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NAFTA Is Renegotiated and Signed by the United States

Published online by Cambridge University Press:  14 January 2019

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A twenty-four-year-old agreement was reborn on October 1, 2018, when President Trump announced that the North American Free Trade Agreement (NAFTA) had been successfully renegotiated. The deal came after an arduous, year-long negotiation process that almost left Canada behind. As one indicator of its contentiousness, the deal lacks an agreed-upon name, but the United States is referring to it as the United States-Mexico-Canada Agreement (USMCA). It keeps some key NAFTA provisions mostly the same, including with respect to state-to-state dispute resolution, but eliminates, modifies, and adds other provisions. Among the changes: investor-state dispute settlement has been eliminated as between the United States and Canada; rules of origin for automobiles and rules for U.S. dairy products have been modified; and new provisions address labor protections, intellectual property rights, rights for indigenous persons, rules for trade negotiations with non-market countries, and the agreement's termination. The agreement was formally signed by the leaders of all three countries on November 30, 3018. It must be approved through the domestic ratification procedures of the three countries before it enters into force.

Type
International Economic Law
Information
American Journal of International Law , Volume 113 , Issue 1 , January 2019 , pp. 150 - 159
Copyright
Copyright © 2019 by The American Society of International Law 

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References

1 Daniel Dale, USMCA? CUSMA? What the New NAFTA is Called Depends on Who's Talking, Star (Nov. 30, 2018), at https://www.thestar.com/news/world/2018/11/30/usmca-cusma-what-the-new-nafta-is-called-depends-on-whos-talking.html (noting that Canadian leaders have described it as “the new NAFTA” and that Canada officially calls it the CUSMA, while Mexico terms it the T-MEC).

2 North American Free Trade Agreement, Dec. 17, 1992, 32 ILM 289 [hereinafter NAFTA Text].

3 Id. pmbl., Art. 102(1)(a).

4 Full transcript: Donald Trump's Jobs Plan Speech, Politico (June 28, 2016), at https://www.politico.com/story/2016/06/full-transcript-trump-job-plan-speech-224891.

5 Office of the U.S. Trade Rep. Press Release, USTR Releases Updated NAFTA Negotiating Objectives (Nov. 2017), at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/november/ustr-releases-updated-nafta# [https://perma.cc/HBM6-DB3A].

6 Ana Swanson & Elisabeth Malkin, Nafta Round Closes with Talks Bogged Down by Conflict, N.Y. Times (Nov. 21, 2017), at https://nyti.ms/2hPJsxG.

7 Id.

8 Id.

9 Donald J. Trump, Remarks on Signing Proclamations on Imports of Large Residential Washers and Certain Photovoltaic Cells and an Exchange with Reporters, 2018 Daily Comp. Pres. Doc. No. 43, at 2 (Jan. 23); see Jean Galbraith, Contemporary Practice of the United States, 112 AJIL 315, 321 n. 48 (noting the debates over Trump's domestic legal authority to terminate NAFTA and over the extent to which such a termination would affect NAFTA’s implementing legislation).

10 In the process, the negotiators overshot a May deadline given by the speaker of the House of Representatives for ensuring that any new deal would be voted on by the then-current Congress. See Galbraith, Jean, Contemporary Practice of the United States, 112 AJIL 510, 512–13 (2018)Google Scholar (discussing these timing issues).

11 Donald J. Trump, Remarks Following a Meeting with Vice Chairman of the State Affairs Commission Kim Yong Chol North Korea and an Exchange with Reporters, 2018 Daily Comp. Pres. Doc. No. 392, at 6 (June 1). The extent of the U.S. trade deficit or surplus with Canada is more complicated than Trump's statement implied. See, e.g., Flora Carr, President Trump Claims the United States Has a Trade Deficit with Canada. That's Not So Clear, Time (Mar. 15, 2018), at http://time.com/5185673/donald-trump-us-cananda-trade-deficit-surplus (noting in response to a similar earlier statement by Trump that the United States runs a trade surplus with Canada if one discounts goods that are manufactured elsewhere in the world but pass through Canada on their way to the United States).

