NAFTA Renegotiation Progress – Legal Review from CCN-Law

PREVIEW: CCN-Law (Cacheaux, Cavazos & Newton, L.L.P.) a San Antonio Law Firm providing services involving International Commerce with a specialization of Mexico – United States commerce just released this article on NAFTA Renegotiation Progress. Tecma received authorization to republish the article here.

NAFTA Renegotiation Progress Report

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 18^th, 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. The USTR then published a Request for Comments from Interested Parties in the Federal Register on May 23^rd . Interested parties must submit comments to USTR by June 12^th, which will be followed by a public hearing on June 27^th . Please see below for links to the USTR notification and Federal Register publication. 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,

“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 Many chapters are outdated and do not reflect modern standards.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 23^rd Federal Register notice seeks public input on what should be the U.S.’s negotiating objectives regarding the 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 their 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 12^th.

WHAT COMES NEXT?

After the June 27^th hearing to be held 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 17^th, 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 an agreement and sign renegotiated NAFTA terms, U.S. law provides that both the U.S. Senate and House must approve the final version of such 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.

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 desiring to participate in the June 27^th hearing should provide prior notice of their attendance, including if they wish to submit testimony at 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 issues in question.

FAQ’s

What are the latest actions of the U.S. with respect to the renegotiation of NAFTA?

On May 18^th, 2017, Robert Lighthizer, head of the Office of the USTR, formally notified Congress of the intention of the Administration of President Donald Trump to renegotiate NAFTA with Mexico and Canada.

What are the main differences between the draft notice submitted on March 28, 2017 to the House Ways and Means Committee and the official notification submitted to Congress on May 18, 2017?

Unlike the draft notice submitted on March 28^th, 2017, which described in detail the main objectives to be pursued by the U.S. in the NAFTA renegotiation process, the May 18^th notification to Congress did not describe the specific or detailed objectives of the U.S. and instead focused on the more conceptual idea of modernizing NAFTA’s terms.
Note, however, that many expect USTR to publish more details on the negotiation intentions and strategy 60 days after the May 18^th formal notice sent by the USTR to Congress.

What are the topics relating to the modernization of NAFTA included in the notice of renegotiation?

The main topics included in the notice of renegotiation include:
– Intellectual property rights;
– Regulatory prices;
– State-owned enterprises;
– Services;
– Customs procedures;
– Sanitary and phytosanitary measures;
– Labor;
– Environment; and
– Small and medium enterprises.

What is next on the agenda of the U.S. in the NAFTA renegotiations?

The Trade Policy Staff Committee published in the Federal Register a request for public comments on relevant matters related to the intent of renegotiation of NAFTA, in order to develop the position of the U.S. in the negotiation. The deadline to file the public comments is June 12^th, 2017.
Subsequently, a public hearing will be held on June 27^th, 2017 to discuss the opinions and concerns of the interested parties with respect to the renegotiation of NAFTA.

Does Mexico have a procedure similar to the U.S. to receive public comments prior to the renegotiation of NAFTA?

Unlike the U.S., Mexico does not have a formal public consultation process to receive comments from interested parties with respect to the scope of the renegotiation.
The participation of Mexican industries and commerce in the renegotiation process will take place largely through chambers of industry and commerce. The private sector has established the “Consejo Consultivo Estratégico de Negociaciones Internacionales del Consejo Coordinador Empresarial,” which will represent the interests of Mexican businesses in the renegotiation of NAFTA, working together with the Mexican government.

What are the latest statements of Mexico with respect to the NAFTA renegotiation?

The Secretary of Foreign Affairs of Mexico, Luis Videgaray, speaking at the seminar “Mexico Day in Miami,” stated that Mexico is willing to modernize NAFTA and that Mexico agrees that there are several matters that need to improve, but that Mexico will not agree to terms that imply less commercial integration among the parties.

What actions has Mexico taken related to the NAFTA renegotiation?

On May 26^th, 2017, the Supreme Court of Justice of Mexico issued a case decision reaffirming that Mexico’s president has the authority to increase, lower or eliminate duties and tariffs on importations and exportations when a trading partner enacts measures that affect Mexico’s economy.

What is the position of Canada with respect to the notice of renegotiation?

Canada’s International Affairs Prime Minister, Chrystia Freeland, says Canada is firmly committed to maintaining free trade in North America, and stated:
“We are at an important crossroads that offers us the opportunity to determine the best way to align NAFTA to new realities and integrate progressive, free and fair approaches to trade and investment.”

When will the NAFTA renegotiation begin?

Based on the 90-day consultation period called for under U.S. law, the negotiations could begin as early as August 17^th, 2017. It is expected that the negotiations will conclude by the end of 2017, prior to the upcoming electoral seasons in Mexico and the United States.

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.

“USTR Notifies Congress of Intent to Modernize NAFTA” U.S. Chamber of Commerce. May 18, 2017.

“White House’s NAFTA Renegotiation Letter To Congress Is Surprisingly Rational.” Forbes, May 18, 2017.

“The countdown to NAFTA talks has begun. What’s going on? A guide.” The Globe and Mail. May 30, 2017.

“Request for Comments on Negotiating Objectives Regarding Modernization of the North American Free Trade Agreement With Canada and Mexico.” Office of the Federal Register. May 23, 2017.

“Renegociación del TLCAN debe ser antes de elecciones: Videgaray.” Excelsior, May 24, 2017.

“Conversatorio del Canciller Luis Videgaray con Andres Oppenheimer.” Secretary of Foreign Affairs of Mexico, May 31, 2017.

“Request for Comments on Negotiating Objectives Regarding Modernization of the North American Free Trade Agreement with Canada and Mexico.” May 23, 2017.
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We thank CCN-LAW for extending Tecma the right to publish this article on NAFTA Renegotiation Progress.

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).
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