NAFTA Parties Prepare for August Negotiations Launch in Washington

3 August 2017

Canada, Mexico, and the United States are preparing for the formal launch of negotiations to upgrade the North American Free Trade Agreement (NAFTA) – a process that is due to begin in less than two weeks.

The 16-20 August round will be held in Washington, with reports from the Canadian Press citing unnamed sources in suggesting that this will be the first of seven rounds planned for this year alone, whose locations will alternate among parties.

In preparation, the three parties have already begun lining up their teams and advancing public consultation processes for potential inputs into the negotiations.

In recent weeks, chief negotiators have already been announced for the US and Mexico, and rumoured for Canada. On the Washington side, John Melle, Assistant US Trade Representative for the Western Hemisphere, will lead that team, according to a statement from the Office of the US Trade Representative.

Mexico, meanwhile, said on Monday 31 July that it has named Kenneth Smith Ramos as chief negotiator at the technical level, along with Salvador Behar Lavalle as another top negotiator. Smith Ramos currently heads the Trade and NAFTA Office at Mexico’s embassy in Washington and was part of Mexico’s negotiating team for the original NAFTA, according to a Wilson Center biography.

Steve Verheul, who was Canada’s lead negotiator on trade talks with the EU, will reportedly represent Ottawa in the NAFTA process, according to reports from both Reuters and iPolitics.

US, Mexico agriculture officials meet in Mérida

The prospect of updating a trade deal responsible for a trillion-dollar annual trading relationship among the three North American neighbours has sparked interest in its potential – along with concerns over whether opening up this trade deal could create losses for some sectors relative to the original accord.

As part of the preparations, the top agriculture officials from the US and Mexico met last week to discuss what the NAFTA upgrade might mean for their respective farm sectors.

NAFTA has widely been credited as being pivotal in the integration of the region’s agricultural markets, and concerns over what a US withdrawal from NAFTA would do to the country’s own farmers was reportedly part of the reason President Donald Trump ultimately decided to stay in the deal and renegotiate, at the behest of his top agriculture and commerce officials. (See Bridges Weekly, 4 May 2017)

US Agriculture Secretary Sonny Perdue and Mexican Agriculture Secretary José Calzada met in Mérida, a city in the Mexican state of Yucatán, over a period of two days.

“Within the framework of the renegotiation of the North American Free Trade Agreement, the principal objective was that both countries knew more about the commercial ties that already exists between them and their productive capacities,” said a statement from Mexico’s Agriculture Secretariat.

“In this brief but effective meeting, the mutual willingness of both sides to modernise and strengthen NAFTA was established, as the primary instrument of high economic and social impact that it represents for both countries,” the statement added, flagging mutual interests in cutting border lag times, improving information exchanges, and addressing sanitary issues and logistics.

It also referred to the need for updating NAFTA’s agriculture provisions to account for new challenges and opportunities that were not as prevalent when the accord took effect over 20 years ago – such as digital trade and organic agricultural goods.

On the US side, Perdue told reporters that ensuring agriculture’s NAFTA gains are maintained is also critical for Washington, while noting the disparity between the benefits for the US farm sector versus the difficulties faced by some US manufacturing sectors.

“How we reconcile those two will remain to be seen,” said Perdue, according to comments reported by Reuters. “Our goal is, first of all, to do no harm in agriculture.”

Mexico negotiating objectives

Last month, the Office of the US Trade Representative released a summary of the US’ negotiating objectives for NAFTA, outlining proposed changes in both existing rules and new areas that were not part of the original accord. (See Bridges Weekly, 20 July 2017)

The document has drawn intense scrutiny since its release, as officials and trade watchers alike weigh what these might mean in practice – both in terms of preserving the existing benefits from the accord, such as the agriculture gains referred to above, as well as for addressing newer needs that have emerged since.

Meanwhile, Mexico has also put together its own set of negotiating objectives, according to Reuters, though those have not yet been released to the public and are still being reviewed internally among lawmakers.

The news agency, in a report this week citing a draft of the document, quoted Mexico as seeking “an expedited negotiation that maintains the benefits that we have achieved during the lifespan of NAFTA, but which at the same time serves as a platform for the modernisation of the treaty.”

Mexico is also eyeing updated rules of origin, while keeping market access gains seen under the original deal on goods and services trade, as well as updating intellectual property provisions in the accord, according to Reuters.

An issue that is expected to spark debate in the talks is how to address NAFTA’s dispute settlement terms in the area of trade remedies, as outlined under Chapter 19. The US negotiating objectives say that Washington would like to see the Chapter 19 dispute settlement mechanism “eliminated” – a request that is expected to see pushback from Canada and Mexico, with lawmakers from both countries already suggesting that they wish to keep that in place.

While Canada has not put forward a list of its own negotiating objectives, Prime Minister Justin Trudeau did outline some of his country’s wishes – and fears – about what a NAFTA upgrade could mean last month, while welcoming the chance to modernise the deal. (See Bridges Weekly, 20 July 2017)

Interest groups, lawmakers weigh in

Meanwhile, civil society, labour unions, and industry groups have been putting their own opinions, wish lists, and concerns forward – particularly given the role and impact that the 1994 deal has already had in setting the rules for trade in the region, along with the myriad changes seen since on the regional and international trading landscape.

This includes, for example, the AFL-CIO, the large US labour federation which has vocally criticised the existing side agreement on labour rights in NAFTA, among other aspects.

This also includes groups that focus more on information and communication technology and digital trade, given the changes seen in that arena over the past two decades, and the interest expressed already by some parties in negotiating rules in this topic. Digital trade was an area that also saw intense negotiation when all three were involved in the Trans-Pacific Partnership (TPP) talks, before the US withdrawal.

On digital trade, for example, two top US lawmakers sent a letter to Trump earlier this month highlighting the value of cross-border data flows, and said that this topic and the removal of any data localisation requirements “should be important priorities for America in any trade negotiation.”

The lawmakers were Ron Wyden, the Oregon Democrat who is the ranking member of the Senate Finance Committee, and John Thune, the South Dakota Republican who chairs the Senate Committee on Commerce, Science, and Transportation and who is also on the Senate Finance Committee.

“A renegotiated North American Free Trade Agreement… should address the wide array of issues undermining the internet’s economic potential, it must set the highest possible bar,” says the letter. It adds that, in light of the trade-offs made to reach digital rules in the TPP, that deal should not be used as a starting point.

“Beyond data flow and data localisation provisions, a modernised NAFTA should, among other things, secure the clearest liability protections for websites hosting user speech and commerce, the toughest bans on discriminatory licensing terms for online services, customs thresholds and procedures that work for small online sellers, and a copyright regime that is consistent with the Bipartisan Congressional Trade Priorities and Accountability Act of 2015,” they added, referring to the legislation which sets out US negotiating objectives in trade deals and delegates the power to negotiate trade agreements to the executive branch.

ICTSD reporting; “Canada taps veteran negotiator to drive talks on NAFTA: sources,” REUTERS, 11 May 2017; “Trump Reveals Start to Nafta Talks as Canada, Mexico Huddle,” BLOOMBERG, 19 July 2017; “U.S. hopes NAFTA update avoids pitting farms against manufacturers,” REUTERS, 28 July 2017; “NAFTA negotiations to include high-level cabinet dinner, 7 rounds of trade talks,” THE CANADIAN PRESS, 1 August 2017; “For manufacturers, managing Chapter 19 is the top NAFTA priority,” THE GLOBE AND MAIL, 31 July 2017; “Net neutrality comments watch,” POLITICO MORNING TECH, 17 July 2017.

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