Arizona Legal Studies

Discussion Paper No. 20-03

USMCA Provisions on Intellectual Property,

Services, and Digital Trade

David A. Gantz
The University of Arizona
James E. Rogers College of Law

January 2020

Electronic copy available at: https://ssrn.com/abstract=3524943

 REPORT 01.17.20
USMCA Provisions on Intellectual
Property, Services, and Digital Trade
David A. Gantz, J.D., J.S.M., Will Clayton Fellow in Trade and International Economics,
Center for the United States and Mexico

Intellectual property (IP) protection

INTRODUCTION
affects commerce throughout the
One of the changes taking place in the economy by: providing incentives
U.S. economy today is the increasing to invent and create; protecting
interrelationship among goods, services, innovators from unauthorized copying;
and intellectual property (IP). While it is not facilitating vertical specialization
the purpose of this discussion to analyze in technology markets; creating a
this relationship in any detail, it is worth platform for financial investments
noting that the United States-Mexico- in innovation; supporting startup
Canada Agreement (USMCA), as with other liquidity and growth through mergers,
regional trade agreements beginning with acquisitions, and IPOs; making
the North American Free Trade Agreement licensing-based technology business
(NAFTA), has recognized the importance of models possible; and, enabling a more What is particularly
all three sectors to the U.S. economy and efficient market for technology transfer important when
to encouraging U.S. trade. Increasingly, and trading in technology and ideas.4 reviewing the services
issues relating to the digital economy, which As the Commerce Department further chapter of the USMCA
incorporate aspects of both IP and services, observes,
are critical to fostering global trade. is that the U.S. has long
The services sector is an important part enjoyed a trade surplus
It is difficult to overemphasize the
of the U.S. economy. According to [the
importance of IP and services to the U.S.
Census Bureau’s Bureau of Economic
in services. In 2009,
economy. According to the U.S. Department U.S. exports of services
Analysis], in 2009 services accounted
of Commerce and the U.S. Patent and
Trademark office, “IP-intensive industries
for 79.6 percent of U.S. private-sector totaled $502 billion,
gross domestic product (GDP), or $9.81 with a surplus of $132
support at least 45 million U.S. jobs and
trillion. Services jobs accounted for more
contribute more than 6 trillion dollars to,
than 80 percent of U.S. private-sector
billion, a larger surplus
or 38.2 percent of, U.S. gross domestic in services than any
employment, or 89.7 million jobs.5
product (GDP).”1 Some 81 U.S. industries are
other country.
identified as relying on patents, copyright,
What is particularly important for this
or trademark protections extensively,
discussion is that the U.S. has long enjoyed
including software publishers, sound
a trade surplus in services. In 2009, U.S.
recording, auto and video equipment
exports of services totaled $502 billion, with
producers, cable and subscription
a surplus of $132 billion, a larger surplus in
programming, performing arts companies,
services than any other country.6 In 2016,
and radio and television broadcasting.2
the U.S. enjoyed a services trade surplus
Total merchandise exports of IP-intensive
with Canada and Mexico amounting to a
industries amounted to $842 billion in 2014,
combined $31 billion, compared to a $86.8
with licensing rights worth $115.2 billion in
billion goods deficit with those countries.
2012.3 As a recent report noted,

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BAKER INSTITUTE REPORT // 01.17.20

The United States also enjoyed surpluses IP chapter is taken from TPP with relatively
each year between 2004–2015.7 minor changes. However, significant
Thus, even if most of the chapters of the additions, deletions and changes are reflected
USMCA, like NAFTA, primarily address various in the December 2019 USMCA Protocol of
aspects of trade in goods, some are focused Amendment.12 Both are discussed herein.
directly on IP and services, and many of the The IP chapter in USMCA mentioned
innovations in USMCA, such as the chapters above encompasses 64 pages including
on telecommunications, competition law, annexes, so it is impractical in a report of
small and medium-sized industries, and this length to cover all aspects, particularly
state-owned enterprises, encompass trade given the significant changes in the fields.
in services as well as goods and depend on However, agriculture-related IP issues, such
the parties’ respect for rules protecting IP. as geographic indications, are discussed in
Because of its relationship to IP and an earlier report.
services, this report includes discussion of USMCA’s Chapter 20 is a combination
the new USMCA chapter on digital trade, of concepts that were included in NAFTA
which, among other things, prohibits more than 25 years ago, innovations since
The similarities of
localization requirements for data storage 1994 found in many other U.S. Free Trade
NAFTA Chapter 17 and and bans tariffs on goods that are delivered Agreements (FTAs), more recent changes
TRIPS are greater than digitally. It also briefly addresses the possible embodied in the TPP, and a few that are
the differences,but impact of the reduced protection for U.S. USMCA-specific.
both are severely out investment in Canada and Mexico (discussed
in detail in an earlier report) on the IP and A. Committee on IP Rights
of date given that they services sectors. Among the highlights of the USMCA changes
were negotiated at a
are the establishment of a Committee on
time when the internet Intellectual Property Rights (IPRC).13 A
INTELLECTUAL PROPERTY
was in its infancy and certain skepticism of new committees is
trade secrets were Chapter 17 of NAFTA was negotiated like warranted, given the general reluctance
given little attention the rest of NAFTA in 1991-1992, several of the parties to schedule meetings.14 Still,
years before the World Trade Organization’s it seems reasonable to hope that given
internationally, just to the significance of the subject matter and
(WTO) Agreement on Trade Related Aspects
refer to a few elements. of Intellectual Property (TRIPS)8 entered the committee’s obligations to exchange
into force January 1, 1995. At the time, a information, strengthen border enforcement
draft of TRIPS was available, but no one, of IP rights, consider issues relating to
including the NAFTA negotiators, could be trade secrets and procedural fairness in
sure that the Uruguay Round negotiations patent litigation, and act as a mediator in
would be successfully concluded.9 The disputes over geographical indications,15
similarities of NAFTA Chapter 17 and TRIPS the mechanism will be utilized frequently.
are greater than the differences,10 but Observers have suggested that the new
both are severely out of date given that provisions on trade secrets are among those
they were negotiated at a time when the that “could increase the importance of the
internet was in its infancy and trade secrets Committee moving forward.”16
were given little attention internationally,
just to refer to a few elements. Under B. Extended Copyright and Trademark
such circumstances, the Trans-Pacific Protection
Partnership (TPP, now the Comprehensive Reflecting again changes in U.S. trade policy
and Progressive TPP, or CPTPP), and later since NAFTA was negotiated, USMCA provides
USMCA, provided valuable opportunities for a requirement that the USMCA parties
to modernize the IP relationships among afford protection for copyrights of at least 70
the NAFTA and USMCA partners, in many years after the author’s death, a period that
cases reflecting innovations taking place in is, for example, beyond the 50 years under
U.S. trade agreements concluded well after Canadian law. If the life of a natural person is
NAFTA entered into force.11 Much of USMCA’s not the basis for measurement (e.g., for an
2
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 USMCA PROVISIONS ON INTELLECTUAL PROPERTY, SERVICES, AND DIGITAL TRADE

