United States: Trump Administration Delivers Formal Notice Of NAFTA Renegotiations

The Office of the U.S. Trade Representative (USTR) on May 23, 2017, issued a notice requesting comments from private industry and other interested parties on upcoming negotiations regarding the North American Free Trade Agreement (NAFTA).

The notice was preceded by the Trump Administration's formal 90-day notification to Congressional leaders last week that it was seeking to engage in negotiations with Canada and Mexico. That 90-day notice was filed as required by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (Trade Act), which allows trade agreements entered into by the president to go through an expedited vote in Congress (often referred to as "Fast Track").

Throughout the presidential campaign, then-candidate Donald Trump repeatedly called NAFTA a "terrible deal." Fears that the United States would unilaterally withdraw subsided as the new administration recognized the complex interdependence of the Canadian, U.S. and Mexican economies; an abrupt U.S. withdrawal would wreak havoc on the sophisticated supply chains and manufacturing plants that have reoriented to take advantage of economies of scale. Imports from NAFTA trade partners contain substantial percentages of U.S.-made components. One study estimates that 40 percent of U.S. imports from Mexico contain U.S.-origin content.

This more nuanced view of NAFTA was reflected in the Trump Administration's notice to Congress. Though critical of NAFTA's outdated provisions on labor and environmental protection, as well as digital trade, intellectual property protection and state-owned enterprises, the notice's objectives for renegotiations were minor and focused on tweaking the agreement rather than forcing wholesale changes.

While Canada and Mexico have signaled a willingness to renegotiate the pact, neither wants NAFTA to devolve into a series of bilateral agreements between the three North American neighbors.

Potential areas of disagreement, include the U.S.' wishes to increase local content for country-of-origin calculations, especially with regard to automobiles (currently 62.5 percent), as well as Canada's protectionism of its dairy industry and Mexico's restrictive policies on foreign investment in its energy sector.

The range of topics solicited for comment by USTR is broad and includes:

•      economic costs and benefits to U.S. producers and consumers of removal of any remaining tariffs and removal or reduction of non-tariff barriers
•      product-specific import or export interests or barriers
•      relevant digital trade issues that should be addressed in the negotiations
•      relevant trade-related intellectual property rights issues that should be addressed in the negotiations

In addition to providing written comments, interested parties may testify at an open hearing scheduled to be held at 9 a.m. on Tuesday, June 27, 2017, in the Main Hearing Room of the U.S. International Trade Commission in Washington, D.C. Written comments and requests to testify must be submitted to USTR by Monday, June 12, 2017. Comments must be submitted electronically; otherwise, alternative arrangements can be made with USTR.

Given the importance of NAFTA to many sectors in the U.S. economy and the complex domestic and international political considerations in play, interested parties are strongly encouraged to take advantage of this opportunity in the context of specific business needs and operations.

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