Following the third negotiating round for NAFTA modernization, held in Ottawa September 23-27, the U.S., Canada, and Mexico issued a joint statement asserting “significant progress” in several areas such as competition, state-owned enterprises, digital trade, competition policy, and telecommunications, as well as the substantive completion of a chapter on small- and medium-sized enterprises (SMEs).

Still, all three NAFTA parties conceded that many difficult issues still have not been resolved, casting significant doubt on the likelihood of concluding talks by the end of the year. U.S. Trade Representative Robert Lighthizer said following the round that finishing negotiations by the end of the year will be “very, very difficult.”

According to press reports, several potentially contentious U.S. proposals were formally tabled during the latest round, including:

  • An intellectual property proposal that did not include “safe harbor” limitations on copyright protection.
  • A government procurement proposal to limit the dollar value of U.S. government procurement to that of the value of combined U.S. access to Canadian and Mexican procurement.
  • A textiles proposal to eliminate existing NAFTA tariff preference levels for certain types of apparel, yarn, and fabric.
  • A proposal to enable access to trade remedies measures for growers of seasonal fruit and produce.

These will all likely be added to the long list of issues that face significant opposition from Canada and Mexico.

The fourth round will take place in Washington, D.C. from October 11-15. USTR Lighthizer has said he hopes to table several proposals at the fourth round that are currently in the pipeline for interagency review and Congressional consultation, which may have major impacts on companies operating in North America. These include proposals on:

  • A “sunset review” mechanism: The Trump administration has previously floated a proposal to automatically terminate NAFTA every five years unless all parties agree to extend the agreement.
  • Rules of origin for automobiles and auto parts. The administration has previously floated proposals to increase regional content requirements as well as establish a national origin requirement.
  • Investor-State Dispute Settlement (ISDS). The administration has previously floated a proposal that would allow NAFTA parties to choose whether to “opt-in” to ISDS.
  • State to State Dispute Settlement. The administration has previously floated a proposal to replace binding state-to-state dispute settlement with a non-binding advisory system.

As some if not all of these proposals are likely to be controversial for Congress as well as U.S. industry, the fourth round will be important to monitor closely to determine what the U.S. negotiators ultimately put forth to their negotiating partners and the potential impact on North American supply chains and business.

For more information, contact: Robert Holleyman, Melissa Morris, Evan Yu