With the aim of modernizing the North American Free Trade Agreement (NAFTA) with Mexico and Canada, the U.S. Trade Representative Robert Lighthizer officially notified Congress of U.S. President Donald Trump’s administration’s intentions to reopen negotiations.
Specific to produce and floral, the principal negotiating objective of the U.S. is to ensure competitive opportunities for U.S. exports to Canada and Mexico and to achieve fairer and more open conditions of trade. For example, securing better market access through robust rules on sanitary and phytosanitary measures will most likely be a priority.
In terms of tariffs, there are no remaining agricultural or industrial tariffs in place between the U.S. and Mexico. The only remaining tariffs exist between the U.S and Canada and do not involve produce or floral. They are:
- Canada imposes agricultural tariffs on imports of dairy, poultry and egg products, and,
- U.S. imposes agricultural tariffs on imports from Canada of the sugar and dairy tariff-rate quota (TRQ) products, plus tariffs on cotton, peanuts and tobacco.
Except for those described above, tariffs that were in place when NAFTA entered into force have since been eliminated or phased to zero. As part of this recent notification to reopen negotiations, Ambassador Lighthizer has also requested the U.S. International Trade Commission (ITC) assess the elimination of duties on a number of products from NAFTA countries. This list included 17 pages of food and agricultural commodities. It is conceivable that if NAFTA is reopened, everything could be on the table — by the U.S., Canada or Mexico.
Generally, the administration indicates the NAFTA negotiations
will seek to support higher-paying jobs in the U.S. and to grow the U.S. economy by obtaining better market access for U.S. products overseas. The administration will also work to reduce barriers that decrease market opportunities for U.S. exports. Plus, because NAFTA was negotiated 25 years ago, the administration states many chapters of the agreement are outdated and do not reflect modern standards. To modernize NAFTA, new provisions will be added addressing intellectual property rights, digital trade and labor, among other topics. In addition to what the U.S. may expect from negotiations, it’s important to remember that Canada and Mexico likely will also use such an opportunity to address their interests as well.
NAFTA — along with all trading relationships — is critical for the produce and floral industry, as the buying and selling of fresh produce and floral products occurs in a global environment. The U.S. also depends on international supply partners as the largest importer of fresh produce globally, importing $17.6 billion in 2015. Mexico and Canada account for about one-half of all U.S. produce imports. Additionally, 70 to 80 percent of cut flowers come from outside of the U.S.
Ambassador Lighthizer’s official notification to Congress fulfills a requirement under existing U.S. law for close consultations with Congress in developing negotiating positions. The delivery of the congressional notification on May 18, 2017, means the U.S. will start NAFTA negotiations with Canada and Mexico no earlier than mid-August 2017, fulfilling a consultation period required under the law. In terms of next steps, existing law also requires the administration to provide a detailed and comprehensive summary of specific objectives 30 days before negotiations start. This requirement will trigger more consultations with Congress. The U.S. government also consulted the public on NAFTA priorities through a Federal Register notice inviting public comment. PMA submitted comments and will testify at a USTR hearing on June 27, 2017, highlighting NAFTA’s success for PMA members as statistics show the growth in trade in fresh produce and floral products.
Once negotiations begin, the progress of trade talks will determine whether the U.S. takes any moves to split the trilateral trade pact into two separate, bilateral deals. Regardless of procedure, the Trump administration is committed to concluding negotiations with timely and substantive results. While negotiations could last years – Ronald Reagan campaigned for a free trade zone starting in 1981 and negotiations concluded in 1994 – stakeholders are motivated to wrap up discussions in time for mid-term elections in the U.S. and the presidential election in Mexico, both in 2018.
PMA will be monitoring next steps as the Trump administration releases more details on negotiating objectives. We are also actively gathering members’ input and working to schedule a meeting with Ambassador Lighthizer to elevate PMA members needs and concern surrounding NAFTA’s real-world impact on produce and floral businesses.