United States: A Closer Look At Round Five Of The NAFTA Negotiations

Round five of the NAFTA negotiations concluded in Mexico City on November 21, 2017. This round was conducted in the absence of trade ministers from all three countries in the hopes of advancing in technical areas and softening tensions between the parties.

In a joint statement, Canadian Foreign Affairs Minister Chrystia Freeland, Mexican Secretary of the Economy Ildefonso Guajardo and United States Trade Representative Robert Lighthizer said that Chief Negotiators "concentrated on making progress with the aim of narrowing gaps and finding solutions. As a result, progress was made in a number of chapters."1 Negotiators made some progress on technical issues during this round, and the chapters on digital trade, sanitary and phyto-sanitary measures, anti-corruption, regulatory matters, trade facilitation and customs enforcement are reported to be near conclusion.2

Despite these advances, trade ministers still commented on the lack of progress on key issues this week. Robert Lighthizer stated, "While we have made progress on some of our efforts to modernize NAFTA, I remain concerned about the lack of headway. Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result."3 Chrystia Freeland also expressed frustration and said, "There are some areas where more extreme (U.S.) proposals have been put forward. These are proposals we simply cannot agree to."4

With respect to the progress made on less contentious portions of NAFTA, negotiators have reported that in this round they have been able to reduce the red tape for exporters and standardized food safety regulations between the three countries.5 Negotiations on digital trade have also seen some progress, so that countries will not be able to require disclosure of proprietary algorithms as a prerequisite for trade. This standardizes legislative precedents set in the US for the protection of proprietary algorithms. However, negotiators have yet to create similar protections for other forms of technology. Additionally, negotiators have agreed on limited civil liability for online platforms hosting third party contents. This change would create consistent accountability standards for content providers such as Facebook and Google.6

Time was also set aside each day of this round to discuss rules of origin. However, no substantive progress was made on US proposals to increase content requirements in the auto sector. Both Canada and Mexico have agreed to discuss auto changes but have insisted that the US proposal is too extreme. Mexico has pushed back on the US's auto content requirements, stating that the proposals are "unviable" and would "make the region less competitive".7 Ildefonso Guajardo said on Tuesday that Mexico will offer a counter proposal to the US once the dimensions of the US proposal are "understood".8 Canada has so far refrained from offering a counter proposal and instead made a presentation on the detriments of the US proposal to the North American automotive industry.9

The US proposal has also received backlash from Congress. More than 70 members of the US House of Representatives discouraged the US Administration from pursuing a boost to the current local production requirements. The bipartisan group of lawmakers wrote a letter to the Trump Administration stating that the proposal "would eliminate the competitive advantages provided to the US auto industry under the current NAFTA rules—or lead to rejection by Canada and Mexico and the end of the agreement."10 In a related development, a delegation of Canadian Members of Parliament from three parties traveled to Washington, DC this week to meet with more than 60 Members of Congress to discuss the importance of keeping or improving NAFTA, rather than rejecting it outright, as President Trump has threatened several times in recent months.

The Mexican Chamber of Commerce (CCE) has said that the US delegation has been reluctant to cooperate in closing chapters. While Canada and Mexico are increasingly consolidating and supporting each other's proposals, the United States' willingness to show flexibility on more controversial matters is lower than its counterparts, said Moisés Kalach, Adviser to the CCE. Mr. Kalach stated: "In the report they [negotiators] gave us, we saw that the Mexican team is proposing, but the USTR (United States Trade Representative) is not responding." Mr. Kalach added that while there had been progress on some chapters, he doubted the willingness of the US negotiating team to make meaningful progress.

Another proposal that has been rejected by Mexico is a proposal relating to the seasonality of agricultural exports from Mexico and Canada by which different rules would apply to imports from Mexico and Canada depending on whether it is harvest season in the US. Regarding this proposal, Mr. Kalach said, in a radio interview, that "If you refer to the agricultural issue of seasonality, the response from the Mexican team was no, there is no part of the proposal that can be accepted, there is no counterproposal. It is simply no, it cannot be accepted." Mr. Kalach also acknowledged there is a risk that NAFTA may be terminated by the US before the conclusion of the renegotiation process.

Although government procurement was discussed on the first day of talks, no formal progress was made on this issue and the US remained firm in its position and proposal of new "Buy American" rules.11 Mexico has now responded with its own protectionist proposal, which would deny Americans access to Mexican government contracts.12

With respect to telecommunications, negotiators could not agree on the insertion of an Annex that would apply specifically to Mexico. The purpose of the Annex would be to prohibit America Movil (a Mexican telecommunications provider) from charging interconnection fees to competitors, such as AT&T, for calls using Movil's network. The disagreement raises sensitive issues of telecommunications reform in Mexico because an August 2017 Mexican Supreme Court case ruled against a 2014 legislative reform effort that contained the prohibition. The Court held that the interconnection fees must be set by the Mexican telecommunications provider, not by the Mexican legislator. The United States would like to enshrine the reform in a NAFTA Annex, notwithstanding the Supreme Court decision, while Mexican negotiators prefer not to address the matter.

