5 Ways the New U.S., Mexico, Canada Trade Agreement Impacts the Detroit Region

This week, the governments of Canada, Mexico and the United States announced an agreement on a revised deal to replace the North American Free Trade Agreement (NAFTA). The new trade agreement, known as the United States-Mexico-Canada Agreement (USMCA) is expected to be signed by the end of November.

The Detroit Regional Chamber supported updates to the 24-year old trade agreement with the understanding that any new agreement must first “do no harm” to the countries’ existing trade relationship.

Here is a look at the top five ways USMCA could impact the region’s economy according to a fact sheet released by the White House.

1. Automotive Manufacturing

The new deal will require more of a vehicle’s parts to be made in North America in order for automakers to avoid tariffs. It requires that 75 percent of the parts must be made in Canada, Mexico or the United States, roughly 12 percentage points higher than under the original NAFTA.

2. Leveling the Playing Field for U.S. Workers

USMCA requires 40 percent of car and truck parts be made by workers earning at least $16 an hour. This requirement would level the playing field between American and Mexican automotive workers and to incentivize manufacturers to build more in the United States.

3. Expanding Market Access for Food and Agricultural Products

Canada will provide new access for the full range of U.S. dairy products, eggs and poultry. In exchange, the United States will allow more Canadian dairy, peanuts and peanut products to cross the border.

4. Digital Trade

USMCA provides a firm foundation for the expansion of trade and investment in innovative products and services, including rules to ensure that data can be transferred cross-border and to minimize limits on where data can be stored and processed.

5. Environmental Protection

New provisions will combat trafficking in wildlife, timber and fish; enhance the effectiveness of customs inspections; strengthen law enforcement networks to stem trafficking; and protect fish and marine species by prohibiting harmful fisheries subsidies and combatting illegal, unreported, and unregulated fishing.

Great Lakes Metro Chambers Push for Action on Infrastructure, Immigration and Trade

The Detroit Regional Chamber and the Great Lakes Metro Chambers Coalition met with members of Congress and their staff during a two-day fly-in to Washington, D.C. last week to discuss several recently proposed policies that will affect business in the Great Lakes region.

During the visit, the Coalition met with Sen. Bob Casey (D-PA), Rep. Tom Emmer (R-MN 6), and Sen. Gary Peters (D-MI), among others. This visit primarily centered around advancing three of the Coalition’s top policy priorities: the development of a robust, nationwide infrastructure plan; increasing high-skilled immigration; and supporting the preservation of the North American Free Trade Agreement (NAFTA).

Coalition members spent much of their time discussing President Trump’s recently proposed infrastructure, immigration and trade policies. The infrastructure policy allocates $1.5 trillion in investment that was proposed in February. The Coalition supports developing comprehensive infrastructure legislation and increased federal funding for key projects, including an upgrade to the Soo Locks.

Regarding immigration, the Coalition continues to support high-skilled immigration. Data shows that immigrants bring the talent, labor, and spending power needed to help grow the Great Lakes’ economy. According to a New American Economy report, in the Great Lakes region alone, immigrants account for half of the population growth over the last 15 years and drove almost two-thirds of the region’s working-age population growth in the same amount of time.

Finally, the Coalition met with representatives to discuss the preservation of NAFTA. Modernization is necessary to improve trade between the United States and its allies, but pulling the United States from NAFTA would be catastrophic for businesses across the Great Lakes region that rely on restrictive-free trade with Canada and Mexico.

The Coalition will continue to engage the administration on improving infrastructure, immigration and trade regulations to help grow the region’s economy.

For more information on the Great Lakes Metro Chambers Coalition, visit http://greatlakesmetrochambers.com.

Chamber Reaffirms Support for NAFTA in Joint Declaration with Canada, Mexico and U.S. Chambers of Commerce

This week, the Detroit Regional Chamber joined leaders of 25 metropolitan chambers of commerce from Canada, the United States and Mexico in Montreal ahead of the sixth round of North American Free Trade Agreement (NAFTA) negotiations. Participants discussed economic issues surrounding the renewal of NAFTA and the risks for businesses if it is not renewed.

To send a clear message to the three governments on the importance of an updated agreement and maintaining open access to the North American market, the chambers signed a joint declaration affirming the importance of NAFTA to the region’s economy. Collectively, these chambers represent an economic impact with a combined GDP of nearly $3.5 trillion.

