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. What can you tell us about the new U.S.-Mexico-Canada Agreement that is intended to replace NAFTA?

A. As discussed in an earlier Weise Wednesday, the United States and Mexico announced on August 27 that they had reached a bilateral trade agreement. Although Canada did not participate in the negotiations, it immediately re-engaged in discussions with the U.S. and Mexico in hopes that the underlying NAFTA agreement could be preserved. 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 and force Canada to make additional concessions on dairy and agricultural issues – 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.

The good news is that talks with Canada resumed in September, and on October 1, it was announced that an agreement was reached and that the new agreement would be named the U.S.-Mexico-Canada Agreement (USMCA). The agreement is expected to be signed by the leaders of the three countries in late November. The agreement must be approved by the legislature in all three countries before coming into effect. Each party is required to notify the other parties when its internal approval is complete. The agreement would come into force on the first day of the third month following the last such notification, probably sometime late next year.

Much of the original NAFTA would be preserved in the USMCA, including the Chapter 19 dispute settlement provision that the U.S. had advocated dropping and Canada resisted strongly. New provisions would impose stricter requirements for eligibility of automobile imports and enhanced intellectual property rights protection. Environmental and labor protection provisions were also added, as were provisions addressing financial services and ecommerce.

A new sunset provision has also been added providing that the USMCA will expire after 16 years from its entry into force unless the parties agree to renew it for another 16-year period. The parties are also required to conduct a “joint review of the operation of the agreement” every six years. As part of this review, each party must confirm in writing their desire to extend the agreement for another 16 years. Canada also made some concessions to the U.S. providing greater access to the Canadian dairy and agricultural markets. The entire text of the new agreement can be found on the USTR website.

As the Congressional approval process moves forward next year, it is expected that public input on the agreement will be solicited by the House Ways and Means Committee and the Senate Finance Committee, the two committees with primary jurisdiction over trade. It is critically important for companies potentially impacted by USMCA to stay tuned, stay engaged, and make your views known as the process unfolds.