AuthorBones, Sophie E.

TABLE OF CONTENTS I. Introduction II. Current Political Climate III. Poison Pills A. Five-year sunset clause B. Investor-State Dispute Settlement C. Rules of Origin D. Procurement E. Supply Management IV. Withdrawal consequences A. Court Challenges B. Contingency Plans V. Conclusion I. INTRODUCTION

On November 2, 2017, the Canada-United States Law Institute ("CUSLI") (2) hosted an expert panel discussion at Steptoe & Johnson LLP's Washington, D.C. offices. The discussion was titled "Is There a Path Forward for North American Trade?" and its purpose was to discuss the range of issues concerning the current NAFTA negotiations. Expert participants sought to discuss the future of current trade topics and their immediate impact on North American economic interests.

The United States, Canada, and Mexico are in the midst of renegotiating the nearly 24-year-old North American Free Trade Agreement ("NAFTA" or the "Agreement"). NAFTA has been considered a model Free Trade Agreement ("FTA"), and while understanding that it has indeed had much success, it is by no means perfect. The current U.S. Administration (the Trump Administration) has repeatedly targeted the Agreement, specifically on structural grounds, and is aiming to rectify the perceived disparities by employing an aggressive negotiating stance.

The Expert panel was broken down into two parts. The first part was a discussion by the experts on specific topics of interest, including: the current state of negotiations; forecasts for the next rounds of negotiation; law and policy implications of a new deal or no deal at all; implications of possible U.S. withdrawal from NAFTA; and responses to possible attempted terminations of NAFTA. The second part of the panel was devoted to a question and answer session.

The meeting featured distinguished experts from both the public and private spheres in Canada and the United States, who attempted to answer the elusive questions of "will there be a new agreement; will each side achieve its goals, and if so, at what cost to the current regime; and what effects will this process have, both in the short and long term?"

It was through an intensive discussion of these questions that three important themes emerged from the expert panel, which this paper will discuss in order: (1) the current political climate in the United States and its impact on the negotiations; (2) the U.S. usage of poison pills within the negotiations; and (3) the consequences of withdrawal from NAFTA.


    The CUSLI Expert's meeting was timely, as Canada, Mexico, and the United States are currently renegotiating the North American Free Trade Agreement (NAFTA). The renegotiation itself is causing some defensiveness from Mexico and Canada, with the current U.S. administration fighting for arguably unreasonable structural changes. When President Trump was inaugurated, one potential concern was that he would sign an executive order giving notice of the United States withdrawal from NAFTA. This withdrawal would have wide-ranging consequences.

    The withdrawal concern is a real fear impacting the negotiations, not least because President Trump won the election in large part based off of his attacks on both NAFTA and illegal immigration across the U.S.-Mexico border. While most polling data shows that Americans by and large favor FTAs, President Trump's conviction that his campaign promise to withdraw from NAFTA won him the election has immediately placed both Canada and Mexico on the defensive in the current negotiations. Currently, the United States Trade Representative's Office ("USTR") is leading the negotiations but is doing so without Congressional input. As a result, a great portion of North American business, including the agricultural sector and the U.S. Congressional committees with jurisdiction, oppose their proposals. These proposals come in the form of several "poison pills" that will be discussed in more detail below.

    The current relationship between the U.S. and Canada governments is arguably strained. Canada is two years into its largely socially progressive government that was elected to build the middle class, work on climate change, and broaden its multilateral relations by pushing for a more active role on the world stage. Canada has seen many successes in achieving a greater international role, most prominently through its refugee program; over 50,000 refugees have been welcomed into the country, and half have entered through private sponsorship, which encourages social cohesion and community integration. Additionally, Prime Minister Justin Trudeau's government has shone a spotlight on the middle class with the aim of combatting the obstacles facing it. Thus, the Canadian government has showed little interest in renegotiating NAFTA and has been ready and willing to sign off on the Canada-EU Trade Agreement. The previous Trudeau government showed some trepidation in the face of FTAs; under Justin Trudeau's father--Prime Minister Pierre Trudeau--in 1988, the Canadian government was strongly against a Canada-United States free-trade agreement and there is some of that sentiment lingering within the Liberal Party.

    Since President Trump's election to office in 2016, the current Prime Minister Trudeau has sought to reorganize his government and prioritize the Canada-United States relationship. Over the last six months, there has been a major effort directed through the Canadian Embassy in Washington, D.C., to reach out and remind Americans how much Canada still matters to them. This effort at outreach is considered to be a direct response to threats made by the Trump campaign during the 2016 election to rescind NAFTA. For example, 9 million jobs in the United States depend on an ability to trade with Canada. There is a history of reciprocal trade relations between US Governors and Canadian Premiers, both of whom are heavily invested in seeing a NAFTA deal happen and have been making efforts to reach out to U.S. federal counterparts.

    The Panelists...

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