iPolitics | 29 June 2016
Three amigos further liberalize NAFTA rules of origin
by BJ Siekierski
Prime Minister Justin Trudeau, US President Barack Obama and Mexican President Enrique Peña Nieto have agreed to again liberalize NAFTA’s rules of origin, Trudeau’s office announced Wednesday during the Three Amigos summit — further reducing barriers to the export of products that account for $166 billion in annual trilateral trade.
According to a backgrounder from the Prime Minister’s Office, Canada, the United States, and Mexico exchanged letters Wednesday confirming agreement on a fourth package of amendments, referred to as Track IV, to liberalize the NAFTA rules of origin for a variety of products.
Rules of origin refer to the criteria used to determine the source of a product — that is, how much of a product’s components must originate in the exporting country for it to get preferential tariff treatment. The more liberalized the rules of origin, the easier or freer the trade.
Since being brought into force in 1994, NAFTA rules of origin have been periodically updated. Most recently, in 2009.
The new agreement covers pharmaceuticals, cosmetics, rubber, metals, industrial and electrical machinery, precision instruments, and natural gas.
“These products currently account for $166 billion in annual trilateral trade. Track IV is a practical example of reducing costs in North American trade,” the backgrounder explains.
“Since the entry into force of the North American Free Trade Agreement (NAFTA), the North American economy has become an integrated production platform that maximizes our capabilities and makes our economies more innovative and competitive.”
The backgrounder also addresses the floundering 12-member Trans-Pacific Partnership, which all three NAFTA partners signed in February but which continues to be virulently opposed in the U.S. as the Canadian government continues its consultations.
“The three leaders strongly support regional economic co-operation as a means to promote shared prosperity, create jobs, enhance North American industrial and agricultural production, and protect workers and the environment,” the backgrounder says.
“Recognizing that the Trans-Pacific Partnership aims to advance these objectives, we will continue to work diligently to complete our respective domestic processes.”
This comes a day after Donald Trump, the presumptive Republican nominee for President of the United States, doubled down on his opposition to trade liberalization, with an emphasis on TPP and NAFTA.
On Tuesday, Trump called TPP a “death-blow for U.S. manufacturing” and — NAFTA “the worst trade deal in history” — and made several references to protecting U.S. steel manufacturing, a subject the three North American leaders also broached.
“A Trump Administration will also ensure that we start using American steel for American infrastructure,” he said.
The backgrounder says Trudeau, Obama and Peña Nieto agreed on the need for governments of all major steel-producing countries to make strong and immediate commitments to address the problem of global excess steelmaking capacity.
Among other things, that means curtailing government subsidies.
In addition, they agreed to create a trilateral Customs Steel Enforcement Dialogue that will facilitate and coordinate compliance efforts and information sharing on anti-dumping and countervailing measures on steel products.
In contrast to Trump’s vision, however, the approach is trilateral.
“It will be an important step towards ensuring that importers of potentially dumped and subsidized steel are compliant with all regulatory requirements and pay all duties owing, thereby protecting the North American steel industry from the injury caused by the dumping and subsidizing of imported goods into the North American marketplace,” the backgrounder says.