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Trade Agreement Renegotiation Updates – NAFTA and KORUS

Trade agreements, whether negotiated bilaterally (between two nations) or multilaterally (between a group of nations), cover not just the exchange of manufactured goods, but services as well. They are complex agreements, long in the writing with the devil lying truly in the details.

Currently, there are two such agreements that the Administration has re-opened to negotiation, the North American Free Trade Agreement (NAFTA) and the United States – Korea Free Trade Agreement, or KORUS FTA.

The NAFTA negotiations have been taking place over the past several months and have centered around a number of key issues.

  • The US wants to increase the percentage of regional value content and US origin content for vehicles from 62.5% to 80% while requiring a full 50% of the value be from US-origin components.
  • The US would like the discussion to be reopen to negotiation and sunset review every five years. For companies who have made long term investments in factories and supply chains this adds significant uncertainty.
  • Mexican truck drivers who fought for fifteen years for the right to have access to the US market beyond a geographic limit find themselves facing restricted access once again.
  • The Canadian government would have to give up protections within a dispute mechanism, something they vehemently want to avoid.

The negotiations have been held on a rotating basis between Washington, Ottawa and Mexico City.

KORUS, which at six years old is far younger compared to the more than twenty-year old NAFTA, is also subject to many of the same concerns about the opening of automotive markets to the vehicles and parts from the respective two countries. The New York Times reported that the Administration would be looking at areas, “including trade in automobiles and, potentially, financial services and procedures related to importing goods.”

KORUS is a bit trickier in its negotiations because there is the underlying work being done diplomatically to rein in North Korea’s missile testing and nuclear activity.

Companies who have a vision of what they would like to see these agreement include or exclude are encouraged to communicate with the Office of the United States Trade Representative to share their views.