This morning, on the sidelines of the G-20 summit in Argentina, the United States, Canada, and Mexico signed the U.S.-Mexico-Canada Agreement (USMCA).  The new trade deal is slated to replace the 24-year old North American Free Trade Agreement (NAFTA).  Today’s signature date was a critical deadline for the parties because it is Mexican President Enrique Peña Nieto’s last day in office before his successor, Andrés Manuel López Obrador, takes office tomorrow.

The three parties have spent the last 15 months negotiating the final text of the USMCA, with a deal reached first between the U.S. and Mexico at the end of August, and Canada signing onto the agreement with additional tweaks a month later.  We have covered the USMCA in previous blog posts (here, here, here, here, and here).

Each country’s legislature must now approve the agreement for it to take effect.  In the United States, the USMCA was negotiated under Trade Promotion Authority, or “fast track” legislation, meaning that the agreement is subject to an up-or-down vote and Congress cannot modify or amend the agreement itself.  Instead, the hurdles involve the implementing legislation that will be required to give effect to the deal under U.S. law.  The Administration has 60 days to submit to Congress a list of changes to U.S. law that will be required to implement the USMCA, and then must prepare a draft implementing bill and “statement of administrative action” at least 30 days before the bill is actually introduced in the House and Senate.  The House must vote first before the bill moves to the Senate for consideration and a vote.      
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On October 1, 2018, the United States, Canada, and Mexico announced that they had reached an agreement to “modernize” the 24-year old North American Free Trade Agreement (NAFTA). When NAFTA came into effect, it created the largest free trade region in the world. Since then, developments in virtually every sector and the advent of cross-border

Last Friday, the U.S. International Trade Commission (“ITC”) formally launched an investigation into the economic benefits of the new U.S.-Mexico-Canada Agreement (“USMCA”) that is to replace NAFTA.

Under the Trade Promotion Authority (“TPA”) law, known as the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, the ITC must prepare a report that assesses the likely impact of the Agreement on the U.S. economy as a whole and on specific industry sectors, as well as the interests of U.S. consumers.  This report, which will be made public, is due to the President and Congress no more than 105 days after the President signs the agreement. The TPA requires the President to wait 90 days from the date of the notification before signing the USMCA.  President Trump notified Congress of his intent to enter into the new trade agreement on August 31, 2018.  Therefore, the earliest the President may sign the agreement is November 30, 2018.

Congress is expected to wait until the ITC report is issued before voting on the new agreement.  In fact, Senate majority leader Mitch McConnell recently told Bloomberg in an interview that the vote on USMCA will be a “next-year issue.”

If Congress does not pass the TPA, the President has threatened to withdraw from NAFTA. 
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As we previously reported, the United States, Canada, and Mexico have reached agreement on the United States-Mexico-Canada Agreement (“USMCA”) to replace the North American Free Trade Agreement (“NAFTA”), which has governed trade between the three countries since 1994.  Article 32.10 of the agreement requires each country to notify the others of any intention to negotiate a free trade agreement with a “non-market country.”  The provision defines a “non-market country,” as any country that: (1) one or more USMCA member countries has determined to be a non-market economy for purposes of the USMCA member country’s trade remedy laws; and (2) none of the USMCA member countries has a free trade agreement with.

Last year, as a result of the expiration of certain language in China’s World Trade Organization (“WTO”) Protocol, the U.S. Department of Commerce conducted a review of its designation of China as a non-market economy country for purposes of the U.S. antidumping laws.  The Department announced the results of its review of China’s status on October 26, 2017, concluding that China continued to be a non-market economy country.  Further, none of the USMCA member countries have a free trade agreement with China.  As a result, China would be considered a “non-market country” for purposes of the USMCA.

Article 32.10 requires a USMCA member country seeking to negotiate a free trade agreement with China, or any other “non-market country” to:
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On Monday, August 27, President Trump announced that he intends to terminate NAFTA if discussions with Canada are not finalized by the end of the week.  This news follows the successful negotiation of an agreement in principle for trade between the U.S. and Mexico.  While, according to the USTR, the agreement provides the “most comprehensive set of enforceable environmental obligations of any previous United States agreement,” the deal also contains numerous provisions of note involving trade.

