The U.S. Trade Representative released objectives for NAFTA renegotiations, which begin August 16th. The document states that the U.S. hopes to remove barriers to American exports by eliminating “unfair subsidies, market-distorting practices by state-owned enterprises, and burdensome restrictions of intellectual property.” The U.S. also seeks to “modernize” the 1994 agreement for the 21st century. A few key objectives are relevant to importers and brokers, and may also cause tension in the negotiations.
Regarding industrial goods, the U.S. wants to maintain the duty-free relationship among the NAFTA countries but also “strengthen disciplines to address non-tariff barriers” that hurt U.S. exports. The U.S. will likely seek to increase exports and reduce imports of textile and apparel products. The U.S. hopes for a similar boost to the export of agricultural goods by reducing or eliminating tariffs and non-tariff barriers. Non-tariff barriers include “discriminatory barriers, restrictive administration of tariff rate quotas, and other unjustified measures that unfairly limit access to markets for U.S. goods, such as cross subsidization, price discrimination, and price undercutting.” The definitions of these practices and descriptive terms depends on who is doing what: expect some real significant tension as negotiations seek to define these practices and terms. Pay close attention to developments if your business or, if you are a Customs Broker, your client’s business is involved.
The U.S. will pursue changes regarding customs, trade facilitation, and rules of origin. The U.S. wants to expedite customs treatment for certain shipments from Canada and Mexico that are above a de minimis threshold and “provide for disciplines on the use of customs brokers, pre-shipment inspection, and the use of reusable containers.”
As for rules of origin, the U.S. aims to strengthen the rules so that benefits of NAFTA go to products “genuinely” made in North America or the U.S. The rules, according to the U.S., should also “incentivize the sourcing of goods and materials from the United States and North America.” The U.S. also wants to “establish origin procedures that streamline the certification and verification of rules of origin and that promote strong enforcement, including with respect to textiles.” These changes will likely cause disruption to supply chains. Any business with non-NAFTA inputs into their manufactured goods is at risk as these negotiations proceed. The best medicine is preventive medicine: spot coming changes as early as possible and, if you can’t change them, prepare for them.
The U.S. wants to prevent State-Owned and Controlled Enterprises from “causing harm” to other Parties and their domestic industries with the provision of subsidies or subsidized investments. They want to “exclude state-owned enterprises as part of the domestic industry in AD/CVD proceedings” and “facilitate the ability to impose measures based on third country dumping.” Also, the U.S. seeks to “create new procedures to address AD/CVD duty evasion, including the ability to conduct AD/CVD verification visits.” “Third country dumping” usually arises in the context of ITA anticircumvention actions. U.S. manufacturers are working with Customs to identify and stop products subject to antidumping from being exported to third countries, minimally processed, and then imported into the U.S. Criminal actions are underway. The law must be clearly understood by those at risk.
In the realm of Intellectual Property, the U.S. seeks to “ensure accelerated and full implementation of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), particularly with respect to meeting enforcement obligations under TRIPS.”
The U.S. also hopes to eliminate the Chapter 19 dispute settlement mechanism and the NAFTA global safeguard exclusion, which has allowed Mexico and Canada to avoid tariffs on certain terms. These objectives are likely to cause tension in negotiations, especially since Mexico has stated they would like to “bolster” the dispute settlement mechanism.