Are we closer to 2 bilateral trade agreements?

“UMFTA” or “MUFTA” (US-Mexico Free Trade Agreement)
or
“CUSFTA” (Canada-US Free Trade Agreement)?

There has been much ado about little this week on NAFTA 2.0. As Canada is put in a “take it or leave it” position just 3 days away from the deadline (August 31st), the Trump and Peña Nieto Administrations announced an “agreement in principle” of the NAFTA 2.0 re-negotiation process between the US and Mexico, where they apparently agreed to the following:

NAFTA 2.0 TOPIC US-MEXICO RESULTS WAS IT IN CP-TPP? POSSIBLE FUTURE?
AUTO RULES OF ORIGIN & NEW ECONOMIC PERFORMANCE OBLIGATIONS (LABOR IN THE AUTOMOTIVE SECTOR) HIGHLY INCREASED
From 62.5% to 75% of regional content to qualify for NAFTA, conditioned to 40-45% of the value of the vehicle be manufactured with workers whose minimum wage is at least $16 USD per hour.
YES
But the threshold was much lower (closer to 40% overall)
There is already OPPOSITION in US Congress.
SUNSET CLAUSE WATERED-DOWN
6 year “Revision” period: if everything is then considered OK by the contracting countries, NAFTA 2.0 (or whatever the re-done agreement is called in the future) should be extended to 16 years in total (awaiting more clarity from the actual final text which should be signed within 90 days of this or the tri-party’s announcement).
NO There is already some OPPOSITION in US Congress.
LABOR RIGHTS MATCHED OR HIGHER THAN CP-TPP
It guarantees freedom of association and other OIT labor rights to workers in the three countries.
YES No strong opposition expected from Canada or US Congress.
NAFTA ARBITRATION PANELS WATERED-DOWN
Re-establishment of jurisdictional powers to national courts to the detriment of ad-hoc arbitral panels each time there is an investment or trade controversy between the investors/traders of the NAFTA countries.
NO There is already OPPOSITION in US Congress, and Canada.
E-COMMERCE DE MINIMIS RULE INCREASED AND MATCHED TO CP-TPP
From $50 USD to $100 USD to the Mexican rule for e-commerce.
YES No strong opposition expected from Canada or US Congress.
INTELLECTUAL PROPERTY REAFFIRMED AND MATCHED TO CP-TPP
Vigorous enforcement of IP rights and of origin denomination.
YES No strong opposition expected from Canada or US Congress.
SEASONAL AGRICULTURAL TRADE Eliminate seasonal agricultural trade quotas between the parties. The status quo of 0% import tariff rates continues between the US and Mexico. No No strong opposition expected from Canada or US Congress.

 

The issues not yet addressed:

  1. Section 232 of the national security import tariff of 25% to steel and 10% to aluminum.
  2. All Canada issues like dairy, softwood, and their opinions on arbitral panels, de minimis, IP and others.
  3. Canada’s adherence (or not) to the US gains in negotiating NAFTA.

President Trump has already notified the Congress about his intention to sign this deal with Mexico and Canada, which will give them more time to catch up and finish the negotiations during September. Please stay tuned as more information is sure to be on the way! And don’t forget to send us a message if you have any questions.

 

 

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Daniel Gutiérrez

Daniel Gutiérrez

Managing Partner at GD Legal. Experienced at IP & Technology Law, Commercial, Real Estate, Ejido, Construction, Secured Financing, Insolvency, Customs, Tax and NAFTA.