The second round of the North American Free Trade Agreement (NAFTA) negotiations among the United States, Canada, and Mexico concluded earlier this month. While official statements from the countries indicated that all three feel they are making progress, a number of “controversial” and important issues remain unresolved.^[1] For example, it remains uncertain whether the negotiations will modify NAFTA’s “rules of origin,” which determine when an item has “originated” in one of the NAFTA countries for preferential tariff treatment, a change driven by the United States’ goal of ensuring automakers incorporate more U.S.-made parts. The parties also did not overhaul NAFTA’s dispute settlement mechanism. Another remaining point of contention is whether to include provisions that would require an increase in Mexican wages, something the Trump administration wants, although it is not necessarily favored by American businesses (as low wages have been a draw for corporations to set up plants in Mexico).^[2]

On September 23, 2017, the third round of talks will take place in Ottawa, Ontario. In advance of these meetings, the Office of the U.S. Trade Representative began circulating a “sunset” provision that may be introduced during these upcoming negotiations. The provision would automatically terminate NAFTA after five years, unless the three countries specifically agree to renew it before then. The idea behind this new provision is that regular analysis of the trade deal would address any problems that arise over time.^[3] Yet not everyone is on board with the “sunset” proposal – representatives from both the U.S. Departments of Agriculture and State have voiced “strong opposition,” echoing the belief held by Canadian and Mexican officials that such periodic re-examination would result in economic instability.^[4]

Meanwhile, Arizona legislators and business leaders travelled to Mexico earlier this month to discuss NAFTA with their respective counterparts.^[5] Arizona lawmakers want to preserve the trading relationship between the two, and therefore emphasized the state’s support of NAFTA as it currently exists.^[6]

While these negotiations continue, companies can take proactive steps to raise concerns about the current NAFTA agreement or proposed changes with their respective elected officials. As state leaders grow increasingly troubled about the potential impact of these re-negotiations on our local economy, companies may want to consider coordinating with Arizona officials to make their concerns heard in Washington.

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Notes:

^[1] See Patrick J. McDonnell, Second Round of NAFTA Talks End With Major Issues Unresolved, L.A. Times (Sept. 5, 2017), http://www.latimes.com/world/mexico-americas/la-fg-mexico-nafta-20170905-story.html.

^[2] See Alan Rappeport, NAFTA Talks Lurch Ahead Without Signs of Major Progress, N.Y. Times (Sept. 5, 2017), https://www.nytimes.com/2017/09/05/business/economy/nafta-negotations.html?rref=collection%2Ftimestopic%2FNorth%20American%20Free%20Trade%20Agreement&action=click&contentCollection
=timestopics®ion=stream&module=stream_unit&version=search&contentPlacement=1&pgtype=collection.

^[3] See Megan Casella, NAFTA Partners Shoot Down U.S. Flirtation With ‘Sunset’ Proposal, POLITICO (Sept. 14, 2017), http://www.politico.com/story/2017/09/14/nafta-canada-mexico-sunset-clause-242734?lo=ap_c1.

^[4] See id.

^[5] See Brianna Bradley, Arizona Legislators, Business Leaders Discuss NAFTA in Mexico, PHOENIX BUSINESS JOURNAL (Sept. 14, 2017), https://www.bizjournals.com/phoenix/news/2017/09/14/arizona-legislators-business-leaders-discuss-nafta.html.

^[6] See id.