In terms of the proposed sunset clause to terminate the agreement every five years unless the countries opted back in, on November 18, 2017, the US released updated trade objectives that appear to accommodate the Mexican proposal for periodic reviews of the trade pact without an automatic expiration. The updated trade objectives specify that the revised NAFTA should "provide a mechanism for ensuring that the Parties assess the benefits of the Agreement on a periodic basis."13 Canada and Mexico have also expressed flexibility on the US proposal to review NAFTA every five years, but they have insisted that it not include a clause that would automatically cancel NAFTA unless there was trilateral agreement to renew it.14

The updated trade objectives also articulate broad goals on dispute settlement, such as establishing "procedures to ensure that panels are composed in a timely manner and with the appropriate expertise", and "ensuring that the Parties retain control of disputes and can address situations when a panel has clearly erred in its assessment of the facts or the obligations that apply."15 Further goals include "allowing arbitrators expeditiously to review and dismiss frivolous claims" and transparency throughout any process.16 While quite vague, and perhaps indicative of support for a set roster of arbitrators and appellate process in any revised system, these statements show support for keeping ISDS in the negotiations.

With respect to labour, Mexico recently announced that they will raise the minimum wage by 10 percent to 88.36 pesos (US$4.71) per day.17 Unifor president Jerry Dias also appeared in Mexico's senate promising to fight for improved Mexican wages and free collective bargaining. Dias stated, "There will not be an agreement until the Mexican team agrees to free collective bargaining, the elimination of yellow unions and that Mexican workers get paid what they deserve."18

Without any real movement on the most contentious issues this round, stakeholders and negotiators are not optimistic about reaching an agreement by March 2018. Negotiators will continue to discuss more technical aspects of the agreement in Washington next month. The trade ministers will then return for round six of the NAFTA talks in Montréal, Canada, from January 23-28, 2018.19

Potential outcomes for the negotiations include: keeping the status quo - with no improvements made to NAFTA and the agreement remains in place (which we do not consider to be likely); updating the NAFTA along the lines discussed above by next summer in time for the Mexican elections; and the US providing notice of withdrawal or possibly even withdrawing from NAFTA with resulting uncertainty, lawsuits and potential Congressional reaction to follow. It is too early to predict which outcome is most likely and stakeholders will no doubt continue to press their issues with policy makers in all three countries.

Mexico and Canada continue to both engage in NAFTA talks while also looking to diversify their trading portfolios with partners in Asia and Latin America. The urgency of their efforts to find new markets and negotiate new agreements is tied directly to their level of impatience and concern with US positions on NAFTA.

Round five did not provide grounds for a great deal of optimism that an agreement will be reached soon and that the prevailing climate of uncertainty will improve. There is an increasing sense of urgency around planning for the different possible negotiating outcomes and North American companies are increasingly looking at the potential impacts of the negotiations on their value chains. As the NAFTA talks continue to unfold, our Dentons NAFTA team will monitor and report on major developments. Our team is also able to assist clients in developing customized tools to assist them in assessing and mitigating risks associated with the termination or amendment of the NAFTA. Please reach out to any of our key contacts for more information.

Footnotes

1. "Trilateral Statement on the Conclusion of the Fourth Round of NAFTA Negotiations", Office of the United States Trade Representative (November, 2017), [Trilateral Statement on the Conclusion of the Fourth Round of NAFTA Negotiations].

2. Alicja Siekierska, "Deadlock on hard issues as NAFTA round concludes under cloud" The Financial Post (November 21, 2017) [Sierkierska].

3. "USTR Lighthizer Statement on the Conclusion for the 5th Round of NAFTA Renegotiations" Office of the United States Trade Representative (November, 2017).

4. Sierkierska, supra note 2.

5. Adrian Morrow, "NAFTA talks creep forward in Mexico" The Globe and Mail (November 19, 2017).

6. Li Zhou, "NAFTA digital trade tweaks", Politico.com (November 20, 2017).

7. Anthony Esposito & David Lawder, "Mexico, Canada shun NAFTA autos counteroffers: sources", Reuters (November 19, 2017).

8. Ibid

9. Ibid

10. David Shepardson, "US House members oppose Trump Administration auto trade rules proposal", Auto News (November 15, 2017)

11. Daniel Dale, "Freeland call US proposals 'extreme' as NAFTA round ends without major progress", The Toronto Star (November 21, 2017)

12. Ibid

13."USTR Releases Updated NAFTA Negotiating Objectives", Office of the United States Trade Representative (November, 2017).

14. Alexander Panetta, "'There are no fireworks': The hunt for news in a ho-hum NAFTA round", The National Post (November 18, 2017).

15. Office of the United States Trade Representative, "Summary of Objectives for the NAFTA Renegotiation" at page 17 (November 2017)

16. Ibid at pages 8-9

17. Sharay Angulo, "As NAFTA talks stall, Mexico raises minimum wage to $4.71 per day", Reuters (November 21, 2017)

18. Anthony Esposito, "Unions take NAFTA wage fight to Mexican Senate" Reuters (November 17, 2017)

19. Trilateral Statement on the Conclusion of the Fourth Round of NAFTA Negotiations, supra note 1.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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.

Authors
Events from this Firm
30 Jan 2019, Other, Chicago, United States

Please join us on January 30, 2019, for the Fifth Annual Courageous Counsel Leadership Institute. This year's theme is "Risk and reward: Creating a culture that promotes innovation, change and growth.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions