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NAFTA 2017 - CCN SPECIAL REPORT - NO. 3

January 1, 1970
NAFTA 2017 - CCN SPECIAL REPORT - NO. 3

United States Trade Representative (USTR) Issues Formal Notice of NAFTA Renegotiation and Publishes Request for Comments under Trade Promotion Authority Procedures

Citing the need to update the terms of the North American Free Trade Agreement (NAFTA), on May 18th, the Office of the U.S. Trade Representative (USTR), through its new head, Robert Lighthizer, formally notified Congress of its intention to begin the NAFTA renegotiation process [footnote 1]. The USTR then published a Request for Comments from Interested Parties in the Federal Register on May 23rd [footnote 2]. Interested parties must submit comments to UTSR by June 12th, to be followed by a USTR hearing on June 27th. Such developments are crucial to understanding the next steps and timeline going forward as the U.S., Mexico and Canada begin the formal NAFTA renegotiation process.

In preceding weeks the Trump Administration had given mixed signals regarding its plans to either withdraw from or renegotiate NAFTA. With the delivery of the USTR's formal notice to U.S. Senate and House leaders, the Administration has now clearly indicated it seeks to "modernize" NAFTA, not withdraw or radically change the existing terms.

In his call for updating NAFTA, the USTR stated that:

NAFTA was negotiated 25 years ago, and while our economy and business have changed considerably over that period, NAFTA has not. Many chapters are outdated and do not reflect modern standards. For example, digital trade was in its infancy when NAFTA was enacted. In addition, and consistent with the negotiating objectives in the Trade Priorities and Accountability Act, our aim is that NAFTA be modernized to include new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises.

The May 23rd Federal Register publication seeks public input on what should be the U.S's negotiating objectives regarding modernization of NAFTA and solicits comments in the following areas:

  • General and product-specific negotiating objectives for Canada and Mexico.
  • Costs/benefits to U.S. producers and consumers from reductions of remaining tariffs or non-tariff barriers on goods traded with Canada and Mexico.
  • Tariff treatment on specific goods, as described by the specific HTSUS customs classifications.
  • Customs and trade procedures that could be addressed in the negotiating process.
  • Appropriate modification to rules of origin.
  • Unnecessary sanitary and phytosanitary measures, as well as technical barriers to trade imposed by Canada and Mexico.
  • Barriers to trade in services.
  • Digital trade issues.
  • Trade related intellectual property rights.
  • Foreign Direct Investment issues.
  • Antitrust and competition related matters.
  • Government Procurement.
  • Environmental issues.
  • Labor issues.
  • Issues pertaining to small and medium-sized businesses.
  • International trade remedies.
  • Matters pertaining to state-owned companies.

Note: All comments must be sent to USTR and received by no later than Monday, June 12th.What Comes Next?

After holding the June 27th hearing scheduled to take place at the U.S. International Trade Commission in Washington, USTR is required under the Bipartisan Congressional Trade Priority and Accountability Act of 2015 to publish, by July 17th,its detailed goals and objectives for the NAFTA renegotiation process. Under such timeline, negotiations could begin as early as August 17th and be concluded by the end of December, 2017. Note, however, that such latter date could change based on many factors.

If the parties are able to reach agreement and sign new terms of a renegotiated NAFTA, U.S. law provides that both the U.S. Senate and House must approve the final version of the parties' renegotiated NAFTA terms. According to the generally accepted timetable published by numerous sources, a U.S. congressional vote could take place in approximately the fall of 2018. [footnote 3 with chart]

It is vital that all interested parties consider participating in the public comment process. We encourage our clients and contacts to carefully review the USTR's Request for Comments and submit their comments. Those who wish to participate in the USTR hearing, should provide notice that they wish to attend the June 27th hearing and/or wish to submit testimony in the hearing.

We will continue to monitor communications from official sources and will continue to keep readers informed of relevant developments.Final Thoughts

Contrary to its previous indications over the past many months, the Trump Administration has now provided formal notice that it seeks to modernize, not cancel or radically redefine NAFTA. While the precise details of how negotiations will be conducted remain pending, it is likely that negotiators from all three countries will focus on the specific HTSUS tariff classifications that directly or indirectly impact U.S. businesses, workers and consumers. Thus, on many specific goods, negotiations will be essentially bilateral, involving the two countries that have the most at stake in relation to a specific type or category of goods. Examples of this would include trade in sugar between Mexico and the U.S. and trade in softwood lumber between the U.S. and Canada. Negotiators will potentially consider scores, if not hundreds, of specific items to be addressed, either bilaterally or among all three countries, depending on the particular goods or issue in question.

Articles:"Request for Comments on Negotiating Objectives Regarding Modernization of the North American Free Trade Agreement With Canada and Mexico.", Federal Register. May 23, 2017." View Link"USTR Notifies Congress of Intent to Modernize NAFTA's" U.S. Chamber of Commerce. May 18, 2017. View Link*********For more information about this document, the topics contained therein or to inquire about legal services, please contact Rene Cacheaux (rcacheaux@ccn-law.com), Robert M. Barnett (rbarnett@ccn-law.com), Miriam Name (mname@ccn-law.com), Edmundo Elias (eelias@ccn-law.com.mx) or Carrie Osman (cosman@ccn-law.com.mx). Copyright 2017 CCN. All Rights Reserved

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