Dedman College of Humanities and Sciences Dedman College Research Faculty News Tower Center

Call me by my name: And no, I’m not NAFTA

Dallas Business Journal

Originally Posted: April 4, 2019

Luisa del Rosal, executive director of the SMUMission Food Texas-Mexico Center, is quoted in this Dallas Business Journal article.

Call it USMCA, NAFTA Redux, NAFTA 2.0, or “The Trade Agreement formerly known as NAFTA.” You can even call it by its name: The United States-Mexico-Canada Agreement.

But until it’s actually approved by Congress or scuttled by the Trump Administration, the complex trade relationship that has developed between the North American nations over the past 25 years remains at an uncomfortable crossroads.

A change in administrations in Mexico, the volatility along the U.S.-Mexico border and a general preference within the Trump Administration for bilateral relationships are creating uncertainties about the new trade framework even before it is approved, said Timothy Leahy, chief legal officer for Latin America for AT&T.

Leahy was one of three trade experts asked to assess the status of the new trade agreement and how it might affect businesses that have come to depend on the trading environment that has developed since NAFTA came into effect in 1994. The program – “The New NAFTA: Getting Down to Business” was hosted by the SMU Cox O’Neil Center for Global Markets and Freedom, The Texas Lawbook and SMU’s Mission Foods Texas-Mexico Center.

 Andres Alvarez, foreign legal consultant at Foley Gardere, said some of the most sweeping changes are likely to be felt in the auto industry, where new requirements for parts origination and dramatic raise in salary standards are likely to have a dramatic effect, whether for better or worse.

“Probably one of the hardest fights in the negotiations was the automotive industry, “ said Alvarez, who noted that negotiators looked at the origin of each component and increased the local labor and regional content of all the various parts.

To qualify for zero tariffs, for instance, cars must have 75 percent of their components manufactured in North America. By 2023, 40 to 45 percent of auto parts have to be made by workers making at least $16 per hour. Moreover, Mexico has the obligation to pass laws to provide protections for labor organizing as well as base-line protections for migrant workers.

“I think that probably cars will get more expensive,” said Alvarez. “Whether that’s good or not, the bottom line will be a matter of cost/benefit analysis.”

Of particular concern to some, and no concern to others, is the complicated structure of the new agreement, as opposed to NAFTA. Where NAFTA was a treaty of 19 discreet chapters, the USMCA is spread over 34 chapters, 13 agreement annexes and 14 side letters of particularized bilateral agreements on everything from research and development expenses and distilled spirits to water resources and cheese.

Panel moderator Luisa del Rosal, executive director of the SMU Dedman College Mission Food Texas-Mexico Center, asked whether the profusion of side-letters might undermine the free trade elements of the original agreement. READ MORE