enterprise such as Disney), the term must recognized the importance of protecting
be at least 75 years when the work was first trade secrets in a high technology society.
published or 70 years after the end of the Patent protection is extensive once a patent
year of creation.17 This compares to only 50 has been granted, but in order to obtain a
years under NAFTA.18 patent, the person seeking the patent must
Protection of trademarks exceeds that disclose extensive information regarding the
found in NAFTA but is consistent with the invention to demonstrate that it is novel,
TPP requirements. Initial registration shall non-obvious, and has utility, information
be for a term of at least ten years, and that becomes public once the patent is
parties must maintain an electronic system granted.24 Thus, if an enterprise wishes to
for applications for and maintenance of keep its proprietary technology for making a
trademarks.19 product secret, it may decide to rely on trade
secret protection, protection that depends
C. Enforcement in the Digital Environment on keeping the process confidential through
It may well be that one of the most restricting knowledge of it to those who
important innovations for American need to know and concluding confidentiality
copyright and trademark owners is the agreements with employees.25 Intangible
requirement that IP enforcement procedures assets, including trade secrets, are protected
must be made available for the digital in the United States under both state and
environment when infringement takes federal law,26 but such protection may be
place. This includes an obligation to provide less effective elsewhere.
“enforcement procedures that permit The trade secret provisions are based
effective and expeditious action by right on the TPP but go somewhat further,
holders against copyright infringement particularly to protect against trade secret
covered under this Chapter that occurs in theft by state-owned enterprises. Among
the online environment.”20 Circumvention these innovations are a restriction on
of “effective technological measures” national laws limiting the term of protection
(e.g., any copying measures) are explicitly for trade secrets, requirements that
made subject to criminal penalties in most judges adjudicating trade secret matters
circumstances.21 Detailed requirements not disclose confidential information, and
for enforcement are also specified. Each prohibitions against a party discouraging
party’s national law is to provide “legal or impeding voluntary licensing of trade
incentives for Internet Service Providers to secrets.27 Criminal penalties for willful
cooperate with copyright owners to deter misappropriation of a trade secret are
the unauthorized storage and transmission required under national law.28
of copyrighted materials or, in the
alternative, to take other action to deter the E. Patent Terms for Pharmaceutical Products
unauthorized storage and transmission of USMCA initially followed an approach taken
copyrighted materials.” These laws are also in U.S. FTAs, at least since 2006, whereby a
meant to protect Internet Service Providers patent term can be extended when issuance
by “precluding monetary relief against has been delayed. It also includes provisions
Internet Service Providers for copyright requiring that pharmaceutical companies’
infringements that they do not control, test data be treated as confidential for at
initiate or direct, and that take place.”22 least five years,29 presumably to discourage
It is evident that the drafters sought and rapid entry of generic competitors into the
presumably achieved a balance of interests market. These provisions were not uniform
in this controversial area. and gave the parties somewhat more
flexibility in certain FTAs, such as the one
D. Enhanced Protection of Trade Secrets with Peru.30
Extensive protection of trade secrets was not However, the amendments, in a
a major element of NAFTA although it was significant achievement for those Democrats
addressed.23 Subsequent agreements have who have chafed at the extensive protection
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BAKER INSTITUTE REPORT // 01.17.20

given pharmaceutical enterprises for their because some members of Congress

branded drugs against generic competition, were concerned that incorporating a ten-
make significant changes. In particular, year term in the agreement would make
the availability of patent term extensions it more difficult for a future Congress to
when unreasonable delays result in an reduce protection for biologic drugs.38
effective shorting of the legal patent term The negotiations between the Trump
has been modestly curtailed. The new administration and the Democratic Congress
provisions limit the extension to five years resulted in the deletion of the article
and permit generic competitors to sell or requiring such protection for biologic
import a competing product for “purposes drugs.39 Some objections were lodged by
related to generating information to meet Republic members,40 but did not result in
requirements for marketing approval for significant Republican opposition to the
the product.”31 Other changes make it compromise.
These modifications easier for a potential competitor to access
were characterized by the branded drug’s previously undisclosed F. Enforcement Generally
the House Committee test data, and authorize a USMCA party Enforcement of IP rights has been a major
to provide incentives for persons who
on Ways and Means concern of U.S. rights holders and the U.S.
successfully challenge the validity of a government since well before NAFTA. In this
as ensuring fair patent or demonstrate non-infringement respect USMCA becomes the cutting edge.
competition and and to disclose publicly information As the United States Trade Representative
“maintaining the regarding the patent and patent terms that (USTR) observed after conclusion of the
balance between have been granted.32 The USMCA provision negotiations,
that permitted patents to be available for
competition and new uses of a known product was also For the first time, a trade agreement will
incentives for removed.33 These modifications were require all the following:
innovation” reflected characterized by the House Committee • Ex officio authority for law enforcement
in U.S. law but not in on Ways and Means as ensuring fair officials to stop suspected counterfeit
competition and “maintaining the balance or pirated goods at every phase of
the USMCA. between competition and incentives for entering, exiting, and transiting through
innovation” reflected in U.S. law but not the territory of any Party.
in the USMCA. This was accomplished • Express recognition that IP enforcement
according to the release inter alia by procedures must be available for the
incorporating a “revised regulatory review digital environment for trademark and
provision to clarify the circumstances in copyright or related rights infringement.
which generic and biosimilar companies • Meaningful criminal procedures and
may use a patented invention so that they penalties for unauthorized camcording
can obtain marketing approval on day of movies, which is a significant source
one of patent expiration” and “revised of pirated movies online.
data protection provision to incorporate • Civil and criminal penalties for satellite
limitations in U.S. law that foster generic and cable signal theft.
competition.”34 • Broad protection against trade secret
Most controversially in the original theft, including against state-owned
USMCA intellectual property chapter, the enterprises.41
parties were to be required to afford data
protection for at least ten years to biologic These obligations are the subject of
drugs.35 The agreed term under TPP, as detailed requirements in the text, including
in Canadian law, was only eight years,36 situations where criminal penalties rather
although under USMCA, Canada had five than civil penalties must be provided.42
years to implement the new requirements.37 Among the more important for the U.S. are
The ten-year term became controversial “Border measures,” whereby “Each Party
in the U.S. as well as Canada, even though shall provide for applications to suspend
current U.S. law provides for eleven years, the release of, or to detain, suspected

4
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 USMCA PROVISIONS ON INTELLECTUAL PROPERTY, SERVICES, AND DIGITAL TRADE

counterfeit or confusingly similar trademark of the WTO’s TRIPS Agreement is impossible

