From: [l w b] at [cs.utexas.edu] (Lance W. Bledsoe) Newsgroups: alt.conspiracy,alt.activism,alt.fan.rush-limbaugh,talk.politics.misc Subject: NAFTA Synopsis (1/3) Date: 9 Sep 1993 11:09:23 -0500 Here is a synopsis of the NAFTA agreement. I have not relly had time to read it, but I thought I'd send it anyway. Your comments would be nice. (It is possible that this is just part of the NAFTA "selling program" so read it with your eyes open and your brain working! >g:Chap05 72 de tr mite aduanero"). Mexico will eliminate by June 30, 1999, de tr mite aduanero"). Mexico will eliminate by June 30, 1999, its existing customs processing fee on North American goods. The United States will eliminate its current merchandise processing fee on goods originating in Mexico by the same date. For goods originating in Canada, the United States currently is phasing down and will eliminate this fee by January 1, 1994, as provided in the Canada-U.S. FTA. Waiver of Customs Duties: The NAFTA prohibits any new performance-based customs duty waiver or duty remission programs. Existing programs in Mexico will be eliminated by January 1, 2001. Consistent with the obligations of the CanadaU.S. FTA, Canada will end its existing duty remission programs by January 1, 1998. Export Taxes: The NAFTA prohibits all three countries from applying export taxes unless such taxes are also applied on goods to be consumed domestically. Limited exceptions allow Mexico to impose export taxes in order to relieve critical shortages of foodstuffs and basic goods. Other Export Measures: When a NAFTA country imposes an export restriction on a product, it must not reduce the proportion of total supply of that product made available to the other NAFTA countries below the level of the preceding three years or other agreed period, impose a higher price on exports to another NAFTA country than the domestic price or require the disruption of normal supply channels. Based on a reservation that Mexico has taken, these obligations do not apply as between Mexico and the other NAFTA countries. Duty-Free Temporary Admission of Goods: The Agreement allows business persons covered by NAFTA's "temporary entry" provisions to bring into a NAFTA country professional equipment and "tools of the trade" on a duty-free, temporary basis. These rules also cover the importation of commercial samples, certain types of advertising films, and goods imported for sports purposes or for display and demonstration. Other rules provide that by 1998 all goods that are returned after repair or alteration in another NAFTA country will re-enter duty-free. The United States undertakes to clarify what ship repairs done in other NAFTA countries on U.S.-flagged vessels qualify for preferential duty treatment. Country-of-Origin Marking: This section also provides principles and rules governing country-of-origin marking. These provisions are designed to minimize unnecessary costs and facilitate the flow of trade within the region, while ensuring that accurate information about the country of origin remains available to purchasers. Alcoholic Beverages - Distinctive Products: The three countries have agreed to recognize Canadian Whiskey, Tequila, Mezcal, Bourbon Whiskey and Tennessee Whiskey as "distinctive products" and to prohibit the sale of products under these names unless they meet the requirements of their country of origin. TEXTILES AND APPAREL This section provides special rules for trade in fibers, yarns, textiles and clothing in the North American market. The NAFTA textiles and apparel provisions take precedence over those of the Multifiber Arrangement and other agreements between NAFTA countries applicable to textile products. Elimination of Tariff and Non-Tariff Barriers The three countries will eliminate immediately or phase out over a maximum period of 10 years their customs duties on textile and apparel goods manufactured in North America that meet the NAFTA rules of origin. In addition, the United States will immediately remove import quotas on such goods produced in Mexico, and will gradually phase out import quotas on Mexican textile and apparel goods that do not meet such rules. No NAFTA country may impose any new quota, except in accordance with specified "safeguards" provisions. Safeguards If textile or apparel producers face serious damage as a result of increased imports from another NAFTA country, the importing country may, during the "transition period", either increase tariffs or, with the exception of Canada-U.S. trade, impose quotas on the imports to provide temporary relief to that industry, subject to specific disciplines. In the case of goods that meet NAFTA's rules of origin, the importing country may take safeguard actions only in the form of tariff increases. Rules of Origin Specific rules of origin in the NAFTA define when imported textile or apparel goods qualify for preferential treatment. For most products, the rule of origin is "yarn forward", which means that textile and apparel goods must be produced from yarn made in a NAFTA country in order to benefit from such treatment. A "fiber forward" rule is provided for certain products such as cotton and man-made fiber yarns. Fiber forward means that goods must be produced from fiber made in a NAFTA country. In other cases, apparel