January 16, 2018

What To Expect As Negotiators Gear Up For Third Round Of NAFTA Talks

Representatives from the U.S., Canadian, and Mexican governments will gather in Montreal starting Tuesday, January 23 for the sixth round of discussions about how to modernize the North American Free Trade Agreement, or NAFTA. Negotiators still have several issues to work out, and the outcome of the talks are uncertain at best.

In remarks before the American Farm Bureau Federation last week, President Donald Trump did not threaten to withdraw from the trade pact, a departure from comments he’d made in recent weeks. When it comes to NAFTA, the president wants to:

  • Improve the U.S. trade balance and reduce the trade deficit with the NAFTA countries;
  • Discipline import and export monopolies to prevent trade distortions;
  • Maintain existing reciprocal duty-free market access for industrial goods and strengthen disciplines to address non-tariff barriers that constrain U.S. exports to NAFTA countries;
  • Promote greater regulatory compatibility with respect to key goods sectors to reduce burdens associated with unnecessary differences in regulation;
  • Build on and set high standards for implementation of World Trade Organization agreements involving trade facilitation and customs valuation;
  • Ensure all customs laws, regulations, and procedures are published on the Internet as well as designating points of contact for questions from traders;
  • Update and strengthen rules of origin to ensure that the benefits of NAFTA go to products genuinely made in the United States and North America;
  • Make sure rules of origin incentivize U.S. and North American production;
  • Prevent duty evasion, combat customs offenses, and ensure goods that meet the rules of origin get NAFTA benefits;
  • Obtain commitments that can facilitate market access and promote greater compatibility among U.S., Canadian, and Mexican regulations;
  • Preserve the ability of the United States to rigorously enforce its trade laws, including the antidumping, countervailing duty, and safeguard laws; and
  • Ensure NAFTA countries avoid manipulating exchange rates.

Click here to read all of the Trump administration’s negotiating objectives. As noted above, negotiators still need to address several contentious issues, including:

  • Automotive rules of origin—NAFTA currently requires that 62.5 percent of automobile components must be from North America to be eligible for duty-free trade. The United States wants that requirement to be increased to 85 percent;
  • A provision that would automatically sunset the pact after five years;
  • Government procurement processes;
  • Dispute settlement systems—the United States wants to eliminate the NAFTA bi-national dispute settlement process for challenging anti-dumping and countervailing duty measures; and
  • Trade disputes with the Canadian softwood lumber and dairy industries.

As the Washington, DC news outlet Axios has reported, some Republican members of Congress have urged the president not to withdraw from NAFTA. Metals Service Center Institute (MSCI) members who are interested in weighing in on the NAFTA deliberations should contact their representatives in the U.S. House and Senate to tell them how to let them know how the elimination of NAFTA would affect their businesses, employees, and customers. Click here for contact information for every member of the House and here for senators.

Click here to re-read MSCI’s NAFTA negotiating priorities and to learn more about the renegotiation process and Congress’s role in it, check out this report by the Congressional Research Service.