NAFTA at 15

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NAFTA at 15

• American Bar AssociationSection of International
  Law2009 Annual Meeting

Adriana Ibarra-Fernandez
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The North American Free Trade Agreement

• The North American Free Trade Agreement (NAFTA)
  created the worlds largest free trade area,
  which today has 442.4 million people and a
  combined gross domestic product of USD 15.4
  trillion.
• Since 1994, each of the NAFTA partners has
  experienced strong economic growth, increased
  trade and investment flows, and rising
  prosperity.
• Manufacturers, farmers, ranchers, and service
  providers have greater export opportunities,
  while consumers have enjoyed lower prices and
  more choices.

Source USTR
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Exports

• Canadas exports to its NAFTA partners increased
  by 173 percent in value from pre-NAFTA levels.
• Exports to the United States grew from USD 116.8
  billion to USD 316.8 billion, while exports to
  Mexico reached USD 3.9 billion.

Source USTR
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Exports

• U.S. exports to Mexico and Canada grew by 157
  percent

Source USTR
5
Exports

• Mexican exports to the U.S. grew by 392 percent,
  reaching USD212.3 billion.
• Exports to Canada also grew substantially from
  USD1.5 to USD5.2 billion, an increase of almost
  237 percent.

Source USTR
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Annual Trilateral Trade
Source USTR
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Are there opportunities and challenges for NAFTA?

• Since 1994
• Canada has signed free trade agreements with
  Israel, Chile, and Costa Rica, and has concluded
  free trade agreement negotiations with the
  members countries of the European Free Trade
  Association (EFTA Iceland, Liechtenstein, Norway
  and Switzerland).

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Are there opportunities and challenges for NAFTA?

• Canada is currently in the process of
  negotiating free trade agreements with four
  countries in Central America (El Salvador,
  Guatemala, Honduras and Nicaragua), Singapore,
  Korea, and has recently launched free trade
  agreement negotiations with the Andean Community
  countries of Colombia and Peru, the Dominican
  Republic and the Caribbean Community (CARICOM).

9
Are there opportunities and challenges for NAFTA?

• Since 1994
• The United States has free trade agreements with
  Jordan, Chile, Singapore, Australia, Morocco,
  Bahrain, the Dominican Republic and five
  countries in Central America CAFTA-DR (Costa
  Rica, El Salvador, Guatemala, Honduras, Nicaragua
  and Costa Rica.)

10
Are there opportunities and challenges for NAFTA?

• The United States has recently signed free trade
  agreements with Peru, Colombia, Panama, and
  Korea, and is currently negotiating a free trade
  agreement with Malaysia. The U.S.-Oman Free Trade
  Agreement will enter into force upon Omans
  completion of its domestic procedures.

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Mexicos FTAs

• Since 1994
• Mexico has free trade agreements with Chile, the
  European Union, the European Free Trade
  Association, Israel, Bolivia, Colombia,
  Nicaragua, the Central America Northern Triangle
  (El Salvador, Guatemala, and Honduras), Costa
  Rica, Uruguay and Japan as well as Agreements in
  terms of the Latin American Association for
  Integration (ALADI) with Brazil and several
  other Latin American Countries.

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Mexicos FTAs

• These new generation FTAs have disciplines that
  NAFTA did not contemplate. When compared with the
  NAFTA region, other regions such as Central
  America (El Salvador, Honduras, Nicaragua,
  Guatemala, Dominican Republic and Costa Rica)
  have more attractive disciplines in their FTAs
  with the U.S. and Canada, which discourage
  establishing operations in the NAFTA Region.

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NAFTA Article 303

• NAFTA In terms of article 303 of NAFTA when
  non-NAFTA materials are imported temporarily into
  Mexico by a Maquiladora and are incorporated into
  finished goods exported to the U.S. or Canada,
  duties must be paid in Mexico as if the non-NAFTA
  materials remained in Mexico for domestic
  consumption.

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NAFTA Article 303

• IMMEX companies must pay Mexican duty on
  non-NAFTA materials equal to

Mexican duty on materials
US or Canadian duty on Finished Goods
Minus
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NAFTA Article 303(Example)
Materials
WORLD
200 x 5 10
Finished Product
USA/Canada
México
IMMEX
IMMEX MUST PAY 5 MEXICAN DUTIES
Value x Duties 100 x 15 15
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NAFTA Article 303

• Other Trade Agreements such as CAFTA do not have
  a duty deferral provision as found in NAFTA
  article 303.
• Instead, CAFTA does permit inputs from Mexico
  and Canada into certain textile articles if those
  countries amend their laws and agreements with
  the CAFTA countries.  To date, only Mexico has
  done so.
• CAFTA's rules of origin are generally less
  complicated, and have a lower RVC requirement
  than NAFTA.
• CAFTA does permit other countries or group of
  countries to accede to its provisions with
  permission of existing parties.

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Other opportunities for improvement?

• a) NAFTA verifications of origin
• Importing country is entitled to request
  exporter or producer located in the territory of
  another NAFTA country, to provide evidence of the
  NAFTA eligibility of goods imported under
  preferential duty treatment.
• SCOPE???

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Other opportunities for improvement?

• Article 505 Records
• Each Party shall provide that
• an exporter or a producer in its territory that
  completes and signs a Certificate of Origin shall
  maintain in its territory, for five years after
  the date on which the Certificate was signed or
  for such longer period as the Party may specify,
  all records relating to the origin of a good for
  which preferential tariff treatment was claimed
  in the territory of another Party, including
  records associated with
• (i) the purchase of, cost of, value of, and
  payment for, the good that is exported from its
  territory,
• (ii) the purchase of, cost of, value of, and
  payment for, all materials, including indirect
  materials, used in the production of the good
  that is exported from its territory, and
• (iii) the production of the good in the form in
  which the good is exported from its territory

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Other opportunities for improvement?

• There is no provision allowing exporter or
  producer to provide the above mentioned
  documents/information with regards to
  representative samples only.
• This can lead to extensive verifications of
  origin which impede evidencing NAFTA eligibility
  of goods even when the goods do in fact meet the
  applicable rules of origin and are therefore
  entitled to preferential duty treatment.

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Other opportunities for improvement?

• b) NAFTAs Dispute Settlement Mechanism
• Panel selection can be blocked by the country
  that breached the agreement.
• Compliance with arbitral resolutions???
• Retaliatory measures such as those imposed by
  Mexico due to lack of compliance by the U.S. with
  panels decision in land transportation case
  brought by Mexico in terms of Chapter XX of
  NAFTA.

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Other opportunities for improvement?

• b) NAFTAs Dispute Settlement Mechanism

Source IQOM
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Post NAFTA Work to Improve Regional
Competitiveness

• Regulatory harmonization
• Trade in services.- impulse cross-border health
  services, transportation, professional services
• Customs cooperation.- Streamline movement of
  goods and individuals in border crossings

Source Ministry of Economy
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Post NAFTA Work to Improve Regional
Competitiveness

• Energy cooperation.- Develop a trilateral plan to
  guarantee access to sufficient, clean, accessible
  and trustworthy energy
• Environment.- Create a trilateral plan in
  response to main environmental challenges such as
  climate change, water shortage and biodiversity
• Social agenda.- Trilateral policies to allow more
  people to benefit from free trade.

Source Ministry of Economy
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Adriana Ibarra FernándezBaker McKenzie, S.C.
Edificio Scotiabank InverlatBlvd. M. Ávila
Camacho No. 1-12o.Colonia Lomas de
Chapultepec11009, México D.FMexico Tel 52 55
5279 2947 Fax [phone]
adriana.ibarra-fernandez_at_bakernet.com
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