United States: What To Expect From A Trump Administration Trade Policy: Revisiting NAFTA

In a recent alert, we discussed several steps that President-elect Trump may take to shake up US trade policy. In this alert, we discuss one of his priority initiatives: the pledge to renegotiate, or withdraw from, the North American Free Trade Agreement (NAFTA) to get a better deal for US workers. If the Trump Administration follows through on this pledge, any one of a number of scenarios may emerge—from an expanded and modernized agreement, implying offensive opportunities for companies to formulate a wish-list agenda for the negotiations, to substantial supply chain and commercial disruption, implying defensive concerns on the part of affected businesses. Given the range of potential outcomes, companies should proactively review their NAFTA positioning and become embedded in the negotiating process early on in order to further and/or safeguard their commercial interests.

Pledges to renegotiate NAFTA are a recurring theme in presidential campaigns. For example, as a presidential candidate in the 2008 primary season, Barack Obama promised to use the "hammer of a potential opt-out" as leverage to renegotiate the agreement's terms. The Obama Administration shelved that idea after the election as trade policy took a back seat to the financial crisis and the push for Obamacare. But there are signs that this time may be different, as the president-elect has kept trade issues at the forefront in the post-election period.

If the Trump Administration decides to seek renegotiation with Canada and Mexico, revisions and updates to NAFTA could be numerous. In one possible scenario, the changes could benefit a broad array of US companies by substantially updating and expanding its reach.1 For example:

  • Intellectual Property (IP): NAFTA's IP provisions are only slightly stronger than those adopted by all World Trade Organization members in 1995. A renegotiated NAFTA could include more robust IP protections, such as a minimum exclusivity period for biologics, which is 12 years under US law but shorter under Canadian and Mexican law.2 Other possible changes include digital rights management (i.e., to prevent circumvention of IP rights with respect to digital products), and limitations and exceptions for copyright (i.e., to protect news reporting, scholarship, research, etc.).
  • Digital Trade: The Internet was in its infancy when NAFTA was signed in 1992, and NAFTA does not include a chapter on the digital economy. Potentially, a renegotiated NAFTA could protect the free flow of information across borders, ban requirements that force US businesses to locate ICT infrastructure abroad, and prohibit foreign governments from requiring disclosure of source code and encryption keys. This would help protect innovative US producers of digital goods and services from unfair foreign practices and would set a high bar for other future negotiations. It is notable that Mexico was a strong ally of the United States in the negotiation of the electronic commerce chapter in the Trans-Pacific Partnership (TPP).
  • Anti-Corruption and Rule of Law: Currently, NAFTA does not contain any provisions on anti-corruption and rule of law. A renegotiated NAFTA could include provisions on good governance, requiring the parties to effectively enforce anticorruption laws and regulations, and also imposing transparency-related requirements.

However, a renegotiated NAFTA could also negatively impact US companies, especially those with international supply chains or operations outside of the United States.3 For example:

  • Rules of Origin: Like other US free trade agreements, NAFTA includes complicated "rules of origin" to determine whether a product imported from Canada or Mexico qualifies for duty-free treatment in the United States. The Trump Administration may seek to tighten the NAFTA rules of origin by withdrawing duty-free treatment from goods made with inputs from third countries, such as China, which account for a significant share of the total value of the finished product. The potential for such changes should be of particular concern to the auto industry and other sectors with substantial Mexican or Canadian production facilities that use third-country inputs.
  • Investor-State Dispute Settlement: NAFTA was one of the first free trade agreements to include investor-state dispute settlement (ISDS) provisions, which have since become a core part of the US trade template—and one of the most controversial. Although Republican administrations have typically supported ISDS, the president-elect criticized the mechanism during the campaign. Thus, it is possible that the Trump Administration will consider jettisoning ISDS from NAFTA. This would eliminate an important safeguard for US companies with investments in Canada and Mexico—each of which may welcome the step, as they have both been the target of high-profile ISDS actions in the past.
  • New Provisions Targeting "Outsourced" Production: The president-elect has threatened to impose additional taxes on US companies that "outsource" US production to foreign countries and then export their products back to the United States. It is unclear whether the Trump Administration plans to use trade policy, tax policy, or the bully pulpit to accomplish this objective. However, to the extent that this policy is advanced via NAFTA, the impact on businesses could be profound.

Finally, some changes to NAFTA could be important for the effect that they have on future free trade agreements negotiated with countries outside North America, or in the event that an updated NAFTA is subsequently expanded to include additional parties. For example:

  • State-Owned Enterprises (SOEs): NAFTA's provisions on SOEs are limited and do not reflect the full range of concerns about discriminatory preferences for SOEs that have come to the fore since NAFTA was signed. TPP would have included robust protections against unfair competition from SOEs, including provisions to combat subsidies to SOE service suppliers. The Trump Administration could push to add an SOE chapter to NAFTA with even stronger protections than those in TPP, given the absence from the NAFTA negotiations of parties with significant defensive concerns (unlike TPP).
  • Currency Manipulation: The president-elect's pledge to instruct the Secretary of the Treasury to declare China a currency manipulator reflects the outsize role that currency has played in US trade policy debates in recent years. Indeed, the lack of a sufficiently strong currency provision was one of the principal complaints of many TPP opponents. It is possible that Canada and Mexico would welcome the opportunity to add a strong currency provision to NAFTA, both for domestic political reasons and to establish a strong precedent for future negotiations with countries that are believed to manipulate their currencies to promote exports.

Several of these changes (e.g., ISDS, currency manipulation, provisions targeting "outsourced" production) would depart from traditional Republican trade orthodoxy, and congressional Republicans may not support them—although they would likely enjoy strong support from traditional trade skeptics in the Democratic Party. The fact that these ideas would even be on the table, however, is a reflection of the president-elect's unorthodox campaign and its unsettling effects on trade politics.

Canada and Mexico are undoubtedly already preparing their own demands for any negotiation, which may prove unacceptable to the United States. Mexico, for example, may push to expand NAFTA's "temporary entry" provisions to expand the availability of visas for Mexican and Canadian service suppliers in the US market—a non-starter in US trade politics since the completion of the Chile and Singapore FTAs in 2003. But if the three countries view the exercise as an opportunity to modernize NAFTA and increase the competiveness of the North American market, the outcome could be an improved and greatly expanded agreement, which could serve as a template for future FTAs with other countries.

Please contact us if you have any questions about how your company can take a strategic approach to a renegotiation of NAFTA.


1. US companies would be wise to look at provisions of the Trans-Pacific Partnership (TPP) for guidance, even though it remains controversial.

2. See Ian F. Fergusson and Brock R. Williams, Congressional Research Service, "The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress" (June 14, 2016) at pp. 49-50.

3. By the same token, companies that compete against those harmed by these provisions stand to gain a competitive edge if they are introduced into NAFTA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

In association with
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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.


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.


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.


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.


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.