or pirated copyright goods that are imported because of the demise of the Doha
into the territory of the Party.”43 This Development Round of multilateral trade
language undoubtedly reflects continuing negotiations,48 and most non-U.S. regional
frustration with the reluctance of Canada trade agreements, including those negotiated
(not Mexico) to develop mechanisms to by the European Union (EU), contain only
interdict counterfeit goods at the border, much more modest, largely unenforceable
particularly with regards to shipments IP provisions.49 Under such circumstances,
from Asia that find their way across the the only apparent route to modernizing
U.S. border after arrival at the Port of international intellectual property rules has
Vancouver.44 USMCA also strengthens been through regional trade agreements
provisions for statutory damages for such as USMCA and the TPP/CPTPP, although
infringement. It specifies that the damages the balance in the area of branded versus
amount be both fully compensatory and generic drugs is still in flux.
sufficient to serve as a deterrent.45
Canada resisted U.S. demands in one
SERVICES
significant area:
One item which Canada did not concede A. Treatment of Services Generally
relates to ISP liability. Article [20.89] NAFTA incorporated three services chapters:
requires legal remedies for instances Chapter 12, addressing cross-border
of copyright infringement occurring services; Chapter 13, addressing (not very
online and safe harbours to limit the effectively) telecommunications services;
liability of internet service providers and Chapter 14, addressing financial
(ISPs). The language of this provision services. At the time, NAFTA’s services
was tightened to limit when ISPs can provisions were far reaching, going well
benefit from safe harbours, requiring the beyond what was ultimately incorporated
service provider to adopt and reasonably in the WTO’s General Agreement on Trade At the time, NAFTA’s
implement certain policies and standard in Services,50 particularly regarding market
technical measures including a “notice- access for financial services in Mexico.
services provisions
and-takedown” system, in addition to Mexico agreed to allow Canada and the were far reaching, going
not receiving a direct financial benefit U.S. access to its financial services markets well beyond what was
from infringing activities . . . [An annex (banking, brokerage, and insurance) over ultimately incorporated
to the IP chapter is intended to clarify specified periods of time, with limits placed
that Canada is exempt from the both on the percentage of ownership in
in the WTO’s General
provision’s application based on its each domestic bank and other financial Agreement on Trade in
current “notice-and-notice” system institution permitted and in terms of the Services, particularly
and other safeguards in Canadian overall foreign participation in the Mexican regarding market
copyright law.] 46 financial system, with a multi-year phase-
access for financial
in in most cases.51 However, the Mexican
G. Conclusion financial crisis beginning in December 1994 services in Mexico.
If one considers the enormous changes in the made most of the phase-in provisions
scope and coverage of IP in regional trade irrelevant; the new (as of December 1)
agreements to which the U.S., Mexico, and Ernesto Zedillo administration decided that
Canada have become parties, particularly increased liquidity was essential to permit
the TPP and the more than a dozen U.S. the Mexican economy to recover and waived
FTAs concluded since 2003,47 the USMCA the NAFTA restrictions on foreign investment
provisions primarily reflect the latest in the banking sector (not simply for Canada
iteration of that evolutionary process, with a and the U.S. but generally), resulting, inter
minor rollback reflecting the Administration’s alia, in most domestic banking assets being
need for Democratic Congressional support acquired by foreign interests over a period of
for approval of the USMCA. Modernization several years.52

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The cross-border services chapter in licenses granted by another party, but it is

NAFTA was also relatively comprehensive not required to do so.56 Mutual recognition
for its time, including various professional of professional qualifications is encouraged
services, the highly controversial cross- in USMCA through hortatory provisions
border trucking services, and investment designed to encourage relevant bodies
market-opening measures, among many (such as the three national bar associations)
others. Still, it is accurate overall to “to establish dialogues with the relevant
suggest that the changes to the cross- bodies of the other Parties, with a view to
border services and financial services facilitating trade in professional services.”57
provisions in the USMCA compared to At least with legal services, similar language
NAFTA are relatively minor, although they in NAFTA did not produce significant results,
may be significant for some providers in and in my view there is little likelihood
certain instances. In contrast, NAFTA’s that it will do so under USMCA. In all NAFTA
largely ineffective telecommunications parties, foreign legal consultants are
chapter has been substantially expanded recognized, whereby a lawyer qualified for
and improved in the USMCA. practice in one country may provide legal
services related to the law of the country
B. Cross-Border Services in which he or she is authorized to practice
With cross-border services, despite or relating to international law in the
the relatively extensive market access country of another party.58 Guidelines are
requirements under the original NAFTA, provided in USMCA for “mutual recognition
coverage has not changed in some sectors. agreements” or similar arrangements for
For example, air services are excluded professional services.59
except for maintenance, including line Reflecting the somewhat greater
maintenance and specialty air services, as importance given to small and medium-
is government procurement.53 The general sized enterprises (SMEs) in USMCA than
obligations relating to national treatment, in NAFTA,60 the chapter provides a weak
most favored nation (MFN) treatment, and obligation: “With a view to enhancing
market access from NAFTA are continued.54 commercial opportunities in services for
For professionals, a challenge for cross- SMEs, and further to Chapter 25 (Small and
border services regulation is recognition Medium-Sized Enterprises), each Party
by the other party of the educational and shall endeavor to support the development
licensing qualifications of the foreign person of SME trade in services and SME-enabling
providing services, whether in medicine, business models, such as direct selling
accounting, engineering, law, or other services, including through measures that
disciplines. NAFTA went further in some facilitate SME access to resources or protect
disciplines (e.g., engineering services) than individuals from fraudulent practices.”61
in others (e.g., legal services). One of the stranger innovations of
For example, lawyers licensed in the USMCA cross-border services chapter
Canada and the U.S. are subject to national mandates changes in Canadian broadcast
treatment in Mexico.55 This means that rules designed to permit the National Football
a U.S. lawyer who is a citizen of the U.S. League (NFL) to sell licenses to Bell Media,
may be authorized to practice in Mexico, a Canadian enterprise. With the change,
but only if she has the education required the NFL can license the Super Bowl to Bell
of Mexican nationals and a cédula issued Media, which in turn will permit licensing the
by the Mexican government after the content to Canadian TV stations. These TV
candidate has completed the requisite stations will then be permitted to substitute
level of Mexican higher education. In other Canadian advertising for the advertising
words, there is no recognition of a U.S. viewed by U.S. audiences.62 This is an
law degree or bar membership in Mexico. obvious commercial benefit for the NFL, and
Under USMCA, a party has the option of probably for Canadian TV stations, although
recognizing the education, experiences, or it will deprive some Canadians who would
otherwise enjoy viewing American Super
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 USMCA PROVISIONS ON INTELLECTUAL PROPERTY, SERVICES, AND DIGITAL TRADE

Bowl advertisements—which, in the view panel in 2001.71 However, the dispute over
of many including myself, are often more Mexican truck access continued in one form
interesting that the football games—of such or another until 2019.72
opportunities.63 The USMCA significantly modifies the
Canada has long enjoyed a “cultural NAFTA obligations. In effect, it permits the
industries” exception to some trade U.S. to continue the existing practices of
obligations under NAFTA.64 A similar permitting approved Mexican trucking
exemption applies to Canada under enterprises to operate in the U.S., but also
USMCA, with some limitations, although allows the U.S. to terminate such practices
programming services, as noted (see USMCA, annex II-U-7):
immediately above, remain covered.65 [T]he United States reserves the right to
For the first time, Mexico also achieves adopt or maintain limitations on grants
“cultural exceptions” in USMCA. The U.S. of authority for persons of Mexico to
and Mexico recognize “that states have provide cross-border long-haul truck
the sovereign right to preserve, develop services in the territory of the United
The USMCA provides
and implement their cultural policies, to States outside the border commercial that “[T]he United
support their cultural industries for the zones if the United States determines States reserves the
purpose of strengthening the diversity of that limitations are required to address
cultural expressions, and to preserve their right to adopt or
material harm or the threat of material
cultural identity.”66 The Mexico-specific harm to U.S. suppliers, operators, or
maintain limitations
provisions preserve a list of exceptions to drivers. The United States may only on grants of authority
market access national treatment, some of adopt such limitations on existing for persons of Mexico
which were included in the NAFTA annexes.
In USMCA, the exceptions deal mostly with
grants of authority if it determines that to provide cross-
a change in circumstances warrants
radio and TV broadcasting, newspaper border long-haul
the limitation and if the limitation is
publishing, cinema services, and audiovisual required to address material harm. The truck services in the
services.67 In my view it is doubtful that the Parties shall meet no later than five territory of the United
restrictions on radio and TV broadcasting years after the entry into force of this States outside the
will be considered objectionable to most agreement to exchange views on the
potential U.S. suppliers, although, unlike border commercial
operation of this entry.
Canada, the majority of the Mexican zones if the United
population does not live within 90 miles or Procedures are established for reviewing the States determines that
so of the U.S. border. However, restrictions cross-border services practices; elimination limitations are required
on cinema services may be considered more of them is not automatic but requires inter
objectionable, and there is some irony in to address material
alia an investigation and determination
the restriction given the fact that dozens of by the International Trade Commission.73
harm or the threat of
movies made by American producers have There is little public evidence to indicate that material harm to U.S.
been filmed in Mexico.68 Mexico’s negotiators fought hard to preserve suppliers, operators,
One of the most contentious aspects
of NAFTA’s cross-border services chapter
the NAFTA rights, presumably because the or drivers.”
economic impact of Mexican truck access
was reciprocal obligations on the part of was not substantial.74 Interestingly, Mexico
Mexico and the U.S. to permit each other’s did not impose a reciprocal limitation.
trucks to carry international cargoes from
one country to the other, after a multi-year C. Financial Services
phase-in period.69 For a variety of reasons,
which are well beyond the scope of this USTR suggests that the major achievements
book, beginning in 1995 the U.S. refused of the USMCA compared to earlier trade
to comply with the NAFTA requirements, agreements including NAFTA are certain
allegedly on the basis of safety concerns “core obligations” including:
but, in the opinion of some, largely for • National treatment, to ensure that U.S.
political reasons.70 The matter was one of financial service suppliers receive the
a few that was the subject of a decision same treatment as local suppliers.
rendered by a Chapter 20 dispute settlement
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• Most-favored-nation treatment, “protect personal data, personal privacy and

to ensure that U.S. financial service the confidentiality of individual records and
suppliers receive the same treatment as accounts, provided that such measures are
those from other countries. not used to circumvent this Article.”80
• Market access, which prohibits Further, “The Parties recognize that
imposition of certain quantitative and immediate, direct, complete, and ongoing
numerical restrictions that would limit access by a Party’s financial regulatory
the business of U.S. financial services authorities to information of covered
suppliers.75 persons, including information underlying
Other observers have offered a more mixed the transactions and operations of such
evaluation: persons, is critical to financial regulation
and supervision, and recognize the need to
The USMCA ensures that the three eliminate any potential limitations on that
member Parties will maintain a access.”81 At the same time, localization
heightened level of openness in requirements for computing facilities are
the financial services sector. At the prohibited as long as financial regulators
same time, the USMCA appears to do have access to the information that is
nothing to further open the sector to processed or stored in such facilities.82
competition. The continued ability to Not surprisingly, the financial services
restrict access to cross-border financial chapter does not apply to measures adopted
services and perpetuate government or maintained with respect to a party’s
favoritism is a drag on innovation and government procurement of financial
cost efficiency.76 services or subsidies provided by a party
with regard to cross-border supply of
The USMCA is explicitly forward-looking financial services by another party.83 The
by establishing a standstill prohibiting chapter also includes a proviso that the
restrictions on cross-border trade that were parties will seek to develop regulatory
not in place as of January 1, 1994 (or with procedures to expedite the offering of
national treatment)77 and by requiring all insurance services by licensed suppliers.84
parties to allow market access for other Several other chapters of USMCA could
parties to any newly established financial have a significant impact on financial
services, subject only to the proviso that services. For example, limitations on
the host party allows its domestic financial exchange rate manipulations (to be
services providers to engage in the new discussed in a later report), a first for U.S.
types of services.78 Where public entities trade agreements, could obviously affect
in the NAFTA parties operate payment and banking operations in North America.85
clearing systems, financial institutions of
other NAFTA parties must be granted access, D. Telecommunications Services
except with respect to another party’s
lender of last resort facilities.79 NAFTA’s telecommunications services
The USMCA parties also made significant chapter (13) was of only limited utility,
efforts to strike a reasonable balance in retrospect. The provisions sought to
among privacy, business decisions of assure liberalization of telecommunications
financial institutions, and the need of services (at the time primarily telephone
financial regulators for information. Thus, and value-added services) through non-
“No Party shall prevent a covered person discrimination (among the NAFTA parties
from transferring information, including and in comparison to other countries
personal information, into and out of the through MFN requirements), open access
Party’s territory by electronic or other to and use of public networks, and
means when this activity is for the conduct support for freer flow of information.86
of business within the scope of the license, Telecommunications services under NAFTA
authorization, or registration of that covered were also affected by technical barriers to
person,” subject to the right of any Party to trade (chapter 9) and by the cross-border
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 USMCA PROVISIONS ON INTELLECTUAL PROPERTY, SERVICES, AND DIGITAL TRADE

