renegotiations.  The submission of this document to Congress was a necessary precondition to the initiation of trade negotiations.  Most of the document is comprised of boiler plate objectives that would apply to most trade negotiations.  Many of the objectives are already addressed to a certain extent under the various World Trade Organization ("WTO") agreements.

While there is little that is unexpected in this document, there are a few clues as to issues that may be of particular interest to the United States.

There are 22 general issues that are listed.  Rather than address each of these, this analysis will focus on areas of interest to Canada, and on issues where the United States may put particular emphasis.

Agriculture

The USTR document identifies general goals under trade in goods, both industrial and agricultural products.  In respect  of Canada, the agricultural target will primarily be dairy, chicken and eggs.  The objectives do seem to contemplate a reduction in American constraints on the import of agriculture goods, subject to a phase-out of tariffs that currently exist.  American willingness to give on trade in agriculture products will make Canadian defence of supply-managed industries more difficult, particularly given the concessions made by Canada in negotiations for the Trans-Pacific Partnership ("TPP") and Comprehensive Economic and Trade Agreement ("CETA").  While possibly painful for Canadian producers, an American win on this issue would also be a win for Canadian consumers.

Import Value Thresholds

The United States has also expressly addressed the difference in customs rules pertaining to e‑commerce.  In particular, the United States wishes to see reciprocity in the scope of customs coverage. It currently has a $800 de minimis standard for express delivery shipments.  Canada currently maintains a $20 threshold, in large part to expand the scope of goods subject to sales taxes.  An American win here would benefit Canadian consumers.

Technical Barriers to Trade

In addressing technical barriers to trade, the objectives contemplate a requirement that decisions and recommendations of the WTO Committee on Technical Barriers to Trade be applied.  This is a novel concept since, in the normal course, a member country can decline to apply WTO decisions, subject to the right of the complaining country to withdraw equivalent concessions.  In conjunction with sanitary/phytosanitary standards, the U.S. goal is likely to advance U.S. interests in the agricultural and chemical industries, where acceptance of new strains or new products may be subject to regulatory control in Canada or Mexico, even if approved in the United States.

It is interesting that the United States is limiting adherence to WTO decisions to technical barriers to trade.  If this principle were to be applied more generally to require enforcement of all WTO decisions, that would certainly provide some comfort to the Canadian softwood lumber industry.  While enhancing the enforceability of WTO decisions is an intriguing concept, the reasonable extension of such a rule across all WTO decisions is almost certainly not going to be acceptable to American negotiators.

Services

The objectives signal a goal of obtaining greater access to the telecommunications and financial services sectors.  There will likely be some significant push-back from Canadian providers of internet, cable and cell phone service.  On financial services, Canadian big banks already have an extensive presence in the American market, and U.S. negotiators will likely press for some form of reciprocal treatment for American financial institutions in Canada.

The Cloud

Another key objective that is of little surprise relates to abolishing restrictions on cross-border data flows.  In a nutshell, this is about cloud storage, and the removal of restrictions on the use of data storage facilities located outside of Canada.  Canada has certain laws that currently prevent use of data storage facilities outside of the country on the grounds of privacy concerns.  Canada would likely be able to maintain restrictions on certain government data under the national security exception, but it will be pressed to recognize that privacy can be protected regardless of the physical location of the data storage facility.  This issue was conceded by TPP negotiations, and it will be difficult to refuse similar concessions under NAFTA.

Procurement

On issues of government procurement, the United States seeks an express exclusion for state and local government from NAFTA procurement obligations.  Sub-federal bodies are not directly included under existing government procurement obligations, though one might argue that a failure to permit open access to procurement at these levels of government might be considered a breach of national treatment obligations, and give rise to a potential remedy under Chapter 11 of NAFTA (though this avenue has not yet been pursued).  A desire to expressly exclude sub-federal American institutions does seem to reflect a potential concern under NAFTA, or in the context of WTO obligations.  Press reports have suggested that Americans are going to go after provincial and municipal procurement in Canada.  Given the American position, such an outcome is most unlikely, particularly given the repeated American goal of reciprocity in the negotiations.

A different plan of attack may come through the objectives relating to state-owned enterprises ("SOE").  A stated goal of the USTR is to require SOEs to accord non-discriminatory treatment with respect to purchase and sale of goods and services.  This might be an alternative means of seeking access to sub-federal procurement in Canada, since there are a number of significant SOEs at the provincial level, particularly in relation to power generation and provision of health services.

Dispute Resolution

Dispute resolution is an issue that is all over the map.  One stated objective is to abolish the Chapter 19 Panels which provide an alternative route to judicial review than in the courts.  Canada had pushed hard for this in the Canada U.S. Free Trade Agreement, with the aim of obtaining an expedited judicial review of American anti-dumping or countervailing duty decisions.  The fear at the time was that the appeal processes under American law would effectively permit an American industry to litigate smaller Canadian industries out of the American market.

The U.S. objective on Chapter 19 is somewhat incongruous given the promotion of NAFTA dispute settlement mechanisms elsewhere in the objectives.  For example, the USTR contemplates incorporating the labour and environmental side agreements into NAFTA, with establishment of enforceable dispute resolution procedures applicable to each.  Some caution may be warranted on the part of Canada and Mexico to the extent that environmental provisions might require active enforcement of obligations under the Paris Climate Accord (such as they are), despite the fact that the United States would not be obliged to do the same.

The U.S. contemplates an overall dispute settlement procedure, which is somewhat ironic, since such a procedure already exists under Chapter 20 of NAFTA.  The United States has undermined the effectiveness of existing measures by repeatedly declining to appoint panelists for disputes under Chapter 20.

A further apparent contradiction on dispute resolution relates to the USTR goals on investment.   One cited goal is to ensure that NAFTA country investors in the United States are not accorded greater substantive rights than domestic investors.  Chapter 11 of NAFTA currently does provide investors of other NAFTA countries higher rights than available to local investors.  For example, a Canadian investor has fewer rights to a remedy for expropriation of its assets in Canada than would be available to an American or Mexican investor.  In this respect, the American goal may effectively mean the end of Chapter 11 of NAFTA.  This dispute resolution procedure has primarily benefitted of American investors over the last two decades; both the Canadian and Mexican governments might be happy to see Chapter 11 gone.

Trade Remedies

For global safeguard remedies, the U.S. is seeking to remove the higher injury standard applicable under NAFTA.  In such cases, NAFTA countries must be demonstrated to be, on their own, a serious cause of injury to domestic producers before safeguard measures may be applied against them.  The United States seeks to essentially remove that exception from NAFTA.

Another trade remedy goal is the possibility of instituting proceedings for third country dumping.  This would mean giving companies under NAFTA a right to bring anti-dumping proceedings in another NAFTA country where their exporters are being harmed by dumping or subsidization from a non-NAFTA country.  NAFTA had originally contemplated further negotiations in this regard, but no further steps were taken at the time.

Transparency

There are a number of mentions of transparency throughout the objectives defined by the USTR.  One interesting aspect of the American position may result in greater transparency or access to Canadian customs data.  American customs data is accessible through a number of services in which all customs information, with the sole exception of price, may be available.  This information extends to goods that are transhipped to Canada through an American port.  Under the Canada Border Services Agency ("CBSA") interpretation of section 107 of the Customs Act, absolutely no information provided on customs documents can be made public.  The rule is somewhat enigmatic when one considers the extent of information on imports into Canada that may be obtained from the United States, but not from Canadian sources.  If the CBSA were required to provide the same degree of transparency as is currently the case in the United States, this information would be of great interest and use to a wide range of industries throughout Canada.

Conclusions

The document outlining the USTR objectives in NAFTA re-negotiations is a very useful document in a number of respects.  First, the reasoned statement of objectives should dispel the panicked myths propagated by certain members of the press.  Second, it does provide a road map to assist Canadian industry in preparing submissions to government on their particular interests.  Finally, it does allow the governments of both Canada and Mexico to get a sense of where concessions might be made to satisfy U.S. negotiators, while maintaining the substantial benefits accorded to citizens of all three NAFTA countries since the agreement entered into force in 1994.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2017

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Geoffrey C. Kubrick
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.