New U.S. Trade Representative (“USTR”) Robert Lightizer submitted a formal notification to Congress of the Trump Administration’s intent to initiate negotiations with Canada and Mexico to modernize the North American Free Trade Agreement (“NAFTA”) on May 18th. Following on the heels of that announcement, the USTR today published a request in the Federal Register for public comments by interested parties with regard to the renegotiation of the NAFTA. U.S. companies doing business in Canada and Mexico, whether sourcing or marketing goods in those markets, should take note of these latest developments, assess how any modifications made to the NAFTA could impact their cross-border operations, and consider submitting public comments to ensure to the USTR that their interests are fully protected. The following provides additional details on these recent developments.
USTR’s Formal Notification to Congress
The USTR’s May 18th letter to Congress, which was required by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (“TPA”), was the first step in the NAFTA renegotiation process. The letter states that the Administration will consult closely with Congress on the specific negotiating objectives of the United States and that the negotiations will commence no earlier than 90 days from the date of the letter—thus, U.S. negotiations with Canada and Mexico could begin as early as mid-August. The May 18th letter notes that renegotiation of the NAFTA is warranted because many provisions of the current agreement are outdated and do not reflect modern standards in the areas of digital trade, intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment and the operations of small and medium enterprises. In addition, the letter states that the mechanisms for enforcing the NAFTA warrant improvement.
Back in February, as we reported previously, a draft letter from then Acting USTR Steven Vaughn was leaked to the media—that letter provided early insights into some of the U.S. renegotiation objectives prior to Robert Lightizer’s confirmation.** Unlike the leaked draft letter, the May 18th notification did not describe the Administration’s specific objectives in any great detail. However, the USTR is expected to publish more details on its website within 60 days.
Request for Public Comments on the NAFTA Negotiating Objectives
Earlier today, the USTR published in the Federal Register a request for interested parties to submit public comments on matters relevant to the modernization of the NAFTA in order to develop U.S. negotiating positions. The deadline for submitting public comments is June 12, 2017, and the USTR is inviting comments addressing the following core issues:
- General and product-specific negotiating objectives for NAFTA modernization;
- Economic costs and benefits to U.S. producers and consumers of removal of any remaining tariffs and removal or reduction of non-tariff barriers on articles traded with Canada and Mexico;
- Treatment of specific goods (described by HTSUS numbers);
- Customs and trade facilitation issues that should be addressed;
- Modifications to the NAFTA rules of origin;
- Unwarranted sanitary or phytosanitary measures and technical barriers to trade imposed by Canada and Mexico
- Relevant barriers to trade in services between the United States, Canada, and Mexico;
- Relevant digital trade issues that should be addressed in the negotiations;
- Relevant trade-related intellectual property rights issues, investment issues, competition-related matters, government procurement issues, and labor and environmental issues;
- Issues of particular concern to small and medium-sized businesses;
- Relevant trade remedy issues; and,
- Relevant state-owned enterprise issues that should be addressed in the negotiation.
A public hearing will also be held on June 27th at the International Trade Commission in Washington, D.C., where interested parties may testify, provided that they provide prior written notification of their intent to appear by June 12, 2017. See 82 Federal Register 23699 (May 23, 2017).
Next Steps in the NAFTA Renegotiation Process
In terms of next steps, the formal renegotiation process with Canada and Mexico could begin as early as mid-August. During the talks with the leaders of Canada and Mexico, the Administration will continue consulting with key congressional committees during the negotiations and will review public comments and the testimony given by interested parties. It is very likely that the negotiations could continue through Mexico’s presidential election in July 2018.
Upon concluding the formal negotiations with Canada and Mexico, the resulting agreement will ultimately be submitted to Congress for approval. Because the President currently has what is known as “Trade Promotion Authority,” Congress must consider the renegotiated agreement, work with the Administration on drafting the implementing legislation, and vote without making any additional amendments to the agreement itself.
As noted above, U.S. companies doing business in Canada and Mexico should consider submitting public comments to the USTR, continue looking for the announcement of specific renegotiation objectives on the USTR’s website, and consider reaching out to members of Congress and other key government decision-makers to ensure that their interests are considered and protected throughout this process. Polsinelli’s attorneys can assist companies in all of these efforts. If you have questions about the NAFTA, how modifications to the NAFTA may impact your international operations or other international trade issues, please feel free to contact a member of Polsinelli’s International practice, including Melissa Proctor at email@example.com.
**Those early objectives addressed areas such as: expanding market access and eliminating barriers to trade in goods and services; obtaining fully reciprocal access to the NAFTA for textile and apparel goods; leveling the playing field on tax treatment; eliminating subsidies, especially on agricultural products; modifying the NAFTA rules of origin; providing greater transparency and efficiency in customs operations; strengthening laws and procedures for enforcing intellectual property rights; eliminating barriers to U.S. investments in Canada and Mexico; preventing barriers against digital trade and services, as well as cross-border data flows; expanding U.S. access to the Canadian and Mexican government procurement markets; folding labor and environmental provisions into the body of the NAFTA itself; eliminating unfair competition favoring state-owned or state-controlled enterprises; eliminating the Chapter 19 dispute resolution provisions of the NAFTA; establishing a five-year review process to ensure proper implementation of the NAFTA; etc.