	Introduction

The 116 th Congress, in both its legislative and oversight capacities, faces numerous trade policy issues related to the North American Free Trade Agreement (NAFTA) renegotiations and the proposed United States-Mexico-Canada Agreement (USMCA). On May 18, 2017, the Trump Administration sent a 90-day notification to Congress of its intent to begin talks with Canada and Mexico to renegotiate and modernize NAFTA, as required by the 2015 Trade Promotion Authority (TPA). Talks officially began on August 16, 2017. Key issues for Congress in regard to the consideration of the proposed USMCA include the constitutional authority of Congress over international trade, its role in revising, approving, or withdrawing from the agreement, U.S. negotiating objectives and the extent to which the proposed agreement makes progress in meeting them as required under TPA. Congress may also consider the agreement's impact on U.S. industries, the U.S. economy, and broader U.S. trade relations with Canada and Mexico, two of the United States' largest trading partners. NAFTA Overview

NAFTA negotiations were first launched under President George H. W. Bush. President William J. Clinton signed into law the NAFTA Implementation Act on December 8, 1993 ( P.L. 103-182 ). NAFTA entered into force on January 1, 1994. It is significant because it was the first FTA among two wealthy countries and a lower-income country and because it established trade liberalization commitments that led the way in setting new rules for future trade agreements on issues important to the United States. These include provisions on intellectual property rights (IPR) protection, services trade, agriculture, dispute settlement procedures, investment, labor, and the environment. At the start of NAFTA, average applied U.S. duties on imports from Mexico were 2.07% and over 50% of U.S. imports from Mexico entered duty free. In contrast, the United States faced higher tariff, nontariff, and investment barriers in Mexico. At the time that NAFTA was implemented, the U.S.-Canada Free Trade Agreement (CUSFTA) was already in effect and U.S. tariffs on most Mexican goods were low, while Mexico had the highest level of trade barriers among the three countries. The market-opening provisions of the agreement gradually eliminated nearly all tariffs and most nontariff barriers on goods produced and traded within North America, mostly over a period of 10 years after it entered into force. Intellectual Property Rights (IPR) Protection . NAFTA was the first U.S. FTA to include IPR protection provisions. Labor and Environment . Proposed USMCA

The proposed USMCA, comprising 34 chapters and 12 side letters, retains most of NAFTA's chapters, making notable changes to market access provisions for autos and agriculture products, and to rules and disciplines, such as on investment, government procurement, and IPR. New issues, such as digital trade, state-owned enterprises, anticorruption, and currency misalignment, are also addressed. Outlook

The timeline for congressional consideration of the proposed USMCA remains unclear in part because of the TPA timeline and also because of issues voiced by Congress related to various provisions of the agreement and other ongoing trade issues with Canada and Mexico. The agreement would have to be approved by Congress and ratified by Mexico and Canada before entering into force. Some policymakers have stated that the path forward to passage of the USMCA by Congress is uncertain partially because the three countries have yet to resolve disputes over U.S. steel and aluminum tariffs. The United States, Canada, and Mexico are currently in a trade dispute over U.S. actions to impose tariffs on such imports due to national security concerns as discussed earlier in the report, The conclusion of the proposed USMCA did not resolve the Section 232 tariff dispute. The U.S. business community, industry groups, some congressional leaders, and Mexican government officials have publicly stated that the tariff issues must be resolved before the USMCA could enter into force.
The 116th Congress faces policy issues related to the Trump Administration's renegotiation of the North American Free Trade Agreement (NAFTA) and the proposed United States-Mexico-Canada Agreement (USMCA). On May 18, 2017, the Trump Administration sent a 90-day notification to Congress of its intent to begin talks with Canada and Mexico to renegotiate and modernize NAFTA, as required by the 2015 Trade Promotion Authority (TPA). Talks officially began on August 16, 2017. Negotiations were concluded on September 30, 2018. The proposed USMCA was signed on November 30, 2018. The agreement must be approved by Congress and ratified by the governments of Mexico and Canada before it can enter into force.
The first NAFTA negotiations were launched in 1992 under President George H.W. Bush and continued under President William J. Clinton, who signed the implementing legislation on December 8, 1991 (P.L. 103-182). NAFTA entered into force on January 1, 1994. It is particularly significant because it was the most comprehensive free trade agreement (FTA) negotiated at the time, contained several groundbreaking provisions, and was the first of a new generation of U.S. FTAs later negotiated. Congress played a major role during its consideration and, after contentious and comprehensive debate, ultimately approved legislation to implement the agreement.
NAFTA established trade liberalization commitments and set new rules and disciplines for future FTAs on issues important to the United States, including intellectual property rights protection, services trade, dispute settlement procedures, investment, labor, and environment. NAFTA's market-opening provisions gradually eliminated nearly all tariff and most nontariff barriers on merchandise trade. At the time of NAFTA negotiations, average applied U.S. duties on imports from Mexico were 2.07%, while U.S. businesses faced average tariffs of 10%, in addition to nontariff and investment barriers, in Mexico. The U.S.-Canada FTA had been in effect since 1989.
The proposed USMCA, comprising 34 chapters and 12 side letters, retains most of NAFTA's market opening measures and most of its chapters, while making notable changes to auto rules of origin, dispute settlement provisions, government procurement, investment, and intellectual property rights (IPR) protection. It also modernizes provisions in services, labor, and the environment. New trade issues, such as digital trade, state-owned enterprises, anticorruption, and currency misalignment, are also addressed. Key issues for Congress in regard to the proposed USMCA include the constitutional authority of Congress over international trade, its role in revising, approving, or withdrawing from the agreement, U.S. negotiating objectives and the extent to which the proposed agreement makes progress in meeting them as required under TPA. Congress may also consider the agreement's impact on U.S. industries, the U.S. economy, and broader U.S. trade relations with Canada and Mexico.
The timing for congressional consideration of the proposed USMCA is unclear in part because of the TPA timeline and also because of issues of interest and concern voiced by Congress, including the level of enforceable labor provisions, auto rules of origin, and investor-state dispute settlement. Some policymakers have stated that the path forward to passage of the USMCA by Congress is uncertain partially because the three countries have yet to resolve disputes over U.S. steel and aluminum tariffs imposed by the Trump Administration. The United States, Canada, and Mexico are currently in a trade dispute over U.S. actions under Section 232 of the Trade Act of 1962 to impose tariffs on such imports due to national security concerns. In response to the U.S. action, Mexico and Canada initiated World Trade Organization dispute settlement proceedings and retaliated against certain U.S. exports. The conclusion of the proposed USMCA did not resolve the Section 232 tariff dispute. The U.S. business community, industry groups, and some congressional leaders have publicly stated that the tariff issue must be resolved before the USMCA could enter into force.