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

President Donald Trump signed yesterday two Presidential Proclamations adjusting imports of aluminum and steel into the United States. In doing so, he stated that measures are now in place to address the impairment to the national security threatened by imports of steel and aluminum from Argentina, Brazil and Australia. South Korea previously reached an agreement with the United States on April 30 to limit its imports of steel. President Trump added, however, that “similar measures are not in place with respect to steel or aluminum imports from Mexico, Canada or the European Union” and that insufficient progress had been made in ongoing negotiations with these countries. He declared that, as of June 1, 2018, the Section 232 tariffs for steel of 25 percent and for aluminum of 10 percent will no longer be suspended for such imports from these countries. The White House indicated that it will continue discussions with them and remains open to discussions with other countries that may lead to permanent country-based exemptions. Continue Reading Trump Administration Implements Section 232 Tariffs on Steel and Aluminum Imports from Canada, Mexico and the European Union

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.

With the deadline approaching for full implementation of the Section 232 tariffs on certain steel and aluminum imports, President Trump on April 30, 2018 relented to increasing pressure and extended the tariff exemptions for key U.S. allies until June 1, 2018. In making the announcement, the Trump administration announced that it had previously reached a final agreement with South Korea on steel imports and has also reached agreements in principle with Argentina, Australia and Brazil on both steel and aluminum imports. In addition, the president indicated that he was extending the country-based exemptions for Canada, Mexico and the European Union for a final 30 days. In all these negotiations, the administration has been focused “on quotas that will restrain imports, prevent transshipment, and protect the national security.” Until June 1, 2018, the United States will maintain current tariff levels for Canada, Mexico and the EU.

The president previously noted in Presidential Proclamation 9711 that the tariffs, initially implemented on March 23, 2018 for most U.S. trading partners, would be extended until May 1, 2018 in recognition of the important security relationship between the United States and these countries while the parties sought alternative means to address the threatened impairment to U.S. national security by imports of steel and aluminum articles from those countries. Unless exempted, the tariffs under these Section 232 trade actions are 25 percent on certain imported steel and 10 percent on certain imported aluminum. Separate from the White House June 1 extension announcement, Commerce Secretary Wilbur Ross stated that these countries will have to agree to reduce the volume of their exports to the United States, indicating that “If people don’t have the tariffs, and they don’t have the quota, that would defeat the whole purpose” of the Section 232 investigations and recommended actions.

It is already known that South Korea has agreed to cap its annual steel exports to the United States at approximately 70 percent of the country’s annual shipments from 2015 to 2017; the aluminum tariff remains in place for South Korea. While yesterday’s announcement indicated that agreements had been reached with Australia, Argentina and Brazil, no details were made available. Negotiations will continue with the remaining countries subject to the extensions (Canada, Mexico and the EU), significant U.S. steel and aluminum trade partners, for the next 30 days.

For additional details on these extensions, see Presidential Proclamation Adjusting Imports of Steel into the United States and Presidential Proclamation Adjusting Imports of Aluminum into the United States.

In wide-ranging remarks during a business session with U.S. governors, President Trump yesterday repeatedly broached the topic of international trade. The president reiterated his commitment to working on fair and reciprocal trade deals and highlighted specific trade issues:

  • Mexico – “You know, with Mexico … we probably lose $130 billion a year…. And, at some point, we have to get stronger and smarter, because we cannot continue to lose that kind of money with one country.”
  • Canada – “We lose a lot with Canada. People don’t know it. Canada is very smooth. They have you believe that it’s wonderful. And it is — for them…. So we have to start showing that we know what we’re doing.”
  • WTO – “World Trade Organization – a catastrophe…. makes it almost impossible for us to do good business. We lose the cases, we don’t have the judges. We have a minority of judges.”
  • China – “[W]e probably lost $504 billion, last year, on trade…. Other Presidents should have solved this problem long before I got here. And they’ve been talking for 25 years. And you know what happened? Nothing.”
  • Steel – “I want to bring the steel industry back into our country. If that takes tariffs, let them take tariffs, okay? Maybe it will cost a little bit more, but we’ll have jobs. Let it take tariffs.”
  • Aluminum – “I want to bring aluminum back into our country. These plants are all closing or closed.”
  • Section 232 Trade Actions – “Recently, we put a tariff on washing machines because we were getting killed ….. That was two months ago. You have to see the activity on new plants being built for washing machines and for solar panels. We had 32 solar-panel plants. Of the 32, 30 were closed, and 2 were on life-to-life resuscitation. They were dead. Now they’re talking about opening up many of them — reopening plants that have been closed for a long time.”

In closing comments on trade, President Trump stated that “we’re going to straighten it out. We’ve already started. I mean, the first year is just — we laid the seeds.”

Twenty-five Republican senators authored a letter to President Trump encouraging his administration to re-engage in Trans-Pacific Partnership (TPP) free trade agreement discussions, which he abandoned shortly after taking office in January 2017. Despite the withdrawal of the United States from TPP negotiations, the remaining 11 countries continued negotiating the newly approved Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is scheduled to be signed by its member countries March 8. This prompted a recent statement by President Trump that he may be interested in the multilateral deal if it could be made “substantially better.”

The senators urged the president to prioritize TPP engagement since increased economic engagement with the involved countries “has the potential to substantially improve the competitiveness of U.S. businesses, support millions of U.S. jobs, increase U.S. exports, increase wages, fully unleash America’s energy potential, and benefit consumers.” In addition, the letter highlights the senators’ belief that re-engaging in TPP discussions can serve as a counter-balance to China’s influence in the region and as another platform to address and modernize trade with Canada and Mexico, which are parties to the CPTPP.

President Trump and several Cabinet members hosted a meeting with congressional Republicans and Democrats on February 13, 2018 at the White House to discuss possible trade remedies in the Section 232 steel and aluminum investigations. The purpose of a Section 232 investigation is to determine the effect of imports on the national security of the United States, and the president stated that his administration is reviewing the final Department of Commerce reports submitted last month and considering all options. He told those attending that quotas and tariffs are options on the table.

In opening the discussions, President Trump stated that while he wants to keep prices down, he also wishes to “make sure that we have a steel industry and aluminum industry, and we do need that for national defense. If we ever have a conflict, we don’t want to be buying the steel from a country that we’re fighting because somehow that doesn’t work very well.” Several senators urged caution, however, including Senator Roy Blunt, who said, “we do need to be careful here that we don’t start a reciprocal battle on tariffs” because the United States not only makes aluminum and steel but also must buy and import these products to satisfy domestic demand. Others cautioned President Trump on the issue of jobs, noting that with so many items manufactured in the United States using steel and aluminum, import tariffs could actually result in a net job loss. In response, the president stated, “In one case, you’re going to create jobs. You may have a higher price or maybe a little bit higher, but you’re going to have jobs. In the other case, you may have a lower price, but you’re not going have jobs; it’s going to be made in China and other places.”

Senator Pat Toomey cautioned the president to proceed cautiously under Section 232 for national security reasons, arguing that U.S. defense needs account for only about 3 percent of domestic steel consumption. “So I think it’s implausible to believe that we’re not able to meet the needs of our defense industry,” he said, indicating that invoking national security concerns could be difficult to support and invite retaliation. Others urged caution in the scope of any enforcement action resulting from the investigations. Commerce Secretary Ross noted that Section 232 remedies do not require “the same tariff on every single country. It doesn’t have to mean the same tariff on every single product. It can be applied in a much more surgical way. And we presented the President with a range of alternatives that goes from a big tariff on everything from everywhere, to very selective tariffs from a very selective group of countries.”

The meeting also included brief comments by multiple participants on other trade matters, including South Korea (the KORUS FTA is a “very bad trade deal”), China (is “violating the international rules, stealing our intellectual property, overproducing steel products”), Canada (has “treated us very, very unfairly when it comes to lumber and timber”), and NAFTA (the renegotiations are “making real headway” but still working through a number of issues).

A full transcript of the meeting is available on the White House website: Remarks by President Trump, Members of Congress, and Members of the Cabinet in Meeting on Trade.