12 Ana Swanson & Jim Tankersley, Mexico, Hitting Back, Imposes Tariffs on $3 Billion Worth of U.S. Goods, N.Y. Times (June 5, 2018), at https://nyti.ms/2xTW8Lp. For discussion of other countries targeted by these tariffs, ongoing requests for World Trade Organization (WTO) consultations with respect to the tariffs and retaliatory measures, and U.S. domestic legal disputes concerning the tariffs, see Galbraith, Jean, Contemporary Practice of the United States, 112 AJIL 751, 754–57 (2018)Google Scholar.

13 Swanson & Tankersley, supra note 12; Can. Dept. of Fin., Countermeasures in Response to Unjustified Tariffs on Canadian Steel and Aluminum Products, at https://www.fin.gc.ca/access/tt-it/cacsap-cmpcaa-1-eng.asp [https://perma.cc/MTZ8-X8K6] (last modified June 29, 2018); Anthony Harrup, Mexico and Canada Are Committed to a Trilateral Deal, Wall St. J. (July 25, 2018), at https://www.wsj.com/articles/mexico-and-canada-are-committed-to-a-trilateral-nafta-deal-1532545283.

14 Donald J. Trump (@realDonaldTrump), Twitter (June 9, 2018, 7:04 PM), at https://twitter.com/realDonaldTrump/status/1005586562959093760 [https://perma.cc/SP3Y-GU3F].

15 U.S. Dep't of Commerce Fact Sheet, Commerce Finds Dumping and Subsidization of Imports of Uncoated Groundwood Paper from Canada (Aug. 2, 2018), available at https://enforcement.trade.gov/download/factsheets/factsheet-canada-uncoated-groundwood-paper-ad-cvd-final-080218.pdf [https://perma.cc/EN4G-33XF]. These tariffs were not ultimately applied. Uncoated Groundwood Paper from Canada, Inv. Nos. 701-TA-584, 731-TA-1382, USITC Pub. 4822 (Sept. 2018) (Final).

16 Ana Swanson, United States and Mexico Are Nearing Nafta Compromise, N.Y. Times (Aug. 3, 2018), at https://nyti.ms/2OagjYq.

17 Id.

18 Id.; see also 19 U.S.C. § 4205(a)(1)(A) (providing as a condition of the fast-track process for legislative approval that the president must notify Congress of his intention to sign a trade agreement ninety calendar days before doing so).

19 Remarks During a Teleconference Call with President Enrique Peña Nieto of Mexico to Discuss the United States-Mexico Trade Agreement and an Exchange with Reporters, 2018 Daily Comp. Pres. Doc. No. 548, at 1 (Aug. 27).

20 Id.

21 Id. at 2.

22 White House Fact Sheet, President Donald J. Trump Is Keeping His Promise to Renegotiate NAFTA (Aug. 27, 2018), at https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-keeping-promise-renegotiate-nafta [https://perma.cc/ZV8D-JGNF]. In this preliminary agreement, Mexico and the United States reportedly agreed that at least 75% of an automobile's value would have to be manufactured in North America in order to qualify for zero tariffs and that 40–45% of the cars had to be made by workers earning $16 an hour. Ana Swanson, Katie Rogers, & Alan Rappeport, Trump Reaches Revised Trade Deal with Mexico, Threatening to Leave Out Canada, N.Y. Times (Aug. 27, 2018), at https://nyti.ms/2oe6sGn. Instead of Trump's five-year sunset clause, the two countries reportedly also agreed to “a review of the trade pact every six years that would extend its lifetime for 16 more years.” Id.