services (chapter 12) discussed above, market. Some observers have suggested
which, provided that telecommunications that the U.S. negotiators were concerned
and most other services were afforded with efforts of Movil SAB, the dominant
non-discriminatory treatment, benefitted mobile network, also owned by Carlos Slim,
from the absence of commercial presence to restrict competition. AT&T reportedly
requirements and from the professional has been investing heavily in the Mexican
licensing and certification procedures wireless market in recent years and
stipulated in that chapter.87 expanding its wireless infrastructure.91
In NAFTA, the most important After Mexico’s Supreme Court
innovations included guarantees of access overturned the country’s legal restrictions
and use of public telecommunications designed to prevent Movil from excluding
networks or services by nationals of another competitors, USMCA negotiators adopted
party, including broadcasters and cable general restrictions on such anticompetitive
system operators.88 These access and usage practices in the telecommunications
rights included the purchasing or leasing markets of all three NAFTA parties.92
of equipment to interface with the public The various competitive safeguards
network, interconnections, attachments to in USMCA are designed to preclude
the public network, and the performance anticompetitive practices such as cross-
of related operating functions, all designed subsidization between different types of
to assure that U.S. telecommunications service providers (e.g., cell phone service
companies could participate effectively and land line service) and the failure of
in the growing Mexican market.89 During the local carriers to provide technical
the years immediately after NAFTA entered information about facilities needed for
into force, one of the primary disputes competitors to provide services.93 Access
between the U.S. and Mexico arose over to a network must be offered on an
the connection fees charged by Mexican “unbundled” basis so suppliers can, inter
telephone networks (primarily the Mexican alia, rent telecommunications infrastructure
near-monopoly, Telmex, owned by rather than having to build their own
billionaire Carlos Slim) to U.S. long-distance infrastructure.94 Interconnection criteria
carriers such as AT&T, including fees for with major suppliers are specified in detail
the millions of calls to Mexico originating and fees must be reasonable.95 Such criteria
each year in the U.S. The carriers and the reflect the requirements of the (post-NAFTA)
U.S. believed these fees were unreasonable 1996 U.S. Telecommunications Act.96
because they exceeded cost-oriented Reflecting the greater concern with
rates, and the U.S. also objected to Mexico’s state-owned enterprises elsewhere
alleged failure to prevent anti-competitive in USMCA compared to NAFTA,97 and
practices by major telecoms suppliers (e.g., perhaps reflecting the desire of the United
Telmex). After extended and unsuccessful States to deal effectively with a potential
consultations, the U.S. chose to challenge problem in future trade agreements
the allegedly unreasonable interconnection with certain countries, this chapter
fees, not in NAFTA but before the WTO, provides that “No Party shall accord
where the U.S. ultimately prevailed on the more favorable treatment to a supplier of
key issues.90 The case suggests that NAFTA’s telecommunications services in its territory
Chapter 13 failed to meet U.S. expectations than that accorded to a like service supplier
in terms of liberalizing the Mexican of another Party on the basis that the
telecommunications market. supplier receiving more favorable treatment
In USMCA, much of the NAFTA’s Chapter is owned or controlled by the central level
13 remains. However, several significant of government of the Party.”98 A (luke-
changes have occurred to discourage warm) effort to address the high cost of
dominant telecommunications firms in roaming services in some jurisdictions is
Mexico from trying to exclude international also included, with the requirement that
telecommunications firms from the Mexican “The Parties shall endeavor to cooperate
on promoting transparent and reasonable
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rates for international mobile roaming videos, music, computer software, video
services that can help promote the growth games, and the like.101 Similarly, cross-
of trade between the Parties and enhance border transfers of electronic information
consumer welfare.”99 In my Canadian are not to be prohibited or restricted for
experience, reasonable roaming rates are business purposes, with exceptions for
more likely to be achieved by agreements non-discriminatory public policy objectives
between major Canadian wireless services that are not arbitrary, unjustifiable
providers such as Bell Canada and Rogers discrimination, or a disguised restriction
and their U.S. counterparts—Verizon, AT&T, on trade.102 One of the most important
T-Mobile, and Sprint. obligations is a ban on parties requiring a
person subject to the chapter “to use or
locate computing facilities in the Party’s
DIGITAL TRADE territory as a condition for conducting
business in that territory” or “require the
For obvious reasons, NAFTA did not
transfer of, or access to, a source code of
incorporate a chapter on digital trade.
software owned by a person of another
In this report, it seems appropriate to
Party . . . as a condition for the import,
consider digital trade in the same chapter
distribution, sale or use of that software.”103
as IP and services because of the close
Other obligations reflect more basic
interrelationships. (For example, copyright
non-discrimination104 and the modern need
law cuts across several of these sectors).
for legal frameworks governing electronic
In the USMCA, the digital trade chapter
transactions, electronic authentication,
was in my view one of the most important
and electronic signatures.105 The chapter
modernizing elements adapted from the TPP.
also recognizes the need for protecting
USTR, with considerable justification, boasts
The digital trade that “The new Digital Trade chapter contains
consumers from fraudulent or deceptive
chapter of the USMCA commercial activities.106
the strongest disciplines on digital trade of
Certainly, one of the most controversial
is a clear and welcome any international agreement, providing a
areas of digital trade today is protection of
recognition of the firm foundation for the expansion of trade
personal consumer information (or lack of
and investment in the innovative products
enormous importance and services where the United States has a
effective protection). The USMCA language
of the global sale competitive advantage.”100 This language
may be more important from what it does
not do.107 It does include a laundry list of
of digital products is a clear and welcome recognition of the
key principles, ensuring compliance with
produced in the U.S. enormous importance of the global sale of
protective measures:
digital products produced in the U.S. Note
also the relationship between the promotion The Parties recognize that . . .
of openness of digital trade in this USMCA key principles include limitation on
chapter and the promotion of simplified collection; choice; data quality; purpose
procedures for exports of small shipments specification; use limitation; security
by U.S. enterprises such as Amazon, as safeguards; transparency; individual
required in USMCA, Chapter 7. Enterprises participation; and accountability. The
like Amazon are creatures of the internet, Parties also recognize the importance
but most of the goods ordered from Amazon of ensuring compliance with measures
must still be shipped from bricks-and- to protect personal information and
mortar warehouses using standard shipping ensuring that any restrictions on
services, whether the packages are destined cross-border flows of personal
for customers in the U.S., Canada, or Mexico. information are necessary and
Some of the obligations reflect proportionate to the risks presented.108
unsuccessful efforts made for several
As others have observed, there is no
decades in other fora, such as the WTO, to
mandatory minimum level of protections
prevent to the application of customs duties
and no ban on the parties relying on
or other discriminatory measures from
voluntary undertakings by enterprises to
being applied to such products as e-books,
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 USMCA PROVISIONS ON INTELLECTUAL PROPERTY, SERVICES, AND DIGITAL TRADE

protect privacy.109 Many Americans are “endeavor to cooperate to identify ways in

among those who would generally be which each Party can expand access to and
reluctant to rely on voluntary undertakings use of government information, including
given the frequency of massive personal data that the Party has made public, with a
data breaches in recent years, including view to enhancing and generating business
those where Marriott, Equifax, eBay, Yahoo, opportunities, especially for SMEs.”119
and Target were the offenders.110 Interestingly, the USMCA chapter is no
Consequently, USMCA seeks to protect longer the most comprehensive digital trade
consumers, whereby “The Parties recognize chapter. A United States-Japan agreement
the importance of adopting and maintaining (separate from the trade agreement) goes
transparent and effective measures to further, including coverage of information
protect consumers from fraudulent or and communications technology that uses “Many foreign
deceptive commercial activities.”111 Parties cryptography.120 Parties to the agreement investments have a
are also required to maintain consumer may not require the suppliers to “transfer significant intellectual
protection laws designed to prohibit or provide access to any proprietary property component
fraudulent and deceptive commercial information relating to cryptography.”121
Among the exceptions, no party under
and many IP-intensive
activities and to cooperate with each other
to enhance consumer welfare.112 the agreement can be required to allow industries must make
However, interactive computer service data access if it would jeopardize a party’s foreign investments
providers, those with a “system or service “essential security interests.”122 in order to compete
that provides or enables electronic access by
effectively in those
multiple users to a computer service,” are not
to be treated as information content providers INVESTMENT RELATING TO markets. The Industrial
in determining liabilities for harm related to INTELLECTUAL PROPERTY Advisory Committee
information storage or processing, or when AND SERVICES believes it is not
the supplier acts in good faith.113 In theory, this beneficial to the U.S.
“safe harbor” would permit service suppliers Investment issues, particularly the
to tailor content to users, thereby increasing reduction of the protection of foreign economic interest to
the quality of the services for consumers.114 investment in most sectors involving curtail rights for U.S.
An annex to the digital services chapter Mexico and its elimination after a three- companies to protect
imposes special requirements on Mexico. year transition period as between the
U.S. and Canada, were discussed in an
their IP investments in
It provides a three-year grace period for
earlier report. However, it is notable that overseas markets.”
Mexico’s obligations relating to interactive
computer services and confirms that those investment disputes often arise within the
requirements are subject to USMCA’s general IP and services sectors. NAFTA’s Chapter 11
exceptions.115 Mexican compliance is also specifically covered intangible property.123
required to be both effective and consistent The Industry Advisory Committee expressed
with Mexico’s Constitution (and implies the “serious concerns” about the exclusion of
need for new legislation),116 but Mexico investment protection:
preserves, under the scope of “public Many foreign investments have
morals,” its legislation is designed, inter alia, a significant intellectual property
to protect against online sex trafficking and component and many IP-intensive
sexual exploitation of minors.117 industries must make foreign
Largely hortatory language provides investments in order to compete
that the parties will “endeavor” to build effectively in those markets. ITAC-13
their national capacities for incident believes it is not beneficial to the U.S.
response and strengthen mechanisms for economic interest to curtail rights
cooperation, with the caveat that “risk- for U.S. companies to protect their IP
based approaches may be more effective investments in overseas markets.124
than prescriptive regulation.”118 The parties Several Chapter 11 cases have
also agree to promote open access to focused on alleged violations of
government-generated public data and intellectual property rights.125

