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NAFTA deal still in question

Posted: January 17, 2018 by John G. Smith

Shoan, Snowden, and Ujczo discuss the future of NAFTA.

TORONTO, ON – The future of NAFTA remains uncertain as negotiators prepare for their latest round of meetings, this time in Montreal. Months into discussions, nobody even knows if U.S. President Donald Trump will decide to outright scrap the deal that governs every load of cross-border freight.

With about 10 million trucks crossing between Canada and the U.S. each year, there is plenty of business at stake. A recent survey by Export Development Canada even found that 26% of exporters would shift their business to the U.S. if the agreement was revoked.

Trade between the U.S. and Canada tripled between 1986 and 2017, Canadian International Freight Forwarders Association executive director Ruth Snowden observed, during a January 17 seminar hosted by the Fernandes Hearn law firm in Toronto. “If [NAFTA] goes, it could be very significant.”

The Canadian Trucking Alliance was among groups discussing NAFTA with Transport Minister Marc Garneau at the same time the seminar was held, and the alliance has openly lobbied for changes to help address barriers like restrictions on repositioning foreign trailers, in addition to calling for further investments in regional border staff and systems alike. “Border fees is another big one,” added Lak Shoan, the Ontario Trucking Association’s director – policy and industry awareness, while sharing the stage with Snowden. Administrative Monetary Penalty System (AMPS) costs linked to problems with Advance Commercial Information (ACI) data are an example of those barriers to trade.

But that wish list is part of a best-case scenario. If NAFTA was actually scrapped, the costs of cross-border trucking could actually become “too prohibitive” to be viable, he said.

The talks

Dan Ujczo, an international trade and customs lawyer with Dickinson Wright, expects the Montreal round of talks to focus on sticking points around rules of origin, as the U.S. looks to require a larger share of domestic vehicle content.

Vehicles that are made with at least 62.5% of North American content can move duty-free between Canada, the U.S., and Mexico. But the U.S. Congressional Research Service has determined that the real share is closer to 45%, he said during the panel presentation. Raw material from China is being transformed into vehicle parts in Mexico, for example. His guess is that negotiators will settle on a target closer to 70% North American content.

Ujczo believes bigger threats to a deal have more to do with challenges around seasonal produce from Mexico. Then there’s the need for Trump to secure a political win to appease anti-NAFTA supporters who helped to propel him into office.

“The politics of trade, the politics of NAFTA, are terrible in the U.S.,” Ujczo said. “There aren’t enough votes in Congress for a new NAFTA right now.”

“The one consistency that’s been very quiet right now is the anti-NAFTA constituency,” he added. What would the voters of Michigan and Ohio say if Trump decides to extend the NAFTA discussions? They might decide to vote for Democrats who have anti-trade positions of their own.

Provisions that require consultations with members of the U.S. Congress could further drag down the already-troubled discussions, especially as the politicians move closer to midterm elections. “Keep an eye on members of Congress saying, ‘We haven’t been consulted with,’” he said, suggesting that the end of March is a key deadline for the negotiations.

Ujczo said it’s also time for Canadian politicians to pull back on their visits to state leaders in their bid to secure more support. “It helped facilitate and got attention on the issue,” he stressed. “You couldn’t go to an airport in the U.S. without bumping into a Canadian minister somewhere.” But now he believes the extra face time could simply feed more discussions about longstanding trade disputes.

In the meantime, there are even questions about what a withdrawal from NAFTA would look like. “Is it Congress or the president that has the authority to withdraw?” he asked. And there are questions about whether the pre-existing Canada-U.S. Free Trade Agreement would snap back into place if the North American deal was scrapped.

No matter what is decided, though, one thing is certain. The discussions promise to reshape north-south freight.

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