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Inu Manak @inumanak
, 22 tweets, 4 min read Read on Twitter
So the U.S. and Mexico agreed to some things today to update #NAFTA. I've looked through the documents posted on the USTR site, and here are some highlights:
#RoO, everyone's favorite subject. NAFTA RoO for autos require 62.5% North American content. This has been increased to 75%, which is a significant change. Previous rumors of a 70% content requirement are thus finally disproved.
The U.S. & Mexico also agreed that 40-45% of auto content is to be made by workers earning $16 per hour. That's probably 40% for light trucks, & 45% for pickup trucks. This is all targeted at Mexico. Even if part of this % can come from R&D, this favors the U.S. and Canada.
RoO have been strengthened across the board. This is not a positive development because NAFTA RoO are already well known to be some of the most restrictive in the world. It just got a whole lot tougher to meet those requirements.
Areas singled out for tougher RoO include: chemicals, steel-intensive products, glass & optical fiber. But that's not all. Content rules have also been strengthened for textiles, aiming to reduce non-regional inputs even further.
On Ag, tariffs will remain at zero. That's a good thing! There's also an agreement on GI's that surely to ruffle the feathers of our European friends— both countries have agreed to not restrict market access for cheeses labeled with certain names.
On the other hand, Mexico will continue to recognize Bourbon Whiskey & Tennessee Whiskey as distinctive U.S. products, & the U.S. reciprocates by recognizing the same for Tequila & Mezcal.
It's a little vague at the moment, but it appears that the agreement includes some WTO+ provisions for SPS issues as well. Big focus on science-based measures.
IP provisions are being toughened up as well, with stronger enforcement mechanisms. The minimum copyright term is also to be extended to 75 years, which is more stringent than the TPP. There's also 10 years data protection for biologic drugs.
More on GIs: "strong and comprehensive standards for the protection against the issuance of GIs that would prevent the United States producers from using common names." I wonder how this is going to work with things Canada agreed to in CETA?
There's a new digital trade chapter, which so far looks like it will be similar to the TPP. Prohibition of duties, electronic signatures, enforceable consumer protection, etc.
Mexico agreed to increase its de minimis shipment value threshold from $50 USD to $100 USD. Pressure is on for Canada to increase its $25 de minimis.
There also appears to be an agreement on a financial services chapter, with key provisions on national treatment, MFN, and market access commitments. There's also a prohibition on local data storage requirements.
There are also new labor and environment chapters that appear, at first glance, to be very similar to what's already in TPP. No surprises there.
There are still a number of issues that aren't mentioned in the official USTR documents, but it seems some other sticking points may be resolved. On the sunset clause, there's now a 16 year period the agreement is in effect, with "review" after 6 years to continue for 16 more.
This new "sunset" provision is better than automatic expiry, and a review in general is not a bad thing to have at all.
But it's still not 100% certain what has happened to ISDS, Ch. 19, or Ch. 20. This will likely be settled shortly after Freeland comes back to DC tomorrow.
Lighthizer wants to submit a notice of intent to sign the deal to Congress by Friday, which gives Canada three days to accept all the things that have been agreed to by the U.S. & Mexico, & also settle the remaining issues. This is doable, but it's going to be tough.
If a notice of intent is received by Friday, it can be signed by the end of November, before AMLO takes office in Mexico. The timeline is not as tight for the U.S. and Canada. However, this means the next Congress will vote on the deal, and that could go either way.
But, if Trump notifies intent to withdraw from NAFTA the day the new agreement is signed, that starts a 6 month clock for Congress to accept the deal, or be left with nothing. While the legality of this has been questioned, that doesn't preclude Trump from taking this step.
So if Canada doesn't get on board this week, we face the prospect of a bilateral U.S.-Mexico trade agreement, and Canada & the U.S. revert back to CUSFTA. Canada also is likely to continue to face steel and aluminum tariffs for not signing on to the deal.
The details matter, and we'll know more once the full text is released. In examining what's been said so far, a lot of liberalization that NAFTA put in place may be rolled back, and that's a cause for concern. Let's see what happens when Canada comes back into the fold tomorrow.
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