Corinne Xu, Margaret Kim, Jake Schmidt, Riyaz Dattu
May 29, 2017
Our last international trade brief dealt with Robert Lighthizer being sworn in as the U.S. Trade Representative, Chinese semiconductors potentially becoming the next target of a national security probe, and a Trade Case Alert involving a Canadian anti-dumping and countervailing investigation being initiated for silicon metal from various countries. In this brief, we discuss how the NAFTA renegotiations could impact Canadian businesses, the imminent implementation of the Canada-EU Comprehensive Economic and Trade Agreement, and a Trade Case Alert relating to Canadian anti-dumping duties being imposed for certain fabricated industrial steel components that can be anticipated to affect various infrastructure projects.
On Thursday, May 18, 2017, recently appointed United States Trade Representative (USTR) Robert Lighthizer submitted to the U.S. Congress the final notice [PDF] outlining President Trump’s intention to begin renegotiating the North American Free Trade Agreement (NAFTA).
The final notice launches the 90-day period under U.S. law for obtaining fast-track negotiating authority from Congress. Although no formal start date has been suggested, the Trump administration wishes to begin the talks “as soon as practicable,” suggesting that formal negotiations with Canada and Mexico could commence in August 2017.
Changes from the Draft Notice
The final notice is significantly less precise on the goals for the NAFTA renegotiations compared to the earlier issued draft notice [PDF], which contained 19 formal objectives that the Trump administration sought to address. Although not specifically enumerated, the final notice states that the objective of the intended renegotiations is to modernize NAFTA by making more robust existing provisions and introducing new provisions concerning “intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labour, environment and small and medium enterprises.”
The lack of precision in the final notice elicited negative reactions from the Democrats. Congresswoman Nancy Pelosi stated that it was “weak” and a “stark contrast” to the aggressive campaign promises President Trump made to middle-class families. In a joint letter to Representative Lighthizer, U.S. Senate Ways & Means Committee members Richard Neal and Bill Pascrell questioned whether the final notice even met the notice requirements under the U.S. Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA). Under the TPA, the notice must describe “specific United States objectives” for a particular negotiation with a particular country.
One of the most contentious changes proposed in the draft notice concerned the elimination of Chapter 19 (the binational trade remedies dispute settlement process). The final notice includes a more generally worded statement that “establishing effective implementation and aggressive enforcement” with the U.S.’s NAFTA trading partners is critical to the success of these agreements and should be “improved.”
Whether this change has been made to allow leeway for the Trump administration to not dispense entirely with Chapter 19 is something that only time will tell.
Although the final notice is far less precise compared to the draft notice, Canadian businesses should not assume that the NAFTA renegotiations will be any easier or less comprehensive than they might have feared with the release of the draft notice. As previously noted, the purpose of the notice is to allow the U.S. Congress to provide President Trump fast-track authority to renegotiate NAFTA and as such the vagueness and ambiguity in the final notice may be purposeful so as to provide President Trump’s administration wider ambit during the negotiations.
Path to the NAFTA renegotiations
The U.S. negotiating approach still remains unpredictable, as top leaders have sent mixed messages. Both Representative Robert Lighthizer and Commerce Secretary Wilbur Ross signalled in a recent meeting with the U.S. Senate Finance Committee that they will try to pursue a trilateral deal. This contrasts with Ross’s statement earlier this month that the Trump administration probably would pursue “two bilaterals that match and are symmetrical.”
The Office of the USTR published a Federal Register announcement on May 23, inviting “interested persons” to submit public comments on the NAFTA renegotiations until June 12. The Office of the USTR will hold a hearing in Washington, D.C., on June 27.
For more information on the submission content and logistics, see “Request for Comments on Negotiating Objectives Regarding Modernization of the North American Free Trade Agreement with Canada and Mexico.”
As yet, there does not appear to be a similar public comment process or public hearing planned in Canada. Informal consultations are underway with various affected industries. Given that President Trump has indicated that he would like to have the renegotiations completed by the end of this year, once the negotiations begin they could move very quickly. Canadian businesses should therefore make their views known to the Canadian government at the earliest opportunity on aspects of NAFTA that they would like to see improved or those that have been working well and should not be altered.