cut and sewn from certain imported fabrics that the NAFTA countries agree are in short supply, such as silk, linen and certain shirting fabrics, can qualify for preferential treatment. Additional provisions, responsive to the needs of North American industry, include "tariff rate quotas" (TRQ's), under which yarns, fabrics and apparel that are made in North America, but that do not meet the rules of origin, can still qualify for preferential duty treatment up to specified import levels. The TRQ's for Canada that were included in the Canada-U.S. FTA have been increased and provided an annual growth rate for at least the first five years. The NAFTA countries will undertake a general review of the textile and apparel rules of origin prior to January 1, 1998. In the interim, they will consult on request on whether specific goods should be made subject to different rules of origin, taking into account availability of supply within the free trade area. In addition, the three countries have established a process to permit annual adjustments to TRQ levels. Labelling Requirements A joint government and private sector Committee on Labelling for Textile Products will recommend ways to eliminate unnecessary obstacles to textile trade resulting from different labelling requirements in the three countries through a work program to develop uniform labelling requirements, for example regarding pictograms and symbols, care instructions, fiber content information and methods for attachment of labels. AUTOMOTIVE GOODS The NAFTA will eliminate barriers to trade in North American automobiles, trucks, buses and parts ("automotive goods") within the free trade area, and eliminate investment restrictions in this sector, over a 10-year transition period. Tariff Elimination Each NAFTA country will phase out all duties on its imports of North American automotive goods during the transition period. Most trade in automotive goods between Canada and the United States is conducted on a duty-free basis under the terms of either the Canada-U.S. FTA or the Canada-U.S. "Autopact". Vehicles: Canada and the United States eliminated tariffs on their trade in vehicles under the Canada-U.S. FTA. Under the NAFTA, for its imports from Mexico, the United States will: - eliminate immediately its tariffs on passenger automobiles; - reduce immediately to 10 percent its tariffs on light trucks and phase out the remaining tariffs over five years; and - phase out its tariffs on other vehicles over 10 years. For imports from Canada and the United States, Mexico will: - reduce immediately by 50 percent its tariffs on passenger automobiles and phase out the remaining tariffs over 10 years; - reduce immediately by 50 percent its tariffs on light trucks and phase out the remaining tariffs over five years; and - phase out its tariffs on all other vehicles over 10 years. Canada will eliminate its tariffs on vehicles imported from Mexico on the same schedule as Mexico will follow for imports from Canada and the United States. Parts: Each country will eliminate its remaining tariffs on certain automotive parts immediately and phase out duties on other parts over five years and a small portion over 10 years. Rules of Origin The NAFTA rules of origin section provides that in order to qualify for preferential tariff treatment, automotive goods must contain a specified percentage of North American content (rising to 62.5 percent for passenger automobiles and light trucks as well as engines and transmissions for such vehicles, and to 60 percent for other vehicles and automotive parts) based on the net-cost formula. In calculating the content level of automotive goods, the value of imports of automotive parts from outside the NAFTA region will be traced through the production chain to improve the accuracy of the content calculation. Mexican Auto Decree The Mexican Auto Decree will terminate at the end of the transition period. Over this period, the restrictions under the Auto Decree will be modified by: - eliminating immediately the limitation on imports of vehicles based on sales in the Mexican market; - amending its "trade balancing" requirements immediately to permit assemblers to reduce gradually the level of exports of vehicles and parts required to import such goods, and eliminating, at the end of the transition period, the requirement that only assemblers in Mexico may import vehicles; - changing its "national value-added" rules by reducing gradually the percentage of parts required to be purchased from Mexican parts producers; by counting purchases from certain in-bond production facilities ("maquiladoras") toward this percentage; by ensuring that Canadian, Mexican and U.S. parts manufacturers may participate in the growing Mexican market on a competitive basis, while requiring assemblers in Mexico during the transition period to continue to purchase parts from Mexican parts producers; and by eliminating at the end of the transition period the national value added requirement. Mexican Auto-Transportation Decree The Mexican Auto-Transportation Decree covering trucks (other than light trucks) and buses will be eliminated immediately, and replaced with a transitional system of quotas in effect for five years. Imports of Used Vehicles Canada's remaining restrictions on the import of used motor vehicles from the United States will be eliminated on January 1, 1994, in accordance with the Canada-U.S. FTA. Beginning 15 years after the NAFTA goes into effect, Canada will phase out over 10 years its prohibition on imports of Mexican used motor vehicles. Mexico will phase out its prohibition on imports of North American used vehicles over the same period. Investment Restrictions In accordance with the NAFTA's investment provisions, Mexico will immediately permit "NAFTA investors" to make investments of up to 100 percent in Mexican "national suppliers" of parts, and up to 49 percent in other automotive parts enterprises, increasing to 100 percent after five years. Mexico's thresholds for the screening of takeovers in the automotive sector will be governed by NAFTA's investment provisions. Corporate Average Fuel Economy Fleet Content Under the NAFTA, the United States will modify the fleet content definition found in its Corporate Average Fuel Economy ("CAFE") rules, so that vehicle manufacturers may choose to have those Mexican-produced parts and vehicles they export to the United States classified as domestic. After 10 years, Mexican production exported to the United States will receive the same treatment as U.S. or Canadian production for purposes of CAFE. Canadian-produced automobiles currently may be classified as domestic for CAFE purposes. The NAFTA does not change the minimum fuel economy standards for vehicles sold in the United States. Automotive Standards The NAFTA creates a special intergovernmental group to review and make recommendations on federal automotive standards in the three countries, including recommendations to achieve greater compatibility in such standards. ENERGY AND BASIC PETROCHEMICALS This section sets out the rights and obligations of the three countries regarding crude oil, gas, refined products, basic petrochemicals, coal, electricity and nuclear energy. In the NAFTA, the three countries confirm their full respect for their constitutions. They also recognize the desirability of strengthening the important role that trade in energy and basic petrochemical goods plays in the North American region and of enhancing this role through sustained and gradual liberalization. The NAFTA's energy provisions incorporate and build on GATT disciplines regarding quantitative restrictions on imports and exports as they apply to energy and basic petrochemical trade. The NAFTA provides that under these disciplines a country may not impose minimum or maximum import or export price requirements, subject to the same exceptions that apply to quantitative restrictions. The NAFTA also makes clear that each country may administer export and import licensing systems, provided that they are operated in a manner consistent with the provisions of the Agreement. In addition, no country may impose a tax, duty or charge on the export of energy or basic petrochemical goods unless the same tax, duty or charge is applied to such goods when consumed domestically. This section also provides that import and export restrictions on energy trade will be limited to certain specific circumstances, such as to conserve exhaustible natural resources, deal with a short supply situation or implement a price stabilization plan. Further, when a NAFTA country imposes any such restriction, it must not reduce the proportion of total supply made available to the other NAFTA countries below the level of the preceding three years or other agreed period, impose a higher price on exports to another NAFTA country than the domestic price or require the disruption of normal supply channels. Based on a reservation that Mexico has taken, these obligations do not apply as between Mexico and the other NAFTA countries. This section also limits the grounds on which a NAFTA country may restrict exports or imports of energy or basic petrochemical goods for reasons of national security. However, based on a reservation that Mexico has taken, energy trade between Mexico and the other NAFTA countries will not be subject to this discipline, but will instead be governed by the Agreement's general national security provision, described in the "Exceptions" section below. The NAFTA confirms that energy regulatory measures are subject to the Agreement's general rules regarding national treatment, import and export restrictions and export taxes. The three countries also agree that the implementation of regulatory measures should be undertaken in a manner that recognizes the importance of a stable regulatory environment. In the NAFTA, Mexico reserves to the Mexican State goods, activities and investments in Mexico in the oil, gas, refining, basic petrochemicals, nuclear and electricity sectors. The NAFTA energy provisions recognize new private investment opportunities in Mexico in non-basic petrochemical goods and in electricity generating facilities for "own use", co-generation and independent power production by allowing NAFTA investors to acquire, establish and operate facilities in these activities. Investment in non-basic petrochemical goods is governed by the general provisions of the Agreement. To promote cross-border trade in natural gas and basic petrochemicals, NAFTA provides that state enterprises, end users and suppliers have the right to negotiate supply contracts. In addition, independent power producers, CFE (Mexico's stateowned electricity firm) and electric utilities in other NAFTA countries also have the right to negotiate power purchase and sale contracts. Each country will also allow its state enterprises to negotiate performance clauses in their service contracts. Certain specific commitments relating to special aspects of Canada-U.S. energy trade, set out in the Energy Chapter of the Canada-U.S. FTA, will continue to apply between the two countries. AGRICULTURE The NAFTA sets out separate bilateral undertakings on crossborder trade in agricultural products, one between Canada and Mexico, and the other between Mexico and the United States. Both include a special transitional safeguard mechanism. As a general matter, the rules of the Canada-U.S. FTA on tariff and non-tariff barriers will continue to apply to agricultural trade between Canada and the United States. Trilateral provisions in the NAFTA address domestic support for agricultural goods and agricultural export subsidies. Tariffs and Non-Tariff Barriers Trade between Mexico and the United States: When the Agreement goes into effect, Mexico and the United States will eliminate immediately all non-tariff barriers to their agricultural trade, generally through their conversion to either "tariff-rate quotas" (TRQ's) or ordinary tariffs. The TRQ's will facilitate the transition for producers of importsensitive products in each country. No tariffs will be imposed on imports within the quota amount. The quantity eligible to enter duty-free under the TRQ will be based on recent average trade levels and will grow generally at three percent per year. The over-quota duty -- initially established at a level designed to equal the existing tariff value of each non-tariff barrier -- will progressively decline to zero during either a 10- or 15-year transition period, depending on the product. Under the NAFTA, Mexico and the United States will eliminate immediately tariffs on a broad range of agricultural products. This means that roughly one-half of U.S.-Mexico bilateral agricultural trade will be duty-free when the Agreement goes into effect. All tariff barriers between Mexico and the United States will be eliminated no later than 10 years after the Agreement takes effect, with the exception of duties on certain highly sensitive products -- including corn and dry beans for Mexico, and orange juice and sugar for the United States. Tariff phase-outs on these few remaining products will be completed after five more years. Mexico and the United States will gradually liberalize bilateral trade in sugar. Both countries will apply TRQ's of equivalent effect on third country sugar by the sixth year after the Agreement goes into effect. All restrictions on trade in sugar between the two countries will be eliminated by the end of the 15-year transition period, except that sugar exported under the U.S. Sugar Re-Export Programs will remain subject to mostfavored-nation (MFN) tariff rates. Trade between Canada and Mexico: Canada and Mexico will eliminate all tariff and non-tariff barriers on their agricultural trade, with the exception of those in the dairy, poultry, egg and sugar sectors. Canada will immediately exempt Mexico from import restrictions covering wheat, barley and their products, beef and veal, and margarine. Canada and Mexico will eliminate immediately or phase out within five years tariffs on many fruit and vegetable products, while tariffs on remaining fruit and vegetable products will be phased out over 10 years. A small number of these products will be subject to the special transitional safeguard described below. Other than in the dairy, poultry and egg sectors, Mexico will replace its import licenses with tariffs, for example on wheat, or TRQ's, for example respecting corn and barley. These tariffs will generally be phased out over a 10-year period. Special Safeguard Provision During the first 10 years the Agreement is in effect, the NAFTA provides a special safeguard provision that applies to certain products within the scope of the bilateral undertakings described above. A NAFTA country may invoke the mechanism where imports of such products from the other country reach "trigger" levels set out in the Agreement. In such circumstances, the importing country may apply the tariff rate in effect at the time the Agreement went into effect or the then-current MFN rate, whichever is lower. This tariff rate may be applied for the remainder of the season or the calendar year, depending on the product. The trigger levels will increase over this 10-year period. Domestic Support Recognizing both the importance of domestic support measures to their respective agricultural sectors and the potential effect of such measures on trade, each of the NAFTA countries will endeavor to move toward domestic support policies that are not trade- distorting. In addition, the three countries recognize that a country may change its domestic support mechanisms so long as such change is in compliance with applicable GATT obligations. Export Subsidies Recognizing that the use of export subsidies within the free trade area is inappropriate except to counter subsidized imports from a non-NAFTA country, the Agreement provides