Following receipt of a request from the U.S. Trade Representative (USTR), the U.S. International Trade Commission (USITC) has initiated investigation No. TPA-105-003 for the purpose of preparing the report required by section 105(c) of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. The report will assess the likely impact of the United States-Mexico-Canada Agreement (USMCA) on the U.S. economy as a whole and on selected industry sectors. Transmittal of the final USITC report to the president and Congress must occur no later than 105 days after the president enters into the agreement.

The investigation, United States-Mexico-Canada Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, was requested by the USTR in a letter received on August 31, 2018. In assessing the likely impact of the USMCA on the U.S. economy, the report will include information and data on the impact the agreement will have on the gross domestic product, exports and imports, aggregate employment and employment opportunities, the production, employment and competitive position of industries likely to be significantly affected by the agreement, and the interests of U.S. consumers.

Key Dates:

  • October 29, 2018: Deadline for filing requests to appear at the public hearing
  • October 30, 2018: Deadline for filing prehearing briefs and statements
  • November 15-16, 2018: Public hearing at USITC
  • December 20, 2018: Deadline for written submissions from the public

Further information on the scope of the investigation and the procedures for written submissions are available in the USITC’s notice of investigation, dated October 12, 2018.

After successful, last-minute negotiations, Canada and the United States agreed on September 30, 2018 to revise and modernize the North American Free Trade Agreement (NAFTA). The United States and Mexico previously announced their intent to proceed with a revised trade agreement (see Trump and Trade Update dated September 4). In remarks to the press, President Trump said, “Throughout the campaign, I promised to renegotiate NAFTA, and today we have kept that promise,” adding, “Once approved by Congress, this new deal will be the most modern, up-to-date, and balanced trade agreement in the history of our country, with the most advanced protections for workers ever developed.”

To augment the president’s announcement, the Office of the U.S. Trade Representative (USTR) released a series of fact sheets concerning the renegotiated trade agreement with Mexico and Canada:

According to the USTR, these features are among the highlights of the new agreement:

  • U.S. auto manufacturers and workers will benefit from new rules of origin requiring 75 percent of auto content to be produced in North America, and the new agreement will incentivize billions of dollars in additional U.S. vehicle and auto parts production.
  • New trade rules will increase wages by requiring that 40-45 percent of auto content be performed by workers earning at least $16 per hour.
  • For textiles, the agreement will promote greater use of Made-in-the-USA fibers, yarns and fabrics. It also establishes provisions for textile-specific verification and customs cooperation that provide new tools for strengthening customs enforcement and preventing fraud and circumvention.
  • The new labor chapter is a core part of the agreement and will make the labor provisions fully enforceable.
  • Canada will eliminate its “Class 7” program that allows low-priced dairy ingredients to undersell U.S. dairy products, and will provide new access for U.S. products, including fluid milk, cream, butter, skim milk powder, cheese and other dairy products. Canada will also eliminate its tariffs on whey and margarine.
  • For poultry, Canada will provide new access for U.S. chicken and eggs and increase its access for turkey. Under this agreement, all other tariffs on agricultural products traded between the United States and Mexico will remain at zero.
  • The new agreement includes a modernized, high-standard chapter that provides strong protection and enforcement of intellectual property rights, including 10 years of data protection for biologic drugs and a large scope of products eligible for protection.
  • Strong measures on digital trade have been established, including rules to ensure data can be transferred cross-border and to minimize limits on where data can be stored.
  • An updated financial services chapter includes commitments to liberalize financial services markets and facilitate a level playing field for U.S. financial institutions, investors and investments in financial institutions, and cross-border trade in financial services.
  • The environment chapter includes enforceable environmental obligations, including obligations to combat trafficking in wildlife, timber and fish; strengthen law enforcement networks to stem such trafficking; and address pressing environmental issues such as air quality and marine litter.

On August 31, 2018, President Donald Trump officially notified Congress of his administration’s intent “to enter into a trade agreement with Mexico — and with Canada if it is willing, in a timely manner, to meet the high standards for free, fair, and reciprocal trade contained therein.” Notification was necessary under the provisions of the Trade Promotion Authority (TPA) legislation, which allows “fast track” consideration of trade agreements (i.e., Congress can vote to approve or reject a trade deal but cannot amend the text of the agreement). In the wake of the president’s notification, U.S. Trade Representative Robert Lighthizer indicated that a resulting free trade agreement could either be bilateral (with Mexico) or trilateral (with Canada also), depending upon the final negotiated text of any agreement. It has been questioned, however, whether a bilateral agreement fulfills TPA requirements since Congress had been earlier notified of the Trump administration’s intent to renegotiate a trilateral North American Free Trade Agreement (NAFTA). If Congress believes that a free trade agreement with only Mexico does not qualify for TPA consideration, amendments could be offered by Congress, potentially complicating any final agreement. With Congressional notification under the TPA, the actual text of any agreement must be submitted to Congress within the next 30 days for its consideration. Continue Reading Trump Administration Moves Forward with Proposed Trade Agreement with Mexico, Continues Negotiations with Canada

On August 27, 2018, the United States and Mexico reached a preliminary agreement “in principle, subject to finalization and implementation,” to update the North American Free Trade Agreement (NAFTA). The Office of the U.S. Trade Representative (USTR) stated that the updated agreement will “support mutually beneficial trade leading to freer markets, fairer trade, and robust economic growth in North America.” In reaching the agreement with Mexico, President Trump stated that, “America has … finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs, and our Nation’s wealth.” Continue Reading United States and Mexico Agree in Principle to New Trade Agreement

Key Notes:

  • On May 23, 2018, the Department of Commerce self initiated a Section 232 national security investigation concerning the imports of automobiles and automotive parts.
  • A formal docket has been opened for the submission of public comments and requests to appear at a public hearing July 19-20, 2018.
  • The Department of Commerce has 270 days to issue its findings and submit a report to the president.

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Top trade officials from the United States, Canada and Mexico will resume negotiations over revisions to NAFTA this week in an effort to finalize an agreement. Reports indicate that while progress has been made, a number of issues remain, including rules of origin pertaining to automobiles, dispute settlement, government procurement and labor.

All parties agree that May will be a critical month in these renegotiations given upcoming events and important time lines. Mexico’s presidential election will occur in July 2018, and U.S. mid-term congressional elections will occur in November 2018. U.S. Trade Representative Robert Lighthizer has indicated a strong desire to conclude negotiations in May in order to seek approval from the current Congress under Trade Promotion Authority.

Trump and Trade has prepared a slide presentation, Summary of NAFTA’s History, Development and Current Status, for our readers as negotiations enter their final phase.

The Office of the U.S. Trade Representative (USTR) has released its annual report on significant foreign trade barriers, providing an inventory of the most important foreign barriers affecting U.S. exports of goods and services, foreign direct investment by U.S. persons and protection of intellectual property rights. The term “trade barriers” does not have a fixed definition but is broadly defined by the USTR as government laws, regulations, policies or practices that either protect domestic goods and services from foreign competition, artificially stimulate exports of particular domestic goods and services, or fail to provide adequate and effective protection of intellectual property rights. The report classifies foreign trade barriers into 10 different categories, including import policies, government procurement, export subsidies, lack of intellectual property protections and service/investment barriers. Continue Reading USTR Releases 2018 National Trade Estimate Report on Foreign Trade Barriers