Keidanren Views on the GATT Review of NAFTA

October 18, 1994
Keidanren
(Japan Federation of Economic Organizations)

• In November 1992, we issued a statement to recommend that the contracting parties to NAFTA promptly go thorough the GATT Review, in view of its significance.

  NAFTA went into effect in January 1994. However, while there is high expectations among non-NAFTA countries for the expansion of trade and investment vis-a-vis NAFTA, there still remains concern about its regionalistic aspects. The contracting parties to NAFTA should, in addition to carrying out their duties set forth in GATT, pay careful attention to the impact on the trade and investment flow which the implementation of NAFTA will have, from the standpoint of enhancing the multilateral free trading system.

  In the GATT Review which is about to go underway, scrutiny should be necessary from the above-mentioned points of view, so that the compatibility is secured with the Uruguay Round Agreements which are scheduled to come into effect in January 1995.

• The following are issues which need special attention in the GATT Review of NAFTA.

  Tariffs/Duties

  • Different transition periods for the abolishment of internal tariffs are set, depending on the country and the product. In addition, the maximum transition period is set for 15 years, as opposed to 10 years which is interpreted as normal.

  • There is a risk of the new trade barriers brought, by the abolishment of the bond system at Maquiladora in Mexico and the draw-back system in Canada.

  Rules of Origin

  Compared with the U.S.-Canada Free Trade Agreement, the rules of origin have been changed and the required local content level has been raised in the case of the Automobiles. As to the color TVs, rules of origin have also been modified and the rules of origin for the textile products have been strengthened.

  Safeguard

  In NAFTA, the selective non-application of safeguard measures for the NAFTA countries has been provided.

  Intellectual Property Rights

  NAFTA provides that the material patents concerning pharmaceutical products and agricultural chemicals are applied retroactively for NAFTA countries.

  Agricultural Products

  Under NAFTA, quota is maintained for some agricultural products.

  Others

  Obligations for the stable supply of energy to the NAFTA countries and the provisions concerning government procurement can create problems if these provisions result in the discrimination against non-NAFTA countries.

• The contracting parties to NAFTA should ensure that it stays open to the outside, by eliminating external barriers through reduction of tariffs for non-NAFTA countries e.g., electronic parts (Mexico), pick-up trucks (United States).

• In addition, different methods for the determination of the origin of the automobile exist in the United States. These include the Net-Cost formula provided for by NAFTA, labeling method, fuel-efficiency regulations, etc. in California and others. This will cause the additional administrative and cost burden for auto-producers in the U.S. Based on the principle of harmonization within three years for the rules of origin in the Uruguay Round Agreements, the United States should proceed with the harmonization both externally and internally.