23 Notice of Intention to Enter into a Trade Agreement, 83 Fed. Reg. 45191 (Aug. 31, 2018).

24 Chrystia Freeland, Minister of Foreign Affairs of Can., Address by Foreign Affairs Minister on the Modernization of the North American Free Trade Agreement (NAFTA) (Aug. 14, 2017), at https://www.canada.ca/en/global-affairs/news/2017/08/address_by_foreignaffairsministeronthemodernizationofthenorthame.html.

25 Galbraith, Jean, Contemporary Practice of the United States, 112 AJIL 499, 504 (2018)Google Scholar.

26 Jack Ewing, Ana Swanson & Motoko Rich, Specter of Trump's Car Tariffs Forces Allies to Give Ground in Talks, N.Y. Times (Aug. 30, 2018), at https://nyti.ms/2NxhDoz.

27 Remarks Prior to a Meeting with Amir Sabah al-Ahmad al-Jabir al-Sabah of Kuwait and an Exchange with Reporters, 2018 Daily Comp. Pres. Doc. No. 574, at 4 (Sept. 5).

28 Alan Rappeport, As Nafta Talks Resume, U.S. and Canada Aren't Budging on Key Priorities, N.Y. Times (Sept. 5, 2018), at https://nyti.ms/2CiMQdQ.

29 Trudeau stated that Canada would “walk away and not sign a deal rather than sign a bad deal for Canadians.” Id. Similarly, Trump tweeted “[t]here is no political necessity to keep Canada in the new NAFTA deal. If we don't make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off… .” Donald J. Trump ), Twitter (Sept. 1, 2018, 11:03 AM):at https://twitter.com/realDonaldTrump/status/1035905988682018816 [https://perma.cc/ZG3M-FUUU].

30 Rappeport, supra note 28.

31 As an example, Rep. Kevin Brady (R-Tex.) stated that “[e]veryone's desire is for this to be a three-country agreement.” David J. Lynch, Damian Paletta & Erica Werner, U.S. All but Certain to Miss Weekend Deadline to Include Canada in Three-Way NAFTA Deal, Wash. Post (Sept. 25, 2018), at https://www.washingtonpost.com/business/economy/us-all-but-certain-to-miss-weekend-deadline-to-include-canada-in-three-way-nafta-deal/2018/09/25/08fc600c-c0d4-11e8-90c9-23f963eea204_story.html?utm_term=.2811af7fab39. Senator Ron Wyden (D-Or.) remarked that “[i]t would be a monumental mistake to do this without Canada.” Alan Rappeport & Jim Tankersley, Congress Uneasy as Trump Moves to Revise Nafta Without Canada, N.Y. Times (Sept. 27, 2018), at https://nyti.ms/2NLKNV5.

32 White House Fact Sheet, President Donald J. Trump Secures a Modern, Rebalanced Trade Agreement with Canada and Mexico (Oct. 1, 2018), at https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-secures-modern-rebalanced-trade-agreement-canada-mexico [https://perma.cc/CM6U-WB44]; see also 19 U.S.C. § 4205(a)(1)(B) (providing as a condition of the fast-track process for legislative approval that the president must publish the text of the agreement sixty days before signing it).

33 Dan Bilefsky, Trade Pact Is Signed at G-20, but Rift Remains for Trump and Trudeau, N.Y. Times (Nov. 30, 2018), at https://www.nytimes.com/2018/11/30/world/europe/usmca-trump-justin-trudeau.html; see also Franz Christian Ebert & Pedro A. Villarreal, The Renegotiated “NAFTA”: What Is in It for Labor Rights, EJIL: Talk! (Oct. 11, 2018), at https://www.ejiltalk.org/category/international-labour-law (noting after the earlier release of the preliminary text that “extensive legal ‘scrubbing’” lay ahead).

34 Office of the U.S. Trade Rep., United States-Mexico-Canada Agreement Text, at https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between [hereinafter USMCA Text]. The draft text reached in October had contained one fewer side letter. See https://perma.cc/4PEB-TTJR (archiving the table of contents for this draft text).

