President Donald Trump’s aim of “tweaking” the U.S.-Canada trade relationship suggests he will make small changes to the North American free-trade agreement – or even pursue separate side-deals – rather than undertake a full renegotiation.
A complete overhaul of the pact would be an arduous process for the U.S. President, stretching for years and requiring the sign-off of a Congress that could put numerous demands on the White House in exchange for its approval.
Mr. Trump could instead opt for more limited agreements with Canada and Mexico on such things as labour standards or rules of origin – allowing him to claim victory on his campaign promise to get better trade deals, while avoiding the political costs of a protracted NAFTA overhaul.
But the Trump administration has laid out no specific plan on how it will proceed. A White House spokeswoman said Tuesday that the administration has “no further comment on NAFTA at this time,” when asked what Mr. Trump’s next steps would be.
The President may, however, have tipped his hand Monday. After his sit-down with Prime Minister Justin Trudeau, he said he would merely be “tweaking” trade arrangements with Canada and that he does not want to target his northern neighbours in the same way he does Mexico.
Such an approach – to treat Canada and Mexico differently – could be more readily achieved through smaller side-deals than by blowing up NAFTA.
“They could negotiate letters of understanding and just use those to layer changes that they want on top of the existing deal,” said Stephen Silvia, a professor of international service at American University in Washington. “If you have an official renegotiation, that would most likely mean you would need to run your agreement through Congress and that would be a dicey proposition.”
While some trade measures, such as setting up tariffs, would certainly require congressional approval, there is enough grey area in trade law that Mr. Trump might be able to take action in other areas without Congress, NAFTA expert Christopher Wilson said.
For instance, Mr. Trump might be able to get changes to rules of origin as a way to strengthen purchase of U.S.-made goods without going through Congress. Mr. Wilson also pointed to labour standards as another area in which the President might be able to make a side deal without legislators’ sign-off. Mr. Trump has blamed Mexico’s lax labour-law enforcement for attracting companies that might otherwise set up in the United States.
“There’s a high degree of uncertainty – I don’t think anyone can say where the line is between the President and Congress on trade powers,” said Mr. Wilson, deputy director of the Mexico Institute at the Woodrow Wilson International Center for Scholars. “There’s a push and pull that happens between the two.”
If Mr. Trump does opt for a full renegotiation, he will face numerous hurdles that would drag the timeline out by years.
Thomas Bollