What Refashioning an Iconic '90s Trade Deal May Look Like

2017-02-16 17:01:51

By Greg Quinn, Bloomberg News

While U.S. President Donald Trump has forced the idea of renegotiating the North American Free Trade Agreement,  some experts agree that an upgrade is welcome for the pact that took effect in 1994 — the year pop idol Justin Bieber was born and the movie “Forrest Gump” was released. From what we know, Trump has Mexico in his target for the bulk of the changes, though his administration has been sparse on specifics. North of the border, the president said this week during a visit by Canadian Prime Minister Justin Trudeau to the White House that he expects only “tweaking” two-way trade relations. Those comments brought a measure of relief, and new uncertainty: What’s changed about U.S.-Canada trade in the past two decades that requires a tweak to the rules? We run through a few options.

Cargo pre-clearance

Canada and the U.S. have taken steps allowing travelers to submit advance information before getting on airplanes to speed their processing, and industry groups have long called for goods to be tagged electronically before speeding through border checkpoints. Trump and Trudeau said in a joint statement Monday the two nations would “commit to establishing pre-clearance operations for cargo” and build on the success of that program for travelers. “There are immigration and customs rules that aren’t in line with modern logistics practices,” David Bradley, CEO of the Canadian Trucking Alliance, said by phone.

Work visas

One of the richest areas for improvement is updating rules about work visas for jobs and technologies that reflect a more mature Internet age — think robotics instead of Windows 95. Canada’s government has more than 60 work categories eligible for a so-called Nafta visa, and only one of them directly mentions computer-related activities. The U.S. issued about 13,100 of the TN or Nafta professional visas in 2015, out of 11 million total non-immigrant visas in America, State Department figures show.

Rules of origin

The treaty gives preferential treatment when goods contain a certain percentages of content from Nafta members. This rule can be cumbersome. Companies often use international supply networks, making it hard to decide where the end product is from. “We have seen important changes in the way that companies source products,” said John Weekes, a former Canadian Nafta chief negotiator and an adviser at the Bennett Jones LLP law firm in Ottawa. “This agreement is 23 years old. There are a lot of things that didn’t even exist when we were negotiating it, such as electronic commerce.”

Services

Nafta, like most trade pacts, is dominated by the movement of items like cotton and machinery, not the rise of the services economy. The treaty has chapters on goods, government procurement and intellectual property. “Updating NAFTA to cover the advent of e-commerce (which didn’t exist in 1994), expanding trade in services, and improved protection for intellectual property is a win-win-win proposition,” Bank of Nova Scotia Chief Economist Jean-Francois Perrault wrote in a report this month.

Ending the long headache over softwood lumber

U.S. lumber firms complain that Canada subsidizes its producers of softwood lumber. While the industry was left out of Nafta, Quebec’s provincial government has called for softwood lumber to be added in any new talks. “Maybe that needs to be inside the agreement,” Chris Sands, director of the Center for Canadian Studies at Johns Hopkins University, told Bloomberg TV Canada.

LATEST STORIES

Industries & Politics

Trends