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Similar issues arise from the relationship Presumably, the impact of eliminating ISDS
between services and investment, since for IP and services will not become fully
many cross-border and financial services apparent until several years after USMCA
activities cannot be undertaken without has entered into force, when the three-
investments, sometimes substantial ones, year grace period for NAFTA Chapter 11 will
in the host country. In the most obvious no longer be available to U.S. companies
example, the dispute between the U.S. providing IP and services to Mexico and
and Mexico over cross-border trucking Canada. Given the enormous importance
addressed the U.S.’s failure to permit of IP and services exports for the U.S., as
Mexican trucks to enter the U.S. and a noted in the introduction to this report,
prohibition on Mexican investment in U.S. it is not unreasonable to predict that this
trucking enterprises, both of which were omission will be among the costliest for
overturned by the Chapter 20 panel.126 the U.S. and U.S. enterprises of any of the
At the conclusion of the USMCA USMCA changes.
negotiations, the Services Advisory
Given the enormous Committee on USMCA objected strongly
importance of IP and to the reduction of Investor-State Dispute
Settlement (ISDS) protections with Mexico
services exports for
and their elimination with Canada:
the U.S., as noted in
[T]he new Trade Agreement eliminates
the introduction to the ability of most businesses to
this report, it is not enforce many of the Agreement’s
unreasonable to predict core protections through ISD [against
that this omission will Mexico], limits recourse to ISDS to only
existing investments, and adds new
be among the costliest
procedural hurdles to any company
for the U.S. and U.S. seeking to use neutral enforcement
enterprises of any of the mechanisms . . .
USMCA changes. Additionally, the Committee is
alarmed that no ISDS protections would
be available for business concerns
in Canada, based on the assertion
that such protections are not needed
due to Canada’s well-regarded legal
protections. The Committee rejects
this view for three reasons: (1) other
countries with less robust legal systems
will demand the same treatment (i.e.,
no ISDS mechanism); (2) U.S. investors
will have to rely on the U.S. government
to enforce the Trade Agreement’s
investment protections not subject to
ISDS, which will politicize the process,
as well as prevent investors from
“being made whole;” and (3) it is out
of step with the approach taken by
other major jurisdictions – such as the
EU – in the investment chapters of their
FTAs – which will leave our competitors’
investments more secure than ours.127

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ENDNOTES manufacturers. See United States-Peru

Trade Promotion Agreement, Art. 16.10.2,
1. U.S. Patent and Trademark Office, April 12, 2006, https://ustr.gov/trade-
“Intellectual Property and the U.S. Economy,” agreements/free-trade-agreements/peru-
September 26, 2016, https://www.uspto. tpa/final-text.
gov/learning-and-resources/ip-motion/ 12. Protocol of Amendment to the United
intellectual-property-and-us-economy. States-Mexico-Agreement, December 10,
2. Ibid. 2019, https://ustr.gov/trade-agreements/
3. Ibid. free-trade-agreements/united-states-
4. Ibid. mexico-canada-agreement/protocol-
5. John Ward, “The Services Sector: amendments.
How Best to Measure It,” International Trade 13. USMCA, art. 20.14.
Administration, U.S. Dept. of Commerce, 14. This IPR Committee is not required to
2010, https://2016.trade.gov/publications/ meet until a year after entry into force of the
ita-newsletter/1010/services-sector-how- USMCA. USMCA, art. 20.14.4.
best-to-measure-it.asp. 15. USMCA, art. 20.14.2-3.
6. Ibid. 16. Nicoleas Mayne, “Changes to NAFTA’s
7. Jennifer Powell, “Services in the Intellectual Property Provisions in the
NAFTA,” U.S. International Trade Commission, USMCA,” IP Law Trends, October 25, 2018,
Office of Industries, Working Paper ID-056, https://www.iplawtrends.com/changes-to-
September 2018, 1, https://webcache. naftas-intellectual-property-provisions-in-
googleusercontent.com/search?q=cache:M the-usmca/.
JqZkAnH1EIJ:https://www.usitc.gov/sites/ 17. USMCA, art. 20.63.
default/files/publications/332/working_ 18. NAFTA, art. 1705.4.
papers/services_in_the_nafta_compiled_ 19. USMCA, arts. 20.25, 20.23; see TPP
version_91818_ss_tc.pdf+&cd=11&hl=en&ct= arts. 18.26, 18.24.
clnk&gl=us&client=firefox-b-1-d. 20. USMCA. art. 20.89.
8. Agreement on Trade-Related Aspects 21. USMCA, art. 20.67.
of Intellectual Property, Annex 1C of the 22. USMCA, art. 20.89.1.
WTO Agreement, April 15, 1994 (as amended 23. NAFTA, art. 1711.
January 23, 2017), https://www.wto.org/ 24. See “What can be patented?”
english/docs_e/legal_e/31bis_trips_01_e. Legal Zoom, https://www.legalzoom.
htm. com/knowledge/patent/topic/what-is-
9. See WTO, “Understanding the WTO: patentable.
Basics—The Uruguay Round,” https://www. 25. See Steven D. Gordon, “Trade
wto.org/english/thewto_e/whatis_e/tif_e/ Secrets and Non-Disclosure Agreements,”
fact5_e.htm (providing a brief history of Holland & Knight, December 17,
the Uruguay Round and noting that “it took 2018, https://www.hklaw.com/
seven and a half years, almost twice the en/insights/publications/2018/12/
original schedule”). trade-secrets-and-nondisclosure-
10. See, e.g., Joel R. Reidenberg, “Trade, agreements?utm_source=Mondaq&utm_
TRIPS and NAFTA,” Fordham Intellectual medium=syndication&utm_
Property, Media and Entertainment Law campaign=View-Original (explaining the
Journal 4, no. 1 (1993): 283-286, https:// use of non-disclosure agreements with key
ir.lawnet.fordham.edu/iplj/vol4/iss1/17/. employees).
11. For example, in the United States- 26. “Protecting Trade Secrets,” FindLaw,
Peru Trade Promotion Agreement, patent https://smallbusiness.findlaw.com/
terms could be adjusted where issuance of intellectual-property/protecting-trade-
a patent had been delayed, and test data for secrets.html.
pharmaceutical products was required to 27. USMCA, arts. 20.1.1, 20.1.5, and
be kept confidential for at least five years, 20.1.7. See also Nathaiel Lipkus and Jamie
presumably to discourage generic drug Maddox, “A Need-to-Know Guide on IP
13
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BAKER INSTITUTE REPORT // 01.17.20

