Before we review the current negotiations and their impact to US-Canada-Mexico trade, let’s talk briefly about the history of The North American Free Trade Agreement - NAFTA for short.
NAFTA is one of the oldest trade agreements still in place, tracing its roots to US President Ronald Regan. President Regan preached a North American common market in his campaign; and in 1984, Congress passed the Trade and Tariff Act. This gave the president expedited authority to change negotiating points in Free Trade agreements so that Congress is only able to approve or disapprove a proposed agreement. From there, the US and Canada began negotiations for a Free Trade Agreement, which was signed in 1988. Fast forward to 1992: a tri-lateral trade agreement was signed between US President George H.W. Bush, Canada’s Prime Minister, Brian Mulroney, and Mexico's President, Salinas. It was eventually signed into law in 1993 by US President Bill Clinton.
If you’ve been following the recent headlines, you’ll have noticed that NAFTA has been back in the spotlight for quite some time. Most recently, the US and Mexico announced a bilateral trade deal on August 27th, which opened the door for Canada to rejoin the trade conversation before the August 31st deadline. Currently, NAFTA accounts for over $1 trillion in annual trade among the three nations.
But while many signs point to optimism toward Canada’s participation, does this mean the deal goes into place and all will be right with the world again? Not so much.
Even if the three nations come to an agreement on a path forward, any proposed new plan would need to run through the appropriate regulatory framework, meaning the House and Senate would need to give approvals before the President could sign an official deal. Additionally, the current NAFTA agreement would have to be terminated before the newly named deal could go into effect.
When we polled BDP’s customers at our Regulatory Compliance Seminar earlier this year, many felt that NAFTA was antiquated and needed an update. So, what types of changes would be involved with the Rules of Origin, if a new agreement goes into effect? It’s too soon to tell.
You might be asking, should I start renewing my NAFTA certificates? Personally, I would recommend waiting to see how the talks unfold before pursuing any fourth quarter certificate renewals. The situation is very fluid, and there are many unknown factors at this time.
Rest assured that BDP is closely monitoring the trade talks, and will continue to update our customers with any new of possible impacts on their North American supply chains.