35 See, e.g., Anupam Chander, The Coming North American Digital Trade Zone, CFR (Oct. 9, 2018), at https://www.cfr.org/blog/coming-north-american-digital-trade-zone (noting that “USMCA negotiators used the TPP's electronic commerce chapter as the basis for negotiations” on various issues related to the digital economy).

36 Trump remarked that steel and aluminum tariffs on Canada and Mexico would remain in place “[u]ntil such time as we can do something that would be different—like quotas, perhaps … .” Remarks on the United States-Mexico-Canada Agreement and an Exchange with Reporters, 2018 Daily Comp. Pres. Doc. No. 656, at 12-13 (Oct. 1) [hereinafter Remarks on the USMCA].

37 Rebecca Joseph, Steel Tariffs “Staying” Despite New Trade Deal: Trump, Glob. News (Oct. 1, 2018), at https://globalnews.ca/news/4504147/donald-trump-steel-tariffs-usmca.

38 USMCA Text, supra note 34, Art. 34.7.

39 Id. Art. 34.7, para. 3; see also https://perma.cc/7XUV-TT37 (archiving the almost identical draft text). The language here is not entirely clear as to whether the 16-year period that is generated by an agreement to renew at the six-year mark is in addition to the remaining ten years of the agreement or instead a substitute for it. Canada has used the term “rolling 16-year period” to describe this provision. Canada-United States-Mexico Agreement (CUSMA): Review and Ongoing Modernization Provision Summary, at https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cusma-aceum/modernization-modernisation.aspx?lang=eng (last modified Nov. 29, 2018).

40 Id. Art. 34.7, para. 4.

41 Id. Art. 34.6. This is almost the same language as the withdrawal provision in NAFTA. See NAFTA Text, supra note 2, Art. 2205.

42 USMCA Text, supra note 34, Art. 32.5; see also https://perma.cc/324H-EMT7 (archiving the quite similar draft text). The agreement also contains provisions concerning protection of non-national migrant workers. Id. Art. 23.8.

43 Id. Art. 23.9; see also https://perma.cc/3CMM-BF2H (archiving the draft text, which used more emphatic language). NAFTA did not provide any chapter for labor provisions, NAFTA Text, supra note 2, but was supplemented with the North American Agreement on Labor Cooperation (NAALC). North American Agreement on Labor Cooperation, Nov. 1, 1993, 32 ILM 1499. The NAALC included a “guiding principle” that the parties should promote the “[e]limination of employment discrimination on such grounds as race, religion, age, sex or other grounds … .” Id. at Annex 1, para. 7. The TPP labor chapter does not provide similar provisions. See Office of the U.S. Trade Rep., TPP Full Text, at ch. 19, at https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-full-text [https://perma.cc/BG7H-J3ZM] [hereinafter TPP Text].

44 USMCA Text, supra note 34, Art. 23.9. This footnote was added during the legal scrub, having been absent from the original draft text. See https://perma.cc/3CMM-BF2H (archiving the draft text).

45 USMCA Text, supra note 34, at ch. 31.

46 Simon Lester, The U.S.-Mexico-Canada (AKA the New NAFTA) Trade Deal: State-State Dispute Settlement, Int'l L. & Econ. Pol'y (Oct. 2, 2018), at https://worldtradelaw.typepad.com/ielpblog/2018/10/the-us-mexico-canada-and-nafta-trade-deal-state-state-dispute-settlement.html; Simon Lester, Panel Appointments and Rosters in the New NAFTA, Int'l L. & Econ. Pol'y (Oct. 26, 2018), at https://worldtradelaw.typepad.com/ielpblog/2018/10/panel-appointment-and-rosters-in-the-new-nafta.html.

