Welcome to Weise Wednesday! Twice a month we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. If you have questions, we encourage you to send them to This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Q. Where do we currently stand on NAFTA renegotiations?

A. As discussed in my last Weise Wednesday, the United States and Mexico had launched bilateral negotiations to modify NAFTA and were close to reaching an agreement. These negotiations did not include Canada, however, and it was not clear what steps would be taken to bring Canada into the discussions.

On August 27, it was announced that the U.S. and Mexico had reached an agreement. According to a fact sheet released by the Office of the U.S. Trade Representative (USTR), some of the key features of the bilateral agreement are:

  • New rules of origin requirements to incentivize billions a year in vehicle and automobile parts production in the U.S., supporting high-wage jobs
  • Stronger, fully enforceable labor standards
  • New commitments to reduce trade-distorting policies for agricultural goods
  • Improvements enabling food and agriculture to trade more fairly
  • Strong and effective intellectual property protections
  • Stronger disciplines on digital trade

There was a sense of urgency to these bilateral talks because of the political situations in Mexico and the U.S. As a result of recent elections in Mexico, a new administration was taking office in 2019, and the United States was facing mid-term elections in November that could dramatically change the make-up of the Congress next year. Consequently, both countries had a strong desire to see any modifications to NAFTA implemented by the end of 2018. Due to the requirement in the U.S. that USTR notify the Congress ninety days before entering into an agreement, a targeted deadline of August 31 emerged.

Immediately after the bilateral agreement was announced on August 27, Canada re-engaged in the discussions with the U.S. and Mexico in an effort to reach a trilateral agreement and preserve the broad concept of NAFTA. The hope was that an agreement could be reached between the three parties by August 31, but that proved to be impossible. 

Although Canada reportedly accepted many of the provisions worked out between the U.S. and Mexico, several stumbling blocks – particularly the U.S. effort to eliminate or modify the Chapter 19 dispute settlement provision – kept Canada from accepting the agreement reached between the U.S. and Mexico. Talks with Canada broke off, and on August 31, President Trump officially notified the Congress of his intention to enter into the bilateral agreement with Mexico.

At this point, it is not clear where all of this will end up. Some have questioned whether U.S. law would even allow NAFTA to be replaced by the new bilateral agreement reached with Mexico. Mexico has also made it clear that it is not comfortable moving forward with the agreement reached with the U.S. unless it includes Canada. Furthermore, the U.S. business community and many members of Congress have stated publicly that the final agreement must include Canada. 

The good news is that talks with Canada have resumed this week, and there is still hope that consensus can be reached between the three parties. Stay tuned for further developments.