NAFTA agreement soon to be renewed?

The North American Free Trade Agreement between the United States of America, Canada and Mexico is active since January 1994. Even though it has proven to be very helpful for the economy in the region, treaties do get old. In contrast to modern treaties, it lacks rules catered to medium-sized enterprisese-commercelabor laws and the environment.


Originally the NAFTA should have been amended along with entering into the Trans-Pacific Partnership (TPP), however the Trump administration has withdrawn support for the TPP and seeks to update NAFTA between the three original countries. In May 2017 the Congress was formerly notified to renegotiatethe NAFTA by the US Trade Representative Robert Lighthizer.


The renegotiations started in August 2017 and so far there have been 7 formal rounds of negotiations. Most recognized were the US proposals for the “rules of origin“, which require automobiles to have 85% of regional value content and 50% US content. Also new to the treaty would be the “sunset provision” according to which the treaty expires after 5 years, unless the three parties renew it, and a rule about the dispute settlements, where NAFTA panel rulings in state-to-state disputes shall not be binding for the parties. Other proposals include the limitation of access to the US government procurement market.


Many of these proposals have been made without congressional consent. The Trade Representative Lighthizer has however defended the proposals, claiming that these would reduce the US trade deficits. Some believe that those high demands are just a negotiation tactic, to get other concessions from Canada and Mexico.


It is disputed if the President of the United States has the power to withdraw from the NAFTA by himself, without congressional consent. There is no specific US-law granting such powers, which leads some to say that the President cannot withdraw from the treaty without the consent of the Congress. On the other hand, the Constitution gives the President authority to conduct foreign affairs, which is the argument of the opposing side to argue, that the President is able to terminate agreements himself.


Equally disputed is the question if the amendments of the NAFTA need congressional consent. The Trump administration already indicated though that under TPA 2015 it would seek congressional approval of the amendments. Both chambers of Congress need to take an “up-or-down” vote, which means that there will be no amendments made by Congress.


The future of NAFTA is uncertain at this point, even more so as the questions of consent of the Congress are not yet answered. It remains to be seen how the three parties conduct their negotiations.