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Possible NAFTA Changes Laid Out in Draft Announcement to Lawmakers

Friday, March 31, 2017
Sandler, Travis & Rosenberg Trade Report

A draft of a letter that would notify Congress of the Trump administration’s intent to renegotiate NAFTA sets forth dozens of potential changes to the 23-year-old agreement. The letter was reportedly sent to the leaders of the House and Senate trade oversight committees for review before it is formally submitted, which press sources say could take place in the next week or so. Negotiations could begin as early as 90 days after that notification.

Acting U.S. Trade Representative Steven Vaughn said in the letter that Canada and Mexico have become among the largest export markets for U.S. manufactured goods and agricultural products under NAFTA but that “the persistent U.S. deficit in goods trade” with these two countries “demands that this administration take swift action to revise the relationship to reflect and respond to new 21st century challenges.” While it is “premature to say what final form the negotiated outcome will take,” he said, the administration expects to “obtain results that improve on previously negotiated outcomes.” Among the improvements mentioned in the letter are the following.

Trade in Goods

- expand current market access on the broadest possible basis

- eliminate non-tariff barriers, including permit and licensing barriers, and other trade restrictive measures

- improve competitive opportunities for textile and apparel exports while addressing U.S. import sensitivities

- level the playing field on tax treatment

Customs

- improve upon World Trade Organization trade facilitation commitments, including rules requiring each NAFTA party to conduct customs operations with transparency, efficiency, and predictability and to not apply customs laws, regulations, decisions, and rulings in a manner that would create unwarranted procedural obstacles to international trade

- seek terms for cooperative efforts regarding enforcement of customs rules and related issues, including in the areas of trade in textiles and apparel, agricultural products of concern, and enhanced ability to prevent and address antidumping and countervailing duty evasion and transshipment

Rules of Origin

- seek rules of origin that ensure NAFTA supports production and jobs in the U.S., procedures for applying these rules, and provisions to address circumvention to ensure that NAFTA preferential duty rates apply only to goods eligible to receive such treatment without creating unnecessary obstacles to trade

Agriculture

- reduce or eliminate non-tariff barriers to agricultural exports, including permit and licensing barriers, restrictive administration of tariff-rate quotas, and unjustified trade restrictions that affect new U.S. technologies, including biotechnology

- secure more open and equitable market access for agricultural products through robust rules on sanitary and phytosanitary measures and eliminate any SPS restrictions not based on science

Intellectual Property Rights

- establish standards that build on WTO and other international agreements

- secure commitments to strengthen IPR enforcement laws and procedures (e.g., by allowing authorities to seize and destroy pirated and counterfeit goods, equipment used to make such goods, and documentary evidence), strengthen measures to provide for compensation for infringement to rights holders, and provide for criminal penalties sufficient to have a deterrent effect

Services

-  expand competitive market opportunities for U.S. services, obtain fairer and more open conditions of trade, and improve transparency and predictability in regulatory procedures

- make any necessary improvements in access for the telecom, financial services, express delivery, professional services, and other sectors

Investment

- establish rules that reduce or eliminate artificial or trade-distorting barriers to U.S. investment

- improve procedures to resolve disputes between U.S. investors and NAFTA countries

Digital Trade

- obtain commitments not to impose customs duties on digital products or unjustifiable discrimination among products delivered electronically

- ensure that NAFTA partners refrain from implementing measures that impede digital trade in goods and services, restrict cross-border data flows, or require local storage or processing of data

Government Procurement

- establish rules requiring government procurement to be conducted in a manner consistent with U.S. law and the Trump administration’s policy on domestic procurement preferences

- expand market access opportunities for U.S. goods, services, and suppliers

Regulatory Reform

- pursue rules that will permit timely and meaningful public comment before the adoption of trade and investment-related measures

- improve regulatory practices and promote increased regulatory coherence, including through increased transparency, elimination of redundancies in testing and certification, early consultations on significant regulations, the periodic review of existing regulatory measures, and the application of good regulatory practices

State-Owned Enterprises

- eliminate or prevent trade distortions and unfair competition favoring state-owned or state-controlled enterprises to the extent of their engagement in commercial activity

- ensure that SOEs engaging in commercial activity do so on the basis of commercial considerations, in particular through disciplines that eliminate or prevent discrimination and market-distorting subsidies

Trade Remedies

- allow a temporary revocation of tariff preferences if increased imports are a substantial cause of serious injury or threat of serious injury to a U.S. industry

- eliminate Chapter 19 dispute settlement of AD and CV determinations because panels “have ignored the appropriate standard of review and applicable law” and “aberrant panel decisions have not been effectively reviewed and corrected”

Labor and Environment

- eliminate fisheries subsidies that distort trade and address illegal, unreported, and unregulated fishing

- secure obligations subject to the same dispute settlement and remedies as other enforceable obligations

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