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NAFTA Modernization Objectives Focus on Trade Deficits, Enforcement, Implementation

Wednesday, July 19, 2017
Sandler, Travis & Rosenberg Trade Report

The Trump administration has announced its objectives in modernizing NAFTA and formal talks are expected to be launched in mid-August. This is an unprecedented effort to update an existing free trade agreement.

The notification to Congress from the Office of the U.S. Trade Representative emphasizes that a major goal of the U.S. in the forthcoming negotiations will be to address its “persistent trade imbalances” with Canada and Mexico by seeking a “fairer deal” that provides it with “more open, equitable, secure, and reciprocal market access.” Existing chapters will be updated to reflect modern standards, and new chapters will be added to cover issues that have emerged since NAFTA was first implemented nearly 25 years ago.

Improving implementation and enforcement will also be a point of emphasis. For example, the U.S. will seek to eliminate the NAFTA exclusion from global safeguards, which would subject Canada and Mexico to any import restrictions adopted under the so-called Section 201 process, as well as the Chapter 19 mechanism for settling trade remedy disputes, which could lead to more antidumping and countervailing duty cases against imports from Canada and Mexico. The U.S. will also press for measures to facilitate the ability to impose measures based on third-country dumping.

Other specific negotiating objectives set forth in USTR’s notification include improving the administration of tariff-rate quotas for agricultural goods; providing for a de minimis shipment value of $800; providing for the automation of import, export, and transit processes; updating and strengthening rules of origin and establishing procedures that streamline the certification and verification of those rules; and establishing rules to prevent restrictions on cross-border data flows.

Administration officials have sought to reassure the business community that they will “do no harm” in revising NAFTA; e.g., by working to preserve existing supply chains and retain existing duty-free treatment. USTR adds that if the U.S. is able to achieve its objectives a “seamless transition to the new NAFTA” should be possible.

Companies with established NAFTA supply chains must carefully review the proposed changes to assess their consequences on their products and costs. To secure favorable outcomes or forestall negative consequences, many companies will communicate their priorities to government negotiators and representatives.

For more information on possible NAFTA changes, please contact Tom Travis at (305) 894-1001 or Nicole Bivens Collinson at (202) 730-4956.

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