NAFTA Renegotiation: Giving the Floor to Exporters

On July 1, 2017, Posted by , In International Analysis,

Available | Disponible : French

The countdown begins. The Trump administration has just given the US Congress a 90-day notice indicating its intention to renegotiate NAFTA. The United States has only a few weeks left to consult and articulate a negotiating position.

US Demands

In its opinion to Congress, the United States Trade Representative Robert Lighthizer emphasized the need to modernize the NAFTA provisions negotiated 23 years ago and to update the US approach to meet the challenges facing consumers, entrepreneurs, farmers, and workers in the United States. This modernization is likely to affect not only e-commerce but also intellectual property, trade in services, technical standards, sanitary measures, customs procedures, labour, environment and dispute settlement. To date, it is difficult to predict what precise demand that United States will address to Canada and Mexico.

However, vis-à-vis Canada, it is likely that US demands will be based on Canada’s concessions under the Trans-Pacific Partnership, such as on intellectual property, electronic commerce and data exchanges, as well as those under the Comprehensive Economic and Trade Agreement with the European Union, in particular on public procurement and imports of milk and other products under supply management. In addition, elements of Canadian trade policy published in the US National Trade Estimates on Foreign Trade Barriers, which the United States considers likely to affect exports, will be relevant in such negotiations. Moreover, the renegotiation of the rules of origin and of the dispute settlement mechanisms will probably be part of US demands.

Canada’s Response

For their part, Canada and Mexico, partners in NAFTA, are currently preparing the ground.

In particular, Canada and the provinces are consulting with exporters and soliciting their cooperation and input. They are trying to identify the demands Canada should make to its trading partners to improve access to US and Mexican markets for its products and services. Canada and the provinces must also begin to identify the concessions they will be willing to grant in the negotiation process, which is always a delicate exercise. To counter an America First approach, they should add “North” to the slogan of the presidential campaign and identify common North American integration initiatives that will benefit all three partners. Furthermore, Canada could look for issues that have little impact in its trade relationship with the US and Mexico such as currency manipulation to use the trade negotiations to put together what is a model agreement, like what NAFTA was on various issues back in 1994.

Canadian exporters have the opportunity to respond to this call. In particular, they have until August 16, 2017 to submit their comments to the Canadian government. On the other hand, Canadian exporters can also have their voices heard across the border. Companies that maintain relationships with US suppliers and customers should urge them to lobby their local chambers of commerce and elected representatives to value the benefits of NAFTA, counter false information on trade deficits, and stress that many jobs depend on their trade relationship with Canada.

In this negotiation, each lobby group will try to take advantage of the situation to be heard. Our Canadian companies need to be aware of this and be prepared quickly.

Next Steps

Given the electoral deadlines in the United States and Mexico, the most ambitious analysts state that negotiators will try to complete negotiations by the end of the year. However, this scenario is unlikely given the many subjects likely to be covered by US demands and USTR’s declared intent to aim for a “good agreement”. We will have a better idea when USTR Robert Lighthizer releases a detailed summary of NAFTA negotiating objectives which is scheduled for July 17, 2017. The formal negotiations are scheduled to start at the earliest on August 16, 2017.

For more information on NAFTA renegotiation issues, please do not hesitate to contact Bernard Colas or one of our international trade lawyers. We may also assist companies in communicating their issues and defending their interests.

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