What To Expect From A Trump Administration Trade Policy: Revisiting NAFTA

In a recent alert, we discussed several steps that President-elect Trump may take to shake up US trade policy. In this alert, we discuss one of his priority initiatives: the pledge to renegotiate, or withdraw from, the North American Free Trade Agreement (NAFTA) to get a better deal for US workers. If the Trump Administration follows through on this pledge, any one of a number of scenarios may emerge—from an expanded and modernized agreement, implying offensive opportunities for companies to formulate a wish-list agenda for the negotiations, to substantial supply chain and commercial disruption, implying defensive concerns on the part of affected businesses. Given the range of potential outcomes, companies should proactively review their NAFTA positioning and become embedded in the negotiating process early on in order to further and/or safeguard their commercial interests.

Pledges to renegotiate NAFTA are a recurring theme in presidential campaigns. For example, as a presidential candidate in the 2008 primary season, Barack Obama promised to use the "hammer of a potential opt-out" as leverage to renegotiate the agreement's terms. The Obama Administration shelved that idea after the election as trade policy took a back seat to the financial crisis and the push for Obamacare. But there are signs that this time may be different, as the president-elect has kept trade issues at the forefront in the post-election period.

If the Trump Administration decides to seek renegotiation with Canada and Mexico, revisions and updates to NAFTA could be numerous. In one possible scenario, the changes could benefit a broad array of US companies by substantially updating and expanding its reach.1 For example:

Intellectual Property (IP): NAFTA's IP provisions are only slightly stronger than those adopted by all World Trade Organization members in 1995. A renegotiated NAFTA could include more robust IP protections, such as a minimum exclusivity period for biologics, which is 12 years under US law but shorter under Canadian and Mexican law.2 Other possible changes include digital rights management (i.e., to prevent circumvention of IP rights with respect to digital products), and limitations and exceptions for copyright (i.e., to protect news reporting, scholarship, research, etc.). Digital Trade: The Internet was in its infancy when NAFTA was signed in 1992, and NAFTA does not include a chapter on the digital economy. Potentially, a renegotiated NAFTA could...