The NAFTA renewal remains a priority for the Chamber, and Chamber President and CEO Sandy Baruah is often sought after for his expertise and insight at discussions in Michigan and Canada based on his current role at the Chamber and his past work in Washington, D.C. The declaration was signed on behalf of the Detroit region’s business community by Brad Williams, vice president of government relations for the Chamber. Read the declaration below:

JOINT DECLARATION OF METROPOLITAN CHAMBERS OF COMMERCE FROM THE UNITED STATES, MEXICO AND CANADA

We, the undersigned representatives of Metropolitan Cities Chambers of Commerce, agree to the following key facts regarding the North American Free-Trade Agreement (NAFTA):

Whereas: NAFTA has created major economic ties between Canada, the United States and Mexico, helping to quadruple trade between our three nations since its inception, now reaching $1.5 trillion USD annually.

Whereas: NAFTA has stimulated cross-border investments in the region. Canadian foreign direct investments in the US have risen from less than $40 billion USD to nearly $400 billion USD, and Mexican Foreign direct investment holdings in the United States have also increased by a factor of ten over the same period.

Whereas: 14 million jobs in the United States, 2 million jobs in Canada, and 3 million jobs in Mexico are dependent on trade between the three NAFTA member countries. Of the 14 million American jobs, 5 million are directly related to the growth of NAFTA.

Whereas: Value chains have become integrated through NAFTA, and many products cross our borders multiple times while becoming a finished product. For example, 40% of the content of all US imports from Mexico is produced in the United States. This integration severely increases the cost of breaking a free-trade zone in North America, both at the national and firm level.

Whereas: NAFTA has provided consumers in our metropolitan areas and across our three nations with access to more abundant and affordable products and services, including both high-quality manufactured goods and a wide variety of agricultural products throughout the year.

Whereas: Many of the companies that we represent would be adversely affected by a non-renewal of NAFTA, or a substantial departure from NAFTA’s core principles.

Thus, on the eve of the 6th round of negotiations for the renewal of NAFTA, we the undersigned:

  • Share a common desire to maintain free trade between the United States, Mexico and Canada.
  • Urge our respective governments to come to an agreement to an updated NAFTA, and to maintain it for the future economic success of all three nations.
  • Will maintain our mobilization in favor of an updated NAFTA, leading to a future trade agreement.

Therefore, we jointly sign this Declaration, Montreal, January 22nd, 2018.

The leaders of the following chambers and boards of trade attended the meeting in Montreal: Albany, Boston, Brampton, Calgary, Chihuahua, Cleveland, Dallas, Detroit, Edmonton, Halifax, Kansas City, Los Angeles, Mérida, Mexico City, Minneapolis, Monterrey, Montreal, Querétaro, San Antonio, St. Louis, Tijuana, Toronto, Vancouver, Veracruz and Winnipeg.

Canadian Businesses, Organizations Continue to Turn to Chamber CEO for Insight on NAFTA

By: Michael Lewis II

With the Trump Administration re-opening the 23-year-old North American Free Trade Agreement between the U.S., Canada and Mexico, Chamber CEO Sandy Baruah continues to receive requests to provide insights based on his current role at the Chamber and his past work in Washington, D.C.  While NAFTA negotiations are not getting much attention in the U.S., it is a significant issue for Canadian executives.

Last week, Baruah joined a panel in Toronto to discuss the future of the NAFTA, border security, and the impact on trade between Canada and the United States that included Perrin Beatty, CEO of the Canadian Chamber of Commerce and Steve Verheul, Canada’s Chief NAFTA negotiator.  Baruah served a similar role in June when he addressed the International Economic Forum of the Americas in Montreal.

Verheul noted that Canada and Mexico are aligned on several key areas of negotiation and the U.S. representatives have yet to put forth proposals in areas of interest to the U.S. team.  Baruah noted that from a U.S. business perspective, the first goal for a revised NAFTA was to “do no harm” as the supplies chains, especially in automotive, are tightly and delicately integrated across the NAFTA region.  Disruptions to this supply chain could cause significant economic and job loss in Michigan and other states.

The Detroit Regional Chamber has endorsed the NAFTA framework and recognizes the importance of the agreement to Michigan businesses.


Michael Lewis II is digital marketing coordinator at the Detroit Regional Chamber.