47 Ian F. Fergusson & M. Angeles Villarreal, Cong. Research Serv., IF10997, Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement 1 (2018); cf. TPP Text, supra note 43, Art. 9.18–.30 [https://perma.cc/H54L-5NTE] (including some provisions on ISDS). When Trump withdrew from the TPP, the other TPP Parties, including Canada and Mexico, negotiated a new agreement without the United States which incorporated many of the original TPP provisions. Gov. Can., Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), at http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/text-texte/index.aspx?lang=eng [https://perma.cc/2S9A-LA69] (last modified Mar. 3, 2018). When the CPTPP enters into force, it will allow for some ISDS between Canada and Mexico, although its terms on ISDS are effectively more limited than were those in the original TPP. Id. Art. 2 & Annex [https://perma.cc/34QY-6LLJ] (providing that certain TPP provisions related to ISDS are suspended “until the Parties agree to end suspension”); see also Can. Gov., Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – Frequently Asked Questions: What Specific Improvements Did Canada Seek in the CPTPP?, at https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/faq.aspx?lang=eng (last modified Oct. 25, 2018) (“Canada secured important suspensions to limit the scope of investor-state dispute settlement (ISDS) provisions.”).

48 Fergusson & Villarreal, supra note 47; USMCA Text, supra note 34, at ch. 14, Annex 14-D [https://perma.cc/AJP3-P57R].

49 USMCA Text, supra note 34, at ch. 4 (also setting forth a phase-in period and certain further specifications); Remarks on the USMCA, supra note 36, at 3.

50 USMCA Text, supra note 34, at ch. 4, Annex Art. 4-B.7; Jim Tankersley, Trump Just Ripped Up Nafta. Here's What's in the New Deal., N.Y. Times (Oct. 1, 2018), at https://nyti.ms/2OsZvQq.

51 USMCA Text, supra note 34, at ch. 20. For more information about the new intellectual property provisions, see Office of the U.S. Trade Rep. Fact Sheet, United States–Mexico–Canada Trade Fact Sheet: Modernizing NAFTA into a 21st Century Trade Agreement (Oct. 2018), at https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/october/united-states%E2%80%93mexico%E2%80%93canada-trade-fa-1 [https://perma.cc/A5ZB-MTMV].

52 Remarks on the USMCA, supra note 36, at 1-2.

53 USMCA Text, supra note 34, at ch. 2; Fergusson & Villarreal, supra note 47 (explaining increase in access to Canadian dairy market); Rod Nickel, Canada Dairy Farmers Content As TPP Deal Keeps System Intact, Reuters (Oct. 5, 2015), at https://www.reuters.com/article/us-trade-tpp-canada-farming-idUSKCN0RZ25E20151005 (noting that the TPP had provided the United States and other TPP countries access to 3.25% of Canada's dairy market).

54 Selena Ross, With New Trade Deal, Canada Avoids a Doomsday Scenario. But Is It a Win?, Wash. Post (Oct. 1, 2018), at https://www.washingtonpost.com/world/the_americas/with-new-trade-deal-canada-avoids-a-doomsday-scenario-but-is-it-a-win/2018/10/01/304d7968-c5a0-11e8-9c0f-2ffaf6d422aa_story.html?utm_term=.24e084d6e264.

55 USMCA Text, supra note 34, Art. 32.10(1). For the earlier draft text of Article 32.10, see https://perma.cc/324H-EMT7 (archiving this draft text).

56 Id. Art. 32.10(2).

57 Id. Art. 32.10(3)–(8).

58 See, e.g., Chad P. Brown, The 5 Surprising Things About the New USMCA Trade Agreement, Wash. Post (Oct. 9, 2018), at https://www.washingtonpost.com/news/monkey-cage/wp/2018/10/09/the-5-surprising-things-about-the-new-usmca-trade-agreement/?noredirect=on&utm_term=.ce0fffd71871 (“Article 32.10 signals the consequences of negotiating a potential free-trade agreement with any nonmarket economies—that is a code word for ‘China’”); David Lawder, Trade Pact Clause Seen Deterring China Trade Deal with Canada, Mexico, Reuters (Oct. 3, 2018), at https://www.reuters.com/article/us-trade-nafta-china/trade-pact-clause-seen-deterring-china-trade-deal-with-canada-mexico-idUSKCN1MC305 (“The clause, which has stirred controversy in Canada, fits in with U.S. President Donald Trump's efforts to isolate China economically and prevent Chinese companies from using Canada or Mexico as a ‘back door’ to ship products tariff-free to the United States.”).