in the U.S.-Mexico-Canada Agreement,” 41. USTR, “United States-Mexico-

Osler, October 2, 2018, https://www.osler. Canada Trade Fact Sheet: Modernizing
com/en/resources/cross-border/2018/a- NAFTA into a 21st Century Trade Agreement:
need-to-know-guide-on-ip-in-the-u-s- Intellectual Property,” https://ustr.gov/
mexico-canada-agreement (an excellent trade-agreements/free-trade-agreements/
summary of USMCA’s IP innovations). united-states-mexico-canada-agreement/
28. USMCA, art. 20.72. fact-sheets/modernizing.
29. USMCA, arts. 20.46, 20.48. 42. USMCA, sec. J.
30. United States-Peru Trade Promotion 43. USMCA, art. 20.84.1.
Agreement, April 12, 2006, art. 16.10, 44. One Canadian law firm, commenting
https://ustr.gov/trade-agreements/free- on the slowness of the amendment of
trade-agreements/peru-tpa/final-text. Canadian IP legislation in 2015, noted that
See Nancy Pelosi Statement on the USMCA the delays “should come as no surprise
Protocol, “Prescriptions Drugs,” December to those familiar with the long-standing
10, 2019 (noting that the changes reflect concerns expressed by many of Canada's
key principles that had been included in trading partners over its intellectual property
trade agreements with Peru, Panama and rights protection regime, or more precisely,
Colombia). lack thereof.” See “Canada Begins Border
31. USMCA, arts. 20.46, note 40 and Enforcement for Counterfeits,” Bennett
20.47. Jones (blog), January 15, 2015, https://
32. USMCA, arts. 20.48, footnote 42, www.bennettjones.com/Blogs-Section/
20.50.2. Canada-Begins-Border-Enforcement-for-
33. USMCA, art. 20.36.2 was deleted by Counterfeits.
USMCA Protocol, para. 3A. 45. USMCA, art. 20.25(6).
34. House Committee on Ways 46. Lipkus and Maddox, “A Need-to-
and Means, “Improvements to the Know Guide.” See USMCA, Annex 20-A,
USMCA,” December 10, 2019, 3, https:// Annex to Section J.
waysandmeans.house.gov/sites/democrats. 47. These include FTAs, inter alia, with
waysandmeans.house.gov/files/documents/ Australia, Singapore, Chile, South Korea,
USMCA%20win%20factsheet%20.pdf. Central America and the Dominican Republic,
35. USMCA, art. 20.49. Colombia, Panama, Peru, Bahrain, Jordan, and
36. TPP, art. 18.51. Morocco, all of which include some version
37. Mayne, “Changes to NAFTA’s of “TRIPS-Plus” content, particularly with
Intellectual Property Provisions in the regard to the extension of patent terms as a
USMCA.” result of delays in approval of pharmaceutical
38. See “Blumenauer, Stakeholders products and protection of confidential test
Elevate Push for USMCA Biologic Drug data. See, e.g., Tom Bollyky, “Intellectual
Changes,” World Trade Online, May 10, Property in Free Trade Agreements,” Council
2019, https://insidetrade.com/daily-news/ on Foreign Relations, December 11, 2015,
blumenauer-stakeholders-elevate-push- 11, https://sites.nationalacademies.org/
usmca-biologics-changes (discussing cs/groups/pgasite/documents/webpage/
Democratic objections to the ten-year period). pga_170567.pdf.
39. USMCA, art. 20.49 was deleted by 48. See Editorial Board, New York
the Protocol, para. 3E. Times, “Global Trade after the Failure of
40. “GOP Lawmakers Lament Proposed the Doha Round,” The New York Times,
Scale-Back of Biologics Protection in January 1, 2016, https://www.nytimes.
USMCA,” World Trade Online, December 4, com/2016/01/01/opinion/global-trade-
2019, https://insidetrade.com/daily-news/ after-the-failure-of-the-doha-round.html.
gop-lawmakers-lament-proposed-scale- 49. Bollyky, “Intellectual Property in
back-biologics-protections-usmca. Free Trade Agreements,” 13.

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 USMCA PROVISIONS ON INTELLECTUAL PROPERTY, SERVICES, AND DIGITAL TRADE

50. General Agreement on Trade in the Panel, February 6, 2001, paras.35-100,

Services, Annex 1B to the WTO Agreement, https://www.nafta-sec-alena.org/Home/
April 15, 1994, https://www.wto.org/ Dispute-Settlement/Decisions-and-Reports.
english/docs_e/legal_e/26-gats_01_e.htm. Disclosure: I was one of the five members of
51. NAFTA, Annex VII, VII-M-I to V-M-22. the Chapter 20 panel.
52. See Heiner Schultz, “Foreign Banks 71. In the Matter of Cross-Border
in Mexico: New Conquistadors or Agents Trucking Services.
of Change?” April 22, 2006, https://pdfs. 72. See James Jaillet, “NAFTA
semanticscholar.org/9c4c/3285001ce95 Replacement Would Give U.S. the Ability
fdc7561da53ae29f04e1136d6.pdf (noting to Limit Cross-Border Trucking Program,”
that after the 1994 financial crisis foreign Overdrive, October 1, 2018, https://www.
banks acquired more than 80% of Mexican overdriveonline.com/usmca-the-new-
domestic banking assets). nafta-would-give-u-s-the-ability-to-limit-
53. USMCA, arts. 15.2.4, 15.2.3(b). cross-border-trucking-program/ (noting
54. USMCA, arts. 15.3, 15.4 and 15.5. that as of late 2018 only 41 Mexican carriers
55. NAFTA, annex I-M-46. have Department of Transportation authority
56. USMCA, art. 15.9.1. to operate out of the commercial—12 mile—
57. USMCA, annex 15-C, para. 2. border zone in the United States).
58. NAFTA, annex VI-Miscellaneous 73. See USMCA Implementation Act,
commitments; see http://www.sice.oas. H.R. 5430,December 13, 2019, 116th Cong.,
org/Trade/NAFTA/anx6.asp. 1st Session, https://www.congress.gov/
59. USMCA, annex 15-C, app. 1. bill/116th-congress/house-bill/5430/
60. See USMCA, ch. 25. text#toc-H73D01E68344741998F1F91CA8B
61. USMCA, art. 15.10. 3E3628, Sec. 322.
62. USMCA, annex 15-D. 74. Major disincentives to such cross-
63. Probably not a serious problem, border operations include the prohibition on
since at least 75% of the Canadian Mexican carriers from hauling loads from
population live within about 90 miles of one U.S. city to another; only international
the U.S. border, probably close enough to cargoes are allowed. Insurance requirements
the U.S. border to watch the Super Bowl for carriers operating in the United States
over TV stations in Buffalo or Seattle. See can also be expensive to meet.
“Canada-Close to the Border,” Twelve Mile 75. USTR, “United States-Mexico-Canada
Circle, February 12, 2008, https://www. Trade Fact Sheet: Modernizing NAFTA.” See
howderfamily.com/blog/canada-close-to- USMCA, particularly arts. 17.3-17.6.
the-border/. 76. Tori K. Whiting and Gabriella
64. NAFTA, annex 2106 (incorporating Beaumont-Smith, eds., “Backgrounder:
certain provisions of the U..>-Canada FTA). An Analysis of the United States-Mexico-
65. USMCA, art. 32.6; annex 15-D. Canada Agreement,” Heritage Foundation,
66. USMCA, annex 15-E. January 28, 2019, 33, https://www.heritage.
67. USMCA, annex 15-E. org/trade/report/analysis-the-united-
68. See “Famous Movies from Mexico,” states-mexico-canada-agreement.
Ranker, https://www.ranker.com/list/ 77. USMCA, art. 17.6.
movies-from-mexico/reference (listing 100 78. USMCA, art. 17.7.
such movies). 79. USMCA, art. 17.15. For a useful
69. NAFTA, annex I, I-M-63, I-M-64; summary of USMCA’s financial services
I-M-67. I-M-68, I-U-18, I-U-19 and I-U-20. chapter highlights, see Daniel. A. Leslie “The
(Cross-border trucking services were not an USMCA—Impact on the Financial Services
issue as between the U.S. and Canada.) Sector,” Norton Rose Fulbright, October 2018,
70. For a full discussion of the issues https://www.nortonrosefulbright.com/
up to 2001, see In the Matter of Cross- en-us/knowledge/publications/5dde68a0/
Border Trucking Services, Secretariat File the-usmca--impact-on-the-financial-
No. USA-MEX-98-2008-01, Final Report of services-sector.