NAFTA Negotiations Are Underway: 5 Things Businesses Should Know

By Stacy Ettinger

Officials from the United States, Canada and Mexico will meet in Washington, D.C. this week to begin negotiations to modernize the North American Free Trade Agreement (NAFTA). The three countries have set an ambitious negotiating schedule, with a plan to hold seven rounds of talks before the end of the year.

The following is a brief look at the schedule for NAFTA renegotiation, key issues likely to be on the negotiating agenda, and the economic relationship between the United States and its NAFTA partners.

Renegotiation Schedule

With elections scheduled in the United States and Mexico in 2018, the NAFTA renegotiation process would likely be a political liability if it drags on too long. The plan, therefore, is to finalize an agreement before the end of the year. With input from businesses and other stakeholders, negotiators are in the process of drafting proposed text to present at the first negotiating session in Washington, D.C. beginning this week.

Six additional negotiating sessions are scheduled through December. After negotiations wrap up, the House of Representatives and Senate will need to vote on, and President Trump will need to sign legislation implementing the agreement. Mexico and Canada also will need to vote to implement per their domestic legal requirements, before a new, “modernized” NAFTA takes effect.

Issues on the Agenda

All three countries go into NAFTA modernization negotiations with their own objectives. Key issues include the following:

  • Tightening Rules of Origin

The United States is looking to “update and strengthen” the rules of origin “to ensure that the benefits of NAFTA go to products genuinely made in the United States and North America.” This might mean raising the North American content requirement for goods to qualify for duty-free treatment. Parts and inputs sold between the NAFTA partners that previously qualified for duty-free treatment could become subject to tariffs.

While U.S. import duties generally are relatively minimal, the same cannot be said for Mexican and Canadian import duties. Given the extensive reliance on integrated cross-border supply chains, the additional duties could drive manufacturers to rethink their sourcing strategies and consider suppliers outside the NAFTA region.

  • Market Access for Agricultural Goods

NAFTA has been very beneficial for cross-border trade in agricultural goods. However, certain products continue to be a source of serious friction between Canada and the United States, including dairy and lumber. Expect both countries to stand their ground to protect sensitive agricultural industries.

  • Energy Production and Transmission

Canada and the United States greatly expanded their bilateral energy trade under NAFTA. Mexico is in the process of opening its oil, gas and power sectors and is looking to incorporate provisions in NAFTA to ensure its energy industries are included in regional energy trade.

  • Eliminating Red Tape

The United States, Canada and Mexico will likely find common ground on proposals regarding regulatory and customs processes that would reduce bureaucratic delays and “red tape.” Given the magnitude and frequency of cross-border transactions between NAFTA partners, any agreement on modernization, simplification and harmonization of customs procedures and processes would result in significant cost savings, particularly for small and medium-sized businesses. Encouraging regulatory cooperation as a way to improve transparency and regulatory compatibility would likely have similar benefits.

  • New Rules for Digital Trade

The United States, Canada and Mexico also have mutual interest in establishment of strong rules promoting and protecting e-commerce and digital trade. The NAFTA countries agreed to such rules, including prohibiting customs duties on digital goods and services, as part of the TPP (Trans-Pacific Partnership) negotiations. Digital trade was in its infancy when NAFTA was negotiated, and there is support among the three countries to address this issue in the ongoing NAFTA modernization efforts.

What Should You Be Doing?

The issues discussed above are just some of the items on the NAFTA renegotiation agenda. NAFTA modernization efforts are on the fast track, and now is the time to engage with government officials to ensure negotiating text reflects your interests.

Benefits of NAFTA

Negotiated 25 years ago, NAFTA was the most comprehensive free trade agreement at the time. With a few exceptions, tariffs on goods produced and traded within North America were reduced to zero. Barriers to investment were eliminated. And service providers were generally free to operate throughout the North American market. The resulting economic integration between the United States, Mexico and Canada is extensive. Canada is the leading market for U.S. exports and the number one customer for each of the Great Lakes states. Mexico is the United States’ second largest export market. The largest categories of traded goods include automobiles and parts, petroleum products, and industrial machinery and equipment.

Stacy Ettinger, a partner in the Washington, D.C. office of the law firm K&L Gates, has worked as a senior legal advisor at the U.S. Department of Commerce where she advised agency officials on U.S. and foreign trade rules, supervised dispute settlement proceedings before the World Trade Organization, and represented the U.S. in international trade negotiations.