Still Much Legal Work Ahead as New North American Free Trade Agreement Advances
Clients will seek guidance to comply with rules of origin, labor and other commitments.
January 31, 2020 at 04:24 PM
4 minute read
The long road to a new North American trade deal continues to promise plenty of work for lawyers, especially now that the United States-Mexico-Canada Agreement has been signed into law.
After many months of tedious negotiations, the U.S. Senate approved the USMCA on Jan. 16 and President Donald Trump signed it into law Wednesday, paving the way for a pact to replace the decades-old North American Free Trade Agreement. Pending approval by Canada, the trade accord could enter into force as soon as this summer.
Adriana Ibarra-Fernandez and Jose Hoyos-Robles, both partners in the international commercial and trade group for Baker McKenzie in Mexico, expect an increase in work as companies prepare for the changes that come with the new agreement.
That means potentially different forms of legal counsel, including confirmation of compliance with rules of origin, reconfiguration of supply chains and analysis of opportunities that will result from the agreement.
More than anything, the Baker McKenzie lawyers anticipate greater emphasis going forward on compliance related to customs and trade issues, and also with the new labor legislation in Mexico. Those labor rules, such as commitments to collective bargaining and other rights aimed at boosting wages, helped nudge U.S. legislators toward approval of the trade pact.
Authorities of all three countries could also initiate panels that will relate to compliance with labor laws once the agreement is in force.
During the first years of the USMCA, the Baker McKenzie team is prepared for a transition period during which trade lawyers and the business community will need to abide by the provisions of the new and old agreements simultaneously.
Government auditors of the three countries will carry out verifications of origin under both agreements to ensure that goods meet the rules of origin applicable at the time of export. This alone will certainly generate more work for trade lawyers, they said.
For many years, NAFTA and other free trade agreements in place focused mainly on trade-related issues.
The USMCA, however, will require that lawyers are able to advise their clients in areas such as intellectual property, information technology, labor and environmental laws. This could result in more specialized professionals that can strategize beyond mere trade and customs issues.
Celine Crowson, head of the intellectual property practice for the Americas at Hogan Lovells, says the agreement contains provisions that shine a light on intellectual property protection and enforcement—and that could improve business confidence in North America.
Trade in counterfeit goods is widespread in Mexico, where outdated intellectual property laws lack enforcement. The American Chamber of Commerce estimates that knockoff goods in Mexico cost companies more than $2 billion a year in lost revenue.
Now, lawyers expect the trade agreement could spur legislation to combat piracy.
"The USMCA in many ways was designed to promulgate U.S. intellectual property laws globally, so the legal changes will primarily occur in Canada and Mexico," Crowson said.
The updated trade accord provides a number of new provisions relating to trade secret protection, patents and trademarks—essentially bringing the regional trade agreement into the modern age. Intellectual property obligations are a frequent source of implementation complications and delays.
Since intellectual property issues are often global in nature, the USMCA could generate work for lawyers in multiple jurisdictions as clients seek analysis and advice on how the agreement could affect their businesses in other major markets.
At the same time, Crowson says enhanced intellectual property protections across North America could encourage companies to do cross-border business in those jurisdictions—places that she says will now have the will and procedures in place to protect intellectual property.
The Baker McKenzie trade team in Mexico expects that implementation of the USMCA should be fairly simple, since the accord is essentially a modernization of NAFTA. But some of the more impacted parties, such as the automotive industry, may take additional time to get used to the new reality and meet the new rules.
The way Baker McKenzie sees it, the USMCA is intended to create a more robust trade bloc—one that is able to compete with Europe and Asia. The three countries need to think as a trade bloc and not seek benefits only for their own country, the trade lawyers in Mexico said.
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