that: - a NAFTA exporting country must give three-days' notice of its intent to introduce a subsidy on agricultural exports to another NAFTA country; - when an exporting NAFTA country believes that another NAFTA country is importing non-NAFTA agricultural goods that benefit from export subsidies, it may request consultations on measures the importing country could take against such subsidized imports; and - if the importing country adopts mutually agreed measures to counter that subsidy, the NAFTA exporting country will not introduce its own export subsidy. Building on the bilateral discipline on export subsidies in the Canada-U.S. FTA, the three countries will work toward the elimination of export subsidies in North American agricultural trade in pursuit of their objective of eliminating such subsidies worldwide. Agricultural Marketing Standards The NAFTA provides that when either Mexico or the United States applies a measure regarding the classification, grading or marketing of a domestic agricultural product, it will provide no less favorable treatment to like products imported from the other country for processing. Resolution of Commercial Disputes The three countries will work toward development of a mechanism for resolving private cross-border commercial disputes involving agricultural products. Committee on Agricultural Trade A trilateral committee on agricultural trade will monitor the implementation and administration of this section. In addition, a Mexico-U.S. working group and a Canada-Mexico working group will be established under the committee to review the operation of grade and quality standards. SANITARY AND PHYTOSANITARY MEASURES This section imposes disciplines on the development, adoption and enforcement of sanitary and phytosanitary (SPS) measures, namely those taken for the protection of human, animal or plant life or health from risks arising from animal or plant pests or diseases, food additives or contaminants. These disciplines are designed to prevent use of SPS measures as disguised restrictions on trade, while safeguarding each country's right to take SPS measures to protect human, animal or plant life or health. Basic Rights and Obligations The NAFTA confirms the right of each country to establish the level of SPS protection that it considers appropriate and provides that a NAFTA country may achieve that level of protection through SPS measures that: - are based on scientific principles and a risk assessment; - are applied only to the extent necessary to provide a country's chosen level of protection; and - do not result in unfair discrimination or disguised restrictions on trade. International Standards To avoid creating unnecessary barriers to trade, the NAFTA encourages the three countries to use relevant international standards in the development of their SPS measures. However, it permits each country to adopt more stringent, science-based measures when necessary to achieve its chosen level of protection. The NAFTA partners will promote the development and review of international SPS standards in such international and North American standardizing organizations as the Codex Alimentarius Commission, the International Office of Epizootics, the Tripartite Animal Health Commission, the International Plant Protection Convention and the North American Plant Protection Organization. Harmonization and Equivalence The three countries have agreed to work toward equivalent SPS measures without reducing any country's chosen level of protection of human, animal or plant life or health. Each NAFTA country will accept SPS measures of another NAFTA country as equivalent to its own, provided that the exporting country demonstrates that its measures achieve the importing country's chosen level of protection. Risk Assessment The NAFTA establishes disciplines on risk assessment, including for evaluating the likelihood of entry, establishment or spread of pests and diseases. SPS measures must be based on an assessment of risk to human, animal or plant life or health, taking into account risk assessment techniques developed by international or North American standardizing organizations. A NAFTA country may grant a phase-in period for compliance by goods from another NAFTA country where the phase-in would be consistent with ensuring the importing country's chosen level of SPS protection. Adaptation to Regional Conditions This section also establishes rules for the adaptation of SPS measures to regional conditions, in particular regarding pest- or disease-free areas and areas of low pest or disease prevalence. An exporting country must provide objective evidence whenever it claims that goods from its territory originate in a pest- or disease-free area or area of low pest or disease prevalence. Procedural "Transparency" The NAFTA requires public notice in most cases prior to the adoption or modification of any SPS measure that may affect trade in North America. The notice must identify the goods to be covered, and the objectives of and reasons for the measure. All SPS measures must be published promptly. Each -- "Thoughtcrime was not a thing that could be concealed forever. You might dodge sucessfully for a while, even for years, but sooner or later they were bound to get you." -- George Orwell, Nineteen Eighty-Four