At a glance

As Canada, Mexico and the United States enter the sixth round of NAFTA renegotiations, employers should begin to consider alternatives for employees who would be affected in the event that labor mobility under the trade pact is restricted.

Canada, Mexico and the United States will begin the sixth round of renegotiations of the North American Free Trade Act on January 23. The parties continue to have significant differences concerning many aspects of the wide-ranging pact.

To date, the labor mobility provisions of the agreement – which ease cross-border movement of businesspersons, certain professionals, intracompany transferees, traders and investors -- have not been a focus of discussions, despite the desire of the business community to see those provisions updated. A key open question is whether the United States will seek restrictions on labor mobility, and, more broadly, whether U.S. President Donald J. Trump will move to withdraw the United States from the agreement entirely, as he has suggested in the past.

NAFTA permits a party to withdraw with six months’ notice to the other member countries. A withdrawal threat would not bind the United States to an exit from the agreement, but could be used as a negotiation tactic to pressure Canada and Mexico. Negotiating parties expect the United States to make such a move. Mexico has signaled that it would leave the talks if the United States moves to withdraw.

If President Trump orders actual withdrawal from NAFTA, the impact of such a directive remains unclear under U.S. law. Legal experts are divided on whether the President has unilateral authority to pull the United States out of a trade agreement. Some argue that the U.S. Congress must vote in favor of withdrawal in order for the United States to exit. Key members of Congress – including members of the President’s own party -- have warned the Trump Administration that withdrawal would have a significant negative impact on the North American economy.

Potential immigration effects of a U.S. withdrawal could include restriction of reciprocal professional worker and businessperson classifications and elimination of streamlined application procedures.

What’s next and what employers should do now

The next round of NAFTA renegotiations will take place in Montreal from January 23-26, with a seventh round of talks slated for March 2018. Negotiators are expected to take a break during the Mexican presidential campaign in the runup to national elections on July 1, 2018.

Given the continuing uncertainty of the U.S. position, the mobility of your organization’s employees under NAFTA could change quickly.