The U.S., Canada, and Mexico officially launched the renegotiation and modernization of NAFTA in August, holding the first round of negotiations August 16-20 in Washington, D.C. and the second on September 1-5 in Mexico City. Negotiators affirmed their commitment to a rapid pace of negotiations and produced a consolidated text to work on throughout the year, with the hope of concluding talks by December A third round is expected to take place September 23-27 in Ottawa.
U.S. proposals in the following areas were reportedly discussed:
- Intellectual property, where the U.S. is seeking 12 years of market exclusivity for biologic medicines;
- Trade remedies, where the U.S. is seeking to eliminate NAFTA’s Chapter 19 dispute settlement and the global safeguard exclusion;
- Broad-based approaches to rules of origin, where the U.S. is seeking overall increases in regional content requirements (without yet elaborating on specifics); and
- Digital commerce, where the U.S. is seeking commitments on e-commerce and telecommunications.
Trade officials have already begun discussion on some of the more difficult areas in the negotiations. Canada and Mexico have staunchly opposed elimination of Chapter 19 dispute settlement, which requires NAFTA parties to adjudicate anti-dumping/countervailing duties through a special tribunal rather than their domestic courts. Both Canada and Mexico have also indicated their opposition to the 12-year exclusivity rule for biologics. Neither of these issues is likely to reach a quick resolution.
Moreover, two issues that are likely to be especially controversial for U.S. industry going forward are investor-state dispute settlement (ISDS) and the rule of origin for automobiles.
During the first round, the media reported the United States was internally considering a system whereby NAFTA countries would have to “opt-in” to ISDS on a case-by-case basis. This triggered immediate and forceful pushback from U.S. industry groups. Such a measure would likely also face significant opposition in Congress. No investment texts have yet been tabled, and the Trump administration has not clarified its policy position on ISDS.
During the second round, U.S. negotiators reportedly engaged their Mexican and Canadian counterparts on increasing the regional value content requirement for automobiles as well as establishing a national content requirement, without proposing specific requirements or rules. Many U.S. automakers have opposed substantial changes to the automotive rules of origin due to the potential for disruption to current supply chains, which would likely result in higher costs and production shifts.
Progress on NAFTA talks continued at the working level despite threats from President Trump throughout August that the United States could withdraw from NAFTA. In a press conference on August 28, for example, he said that the U.S. “will either terminate or renegotiate” NAFTA, stating that Mexico was being “difficult” in the negotiations. Although many consider the President’s statements to be an attempt to create leverage for U.S. negotiating positions (unilateral withdrawal remains unlikely in the face of agriculture, industry, and Congressional opposition), his response to the uncertain pace of negotiations will no doubt be a factor to monitor as talks continue. Both the Canadian and Mexican delegations privately expressed frustration with the President’s statements.
For more information, contact: Robert Holleyman, Melissa Morris, Evan Yu