Push for Preclearance in NAFTA, Trade Stakeholders Tell Trump Administration
The Trump administration should push for preclearance provisions in any updated North American free trade agreement, several members of the trade said during a June 29 hearing. NAFTA negotiations should fortify elements of the Obama administration’s Beyond the Border vision such as a common U.S.-Canadian single-window platform and cargo preclearance mechanism, Daniel Ujczo, a representative for the Canada-U.S. Business Association and American Chamber of Commerce in Canada, said during a hearing at the International Trade Commission convened by the Office of the U.S. Trade Representative. “The mix of technology of single window as well as allowing preclearance at facilities themselves would significantly advance Canada and U.S. and North American trade.”
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Ujczo said he is waiting for the Canadian Parliament to pass pending legislation to expand U.S. preclearance to more Canadian airports. Passage of the legislation would also set the stage for stationing customs agents at original equipment manufacturer facilities to preclear their movement from nation to nation, Ujczo said. Enshrining preclearance and trusted trader provisions into NAFTA would promote border security and efficiency, U.S.-Mexico Chamber of Commerce CEO Albert Zapanta said. Lack of broadband is the biggest underlying problem for inspection efficiency along the U.S.-Mexico border, which houses several outdated facilities, Border Trade Alliance board member Sam Vale said.
CompTIA International Government and Regulatory Affairs Director Stefanie Holland called for the merchandise processing fee exemption to remain in NAFTA, saying that it makes NAFTA a greater value than the World Trade Organization Information Technology Agreement for IT products, in many cases. There have been multiple days of hearings on NAFTA renegotiations (see 1706270074 and 1706270047).
Several customs-related barriers are limiting trade and the ability to measure value added in the agreement, speakers said during the hearing. For instance, most Mexican commodities are classified at the four-digit level, while U.S. goods have many six-, eight- and 10-digit subheadings, said Manuel Molano, deputy director general for the Instituto Mexicano para la Competividad, a Mexican think tank. Trade deficit numbers might be exaggerated because a car company that has a plant in Michigan and one in Mexico might just need to “do a write-off on the debt accrued from one to the other, and that should be part of the deficit,” he said. “The deficit’s such an important issue right now. Maybe we should think together with the business chambers since these are all transnational businesses to supply some supply chain-level data so we can know exactly where the value is added.” Molano pointed to iPhones as an example, saying the value added to the devices through Chinese manufacturing is “tiny” compared to the “ingenuity and the innovation” originating in Silicon Valley.
Assistant U.S. Trade Representative for the Western Hemisphere John Melle said Canada is hampering the development of its own digital commerce by keeping its de minimis level at $20. He noted that he has been part of a U.S. effort to convince Canada to raise its de minimis over the last 25 years, but added that Canada doesn’t see such a move as a “win-win.” But there’s been a “limited acknowledgement” by the Canadian government that it should boost its de minimis level, said Clark Packard, trade policy analyst for the R Street Institute, a conservative think tank. It seems that a recent report released by the office of Canada’s auditor-general is laying the foundation for “this to be somewhat of an easy concession for them to make to U.S. trade negotiators and Mexican trade negotiators as well.”
Council of the Americas Vice President Eric Farnsworth cautioned that any rule-of-origin changes should result from an iterative process with industry, as re-examining those provisions could result in unintended consequences if not fully vetted. “Producers are going to react to [changes] based on their own realities,” he said. “And so it’s that balance that we’re asking the people to keep in mind in a very transparent way.”