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BAKER INSTITUTE REPORT // 01.17.20

80. USMCA, art. 17.17. 102. USMCA, art. 19.11. See GATT 1994,
81. USMCA, art. 17.18.1. art. XX.
82. USMCA, art. 17.18.2. 103. USMCA, arts. 19.12, 19.16.
83. USMCA. arts. 17.2.4 and 17.2.5. 104. USMCA, art. 19.4
Government procurement of financial 105. USMCA, arts. 19.5, 19.6.
services as between the United States 106. USMCA, art. 19.7 (cross-referencing
and Mexico is governed by USMCA ch. 13. USMCA art. 21.4.2 on consumer protection).
Financial services relating to government 107. USMCA, art. 19.8.
procurement as between the United States 108. USMCA, art. 19.8.3.
and Canada are governed only by the WTO’s 109. Whiting and Beaumont-Smith,
Government Procurement Agreement. “Backgrounder,” 37.
84. USMCA, art. 17.16. 110. See Taylor Armerding, “The 18
85. See USMCA, ch. 33. Biggest Data Breaches of the 21st Century,”
86. See Geneva E. Stephens, CSO, December 20, 2018, https://www.
“Telecommunications Under the NAFTA and csoonline.com/article/2130877/the-
Its Effect on Canada’s Telecommunications biggest-data-breaches-of-the-21st-
Industry,” Law and Business Review of the century.html.
Americas 3, number 1: 93, 96, (Winter 1997). 111. USMCA, art. 19.7.1.
87. NAFTA, arts. 1202, 1203, 1205 and 1210. 112. USMCA, art. 19.7.2, 19.7.3.
88. NAFTA, arts. 1301-1302. 113. USMCA, arts.19.1, 19.17.
89. NAFTA, art. 1302.2. 114. Whiting and Beaumont-Smith,
90. See Mexico—Measures Affecting “Backgrounder,” 38.
Telecommunications Services, DS204, April 115. USMCA, annex 19-A.
2, 2004, adopted June 1, 2004, https://docs. 116. USMCA, annex 19-A(3).
wto.org/dol2fe/Pages/FE_Search/FE_S_ 117. USMCA, annex 19-A(4).
S009-DP.aspx?language=E&CatalogueIdList 118. USMCA, art. 19.15.
=48485&CurrentCatalogueIdIndex=0&FullTe 119. USMCA, art. 19.18
xtHash=&HasEnglishRecord=True&HasFrenc 120. Agreement between the United
hRecord=True&HasSpanishRecord=True. See States of America and Japan Concerning
also the WTO’s summary, https://www.wto. Digital Trade, October 7, 2019, https://ustr.
org/english/tratop_e/dispu_e/cases_e/ gov/sites/default/files/files/agreements/
ds204_e.htm. japan/Agreement_between_the_United_
91. See Whiting and Beaumont-Smith, States_and_Japan_concerning_Digital_
“Backgrounder,” 35. Trade.pdf; see “U.S.-Japan Digital Trade
92. Ibid. Agreement Includes new ICT, tax, Security
93. USMCA, art. 18.6. Language,” World Trade Online, October 7,
94. USMCA, art. 18.8. 2019, https://insidetrade.com/daily-news/
95. USMCA, art. 18.9. usmca-incorporates-new-digital-trade-
96. Telecommunications Act of 1996, S. chapter-cybersecurity-provisions
652, 104th Cong. (1996), https://transition. 121. Ibid, art. 21.
fcc.gov/Reports/tcom1996.txt. 122. Ibid, art. 4(a).
97. See USMCA ch. 22. 123. See NAFTA, art. 1139 (including
98. USMCA, art. 18.18. in the definition of “investment” “(g)
99. USMCA, art. 18.25.1. real estate or other property, tangible or
100. USTR, “United States-Mexico- intangible, in the expectation or used for
Canada Fact Sheet.” the purpose of economic benefit or other
101. USMCA, art. 19.3. The provision business purposes”).
does not preclude Mexico from imposing 124. Report of the Industry Trade
value added taxes on such products, Advisory Committee on Intellectual Property,
or Canada from imposing provincial or September 27, 2018, 33, https://ustr.gov/
national sales taxes. trade-agreements/free-trade-agreements/
united-states-mexico-canada-agreement/
advisory-committee.
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 USMCA PROVISIONS ON INTELLECTUAL PROPERTY, SERVICES, AND DIGITAL TRADE

125. See, e.g., Eli Lily and Co. v.

Government of Canada, ICSID Case no.
UNCT/14/2 (March 16, 2017), https://icsid.
worldbank.org/en/Pages/cases/casedetail.
aspx?CaseNo=UNCT/14/2. For a review of
the case, see Thomas Musmann, “Eli Lilly
v. Canada – The First Final Award Ever on
Patents and International Investment Law,”
Kluwer Patent Blog, April 4, 2017, http://
patentblog.kluweriplaw.com/2017/04/04/
eli-lilly-v-canada-the-first-final-award-
ever-on-patents-and-international-invest-
ment-law/.
126. In the Matter of Cross-Border
Trucking Services.
127. “Report of the Industry Trade
Advisory Committee on Services,”
September 27, 2018, 7, https://ustr.gov/
trade-agreements/free-trade-agreements/
united-states-mexico-canada-agreement/
advisory-committee.

AUTHOR
David A. Gantz, J.D., J.S.M., is the Will Clayton
Fellow in Trade and International Economics See more Baker Institute Reports at:
at the Center for the United States and www.bakerinstitute.org/baker-reports
Mexico whose work focuses on international
trade and economics. He is also the Samuel This publication was written by a
researcher (or researchers) who
M. Fegtly Professor of Law Emeritus at the
participated in a Baker Institute project.
University of Arizona’s James E. Rogers Wherever feasible, this research is
College of Law and director emeritus of reviewed by outside experts before it is
the international trade and business law released. However, the views expressed
program. Gantz has written extensively on herein are those of the individual
World Trade Organization and NAFTA trade author(s), and do not necessarily
represent the views of Rice University’s
law and dispute resolution issues, as well as
Baker Institute for Public Policy.
a range of other international trade matters.
© 2020 Rice University’s Baker
Institute for Public Policy

This material may be quoted or

reproduced without prior permission,
provided appropriate credit is given to
the author and Rice University’s Baker
Institute for Public Policy.

Cite as:
Gantz, David A. 2020. USMCA
Provisions on Intellectual Property,
Services, and Digital Trade. Baker
Institute Report no. 01.17.20.
Rice University’s Baker Institute for
Public Policy, Houston, Texas.

17
Electronic copy available at: https://ssrn.com/abstract=3524943