Customs Improvements at Border Best Thing in New NAFTA, Canada Expert Says

When the head of the Canada Institute asked Canadian negotiators in the NAFTA talks what they were most proud of, they said modernization at the border. "The customs facilitation, the regulatory [change] makes a big difference," said Laura Dawson, director of the Wilson Center's Canada Institute. "Origin certificates used to have to be faxed to the border. The fact that they're going to use iPads is a huge win."

Dawson, speaking on a Wilson Center panel on the new NAFTA on Oct. 5, agreed with McLarty Associates partner Kellie Meiman Hock, who said her take on the U.S.-Mexico-Canada Agreement is "it coulda been worse." But, Dawson said, more than 50 percent of USMCA is good modernization. Hock agreed that the customs text is good, though she said other modernization "primarily is warmed-over TPP," referring to the Trans-Pacific Partnership.

Hock asked her fellow panelists who are Mexico experts if that country's legislature could pass a law improving collective bargaining rights by January 2019, as required in the Labor Chapter. One of the annexes to that chapter warns that if Mexico does not get the law passed by then, it could delay approval of the deal in the U.S. Congress.

Former U.S. Ambassador to Mexico and current Mexico Institute fellow Tony Wayne said that's doable. Duncan Wood, director of the Wilson Center's Mexico Institute, said in a brief interview with International Trade Today after the panel that there's an internal debate in the new administration on precisely how to reform labor laws. He asked, "Is it going to be collective bargaining old PRI style, or AMLO style?" PRI was the party that ran Mexico for decades until the election of former President Vincente Fox, and Andres Manuel Lopez Obrador, or AMLO, used to belong to the party. Lopez Obrador is Mexico's president-elect.

The upcoming inauguration of AMLO on Dec. 1 was the ostensible catalyst for getting USMCA sealed last week, but Hock doesn't buy that. She said the Trump administration wanted "a talking point before the midterms." However, Hock said, given that retaliatory tariffs on agriculture from Mexico, Canada and China are still in place, "I don't know how long [farmers'] patience will last." She said that Canadians have made it clear they won't sign USMCA until steel and aluminum tariffs -- the action that triggered those retaliatory duties -- are lifted. Since they don't want to accept quotas on those exports, and Trump says quotas are necessary, Hock says an illusory quota may be the way out -- one that is far higher than current export levels.

Wayne noted that Canada has targeted $12.8 billion in U.S. exports and Mexico raised duties on $3.5 billion in U.S. exports because of the steel and aluminum tariffs. Hock, who is critical of the "drama" that accompanied renegotiation, warned "the roller coaster is not over. Personally, I think he could still withdraw to get it through Congress."

And, if a trade skeptic is in office six years after implementation, there could be another ride on the roller coaster. The revised sunset clause "seems like it's better but it still provides opportunities to throw sand in the gears at the six-year point," Dawson said. She said it seems similar to the past softwood lumber agreements, which allowed Canadian lumber to enter without quotas when prices reached a certain point. They are supposed to be renewed each time one expires, but sometimes there is a gap -- as there is now.