The agreement in principle is expected to contain a more robust intellectual property (“IP”) chapter than that of its NAFTA predecessor.  In fact, the USTR is calling the chapter the “most comprehensive” for enforcement of IP with any trade agreement to which the U.S. is a party.  In particular, among other provisions, enforcement authorities must be able to stop the entry or exit of goods that are suspected to be pirated or counterfeited, the countries must establish “meaningful” criminal penalties for the camcording of movies, the countries will require national treatment for copyright, and both countries will make available civil and criminal remedies for the theft of trade secrets. 
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The New York Times reported on March 20 that the United States was seeking to table a proposal in the NAFTA negotiations to limit the placement of consumer warnings on food packaging with respect to foods that are high in sugar, salt, or fat.  According to a copy of the negotiating document obtained by the Times, the U.S. proposal would prevent the use of any warning symbol, shape or color that “inappropriately denotes that a hazard exists from consumption of the food or nonalcoholic beverages.”

USTR Lighthizer confirmed the United States has concerns with warning and consumption labels used by trading partners at a March 21 hearing before the U.S. Ways and Means Committee on U.S. trade policy, including and the status of NAFTA negotiations.   During a line of questioning pursued by Rep. Lloyd Doggett (D-TX) inquiring specifically about the NYT article, Ambassador Lighthizer stated that while the United States was against obesity, it did not support the use of food label warning requirements “to create a protectionist environment.”  Separately, a USTR spokesperson emphasized that “the United States supports science-based labeling that is truthful and not misleading.”
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As the fourth round of NAFTA negotiations were completed in Washington on Tuesday, October 17, 2017, significant new obstacles to the trade talks are emerging.  As a result, the fifth round of talks has been postponed until mid-November.

Specifically, Canada and Mexico have rejected the U.S.’s proposals on the elimination of NAFTA dispute panels in AD/CVD decisions, dairy, automotive content, government procurement, country-specific rule of origin rules, and a sunset clause.

U.S. Trade Representative Lighthizer, Mexican Economy Minister Guajardo, and Canadian Foreign Minister Freeland noted in a joint statement that the extended timelines provide the countries
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As trade ministers kicked-off the fourth round of negotiations to revamp the North American Free Trade Agreement in Alexandria, Virginia on October 11, Canadian Prime Minister Justin Trudeau traveled to nearby Capitol Hill to meet with members of the House Ways and Means Committee in a closed-door session to discuss mutual objectives of a renegotiated agreement.

Based on news reports, Trudeau reminded the key U.S. lawmakers with jurisdiction over the nation’s trade that Canada is the United States’ largest customer.  Ways and Means Committee Chairman Kevin Brady (R-TX)’s opening remarks acknowledged the importance of the beneficial trading relationship and recognized Canada as an important U.S. ally.  Noting, however, that even strong relationships have their challenges, the Chairman expressed a hope for progress on issues related to customs barriers, intellectual property protection and greater market access for U.S. dairy producers.
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Negotiators for the United States, Canada and Mexico wrapped up their second round of discussions concerning renegotiation of the NAFTA. While the negotiators expressed pleasure at the progress made, by all accounts the talks provided no new breakthroughs. Apparently, new texts in certain areas were exchanged, but no progress was made on the difficult issues

USTR Releases NAFTA Negotiating Objectives One Month Ahead of Anticipated Start to Renegotiations 

In a next step toward renegotiating NAFTA, USTR has released a summary of the administration’s negotiating objectives.  Although the overall themes are no surprise, the summary provides limited additional insight into the renegotiation goals through tangible examples.  There is a continued emphasis on increased and improved market access for American businesses, as well as ensuring free and fair trade among the NAFTA parties.

Notably, USTR is now citing deficit reduction as an objective for the NAFTA renegotiations.  Other key objectives cited in USTR’s summary include:
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