NAFTA Renegotiation Begins In Washington

by King & Spalding

On August 16, 2017, Canada, Mexico, and the United States formally commenced renegotiation of the North American Free Trade Agreement (NAFTA) in Washington, DC. U.S. Trade Representative (USTR) Robert Lighthizer called it “an historic day for the United States” because, “for the first time, [the United States] will start negotiating to revise a major free trade agreement.” Although substantive aspects of the meetings were conducted privately, the three countries publicly stated that “[t]he scope and volume of proposals during the first round of the negotiation reflects a commitment from all three countries to an ambitious outcome and reaffirms the importance of updating the rules governing the world’s largest free trade area.”

As reported previously, a key U.S. objective for the NAFTA renegotiations was to ensure that NAFTA is improved in a manner that helps U.S. workers and manufacturers. Ambassador Lighthizer’s opening statement emphasized that “for countless Americans, this agreement has failed. We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved because of incentives—intended or not—in the current agreement.” News reports indicate that Canadian and Mexican “officials pushed back in public comments of their own” in response to Ambassador Lighthizer’s opening statement. Canada’s Foreign Minister Chrystia Freeland said that “Canada doesn’t view trade surpluses or deficits as a primary measure of whether a trading relationship works” and expressed the “deep friendship our countries share.” Mexico’s Economy Minister Ildefonso Guajardo added that NAFTA is “a strong success for all parties . . . For a deal to be successful, it has to work for all parties involved . . . Otherwise it is not a deal.”

Ambassador Lighthizer also stated that President Trump “is not interested in a mere tweaking of a few provisions and a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.” As specific examples of what needs to be changed or added to the agreement, Ambassador Lighthizer emphasized “huge trade deficits,” rules of origin, labor provisions, currency manipulation, and dispute settlement, among others.

Prior to commencing negotiations, the parties signed a confidentiality agreement to not disclose text, proposals, or other information from the negotiations. Thus, many details regarding the first round of talks are not publicly available. At the conclusion of the first round of negotiations, however, the three countries released a statement saying that there were “five full days of meetings by a team of subject matter experts covering more than two dozen different negotiation topics.” Although the parties’ joint statement says that “the first round of the negotiation reflects a commitment from all three countries to an ambitious outcome,” political leaders have not painted such an optimistic picture. According to President Trump, Mexico and Canada are “being very difficult” in the NAFTA negotiations, and he threatened to back out of NAFTA three times in one week in August. Minister Guajardo said that “[t]he start of the talks is like a roller coaster” and that Mexico is “also analyzing a scenario with no NAFTA.” In the meantime, Canada is reportedly being asked to give up its “ultimate prize” from the original NAFTA negotiations—NAFTA’s dispute resolution mechanism. Prior to the renegotiations, Canada suggested that “it could walk away” from the negotiations “if the United States pushed to remove” this mechanism from NAFTA.

Although the negotiations appear to have been tense, they will continue. According to the countries’ joint statement, the countries’ negotiating groups “agreed to provide additional text, comments or alternate proposals during the next two weeks. . . . Negotiators from each country will continue domestic consultations and work to advance negotiating text through the end of August, and will reconvene in Mexico for a second round of talks from September 1-5.” The third round of negotiations will take place in Canada in late September, the fourth round will occur in the United States in October, and subsequent rounds will be scheduled for later in 2017.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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