Although the situation remains fluid, all signs now point to renegotiation (as opposed to termination) of the North American Free Trade Agreement (NAFTA or the Agreement). Late last week, press reports indicated that a draft executive order declaring the intent of the United States to withdraw from NAFTA was being considered by the White House, but President Trump tweeted last Thursday morning that he agreed with his Canadian and Mexican counterparts “to renegotiate NAFTA rather than terminate.” These developments are occurring against the backdrop of increased attention on the U.S.-Canadian trade relationship in particular, on issues ranging from new duties imposed on imports of Canadian softwood lumber into the United States to barriers to access to the Canadian market for certain U.S. dairy products.

Earlier communications between the White House and Congressional leaders, however, may provide some clues regarding what changes could be in store for NAFTA. In late March, a draft letter from USTR was transmitted to both chambers of Congress to express the Administration’s intent to initiate negotiations with Canada and Mexico related to NAFTA, a requirement which must be fulfilled 90 days before renegotiations may begin, and outlining “specific objectives for negotiation” (Draft Notice of Intent to Renegotiate). The White House, however, has issued statements linking communication of the United States’ formal renegotiation positions to Robert Lighthizer being confirmed by the Senate as USTR, which suggests that the Draft Notice of Intent to Renegotiate will serve as a point of departure for developing key positions.

Thus, while the formal U.S. positions or specific objectives for renegotiation have not been disclosed to date, the Draft Notice of Intent to Renegotiate is nevertheless helpful to understand potential key areas going forward.

• With respect to trade in goods, the letter indicates that the United States will seek to eliminate non-tariff barriers to U.S. exports, maintain fully reciprocal access to NAFTA country markets for U.S. textile and apparel products, and “seek to level the playing field on tax treatment.”

• With respect to rules of origin, the letter indicates that the United States will seek to ensure that the rules support production and jobs in the United States. In particular, the United States will seek to implement provisions that address circumvention to ensure that preferential duty rates apply only to goods eligible to receive such treatment under the Agreement, the letter states.

• With respect to customs matters and enforcement, the letter indicates that the United States will seek to have the NAFTA countries improve upon their WTO trade facilitation agreements, strengthen collaboration in implementing the WTO trade facilitation agreement, and terms for cooperative efforts with NAFTA countries regarding enforcement of customs rules and related issues.

• With respect to trade remedies, the letter indicates that the United States will seek to institute a safeguard mechanism to allow temporary revocation of tariff preferences where increased imports from NAFTA countries are the substantial cause of serious injury.

• With respect to anti-dumping and countervailing duties dispute settlement, the letter indicates that the United States will seek to eliminate NAFTA Chapter 19 dispute settlement panels for anti-dumping and countervailing duty determinations. The Draft Notice of Intent to Renegotiate specifically notes that this change is the result of U.S. experience where panels have ignored the appropriate standard of review and applicable law, and where aberrant panel decisions have not been effectively reviewed and corrected.

In sum, developments regarding NAFTA renegotiation are occurring at a rapid pace. U.S. manufacturers, businesses, farmers, and ranchers that are affected by NAFTA should be ready to act quickly on pursuing key priorities and negotiating objectives in the weeks and months ahead. We will continue to provide updates as developments warrant.