59 Protocol Replacing the North American Free Trade Agreement with the Agreement Between the United States of America, the United Mexican States, and Canada, at https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/USMCA_Protocol.pdf (further providing that entry into force shall have the effect of superseding NAFTA (except as incorporated into the USMCA) and shall trigger the termination of the North American Agreement on Labor Cooperation); see also USMCA Text, supra note 34, Art. 34.5 (cross-referencing the Protocol). The draft text of the USMCA set similar timing rules for the entry into force but did not rely on a separate protocol. See https://perma.cc/7XUV-TT37 (archiving the draft text).

60 Bipartisan Congressional Trade Priorities and Accountability Act of 2015, Pub. L. No. 114-26, 129 Stat. 320 (codified at 19 U.S.C §§ 4201–10).

61 19 U.S.C. § 4205(a)(1)(D)–(E). Prior to submitting the implementing legislation to Congress, the executive branch typically consults with the House Ways and Means Committee and the Senate Finance Committee on the content of this legislation through what is known as the “mock markup” process. Ian F. Fergusson & Christopher M. Davis, Cong. Research Serv., R43491, Trade Promotion Authority (TPA): Frequently Asked Questions 25–26 (Sept. 4, 2018).

62 19 U.S.C. § 2191 (setting out the process, which allows for up to forty-five days for the implementing legislation to be in committee and another fifteen days for the floor vote to occur, with only days that the chamber is in session counting for these timing purposes); see also Fergusson & Davis, supra note 61, at 24–25 (discussing mechanisms for disapproval by which this process can be altered).

63 Remarks on the USMCA, supra note 36, at 8.

64 Donald J. Trump, Remarks on the United States-Mexico-Canada Agreement and an Exchange with Reporters Prior to Departure for Philadelphia, Pennsylvania, 2018 Daily Comp. Pres. Doc. No. 660, at 1 (Oct. 2).

65 White House Press Release, Joint Statement on the United States-Korea Free Trade Agreement (Sept. 24, 2018), at https://www.whitehouse.gov/briefings-statements/joint-statement-united-states-korea-free-trade-agreement [https://perma.cc/K4FB-RRPG]; see also Galbraith, supra note 10, at 510–12 (discussing the preliminary renegotiation reached in the spring of 2018).

66 Motoko Rich, Japan's Embrace of Bilateral Trade Talks with U.S. Spares It from Tariffs, N.Y. Times (Sept. 27, 2018), at https://nyti.ms/2NIAYay (noting Japan's concern that the United States might impose tariffs on imported cars).

67 White House Press Release, Remarks by President Trump in a Cabinet Meeting (Oct. 17, 2018), at https://www.whitehouse.gov/briefings-statements/remarks-president-trump-cabinet-meeting-11 [https://perma.cc/Z768-QVCM].

68 Glenn Thrush, Trump Trade Adviser Warns That There Will Be No Quick Deal with China, N.Y. Times (Nov. 9, 2018), at https://www.nytimes.com/2018/11/09/us/politics/peter-navarro-china-trade.html; see also Galbraith, supra note 12, at 751–53 (describing the wide-ranging tariffs and counter-tariffs imposed by China and the United States in the summer and fall of 2018 and the related WTO requests for consultations).

69 Keith Bradsher & Alan Rappeport, U.S.-China Trade Truce Gives Both Sides Political Breathing Room, N.Y. Times (Dec. 2, 2018), at https://www.nytimes.com/2018/12/02/business/trade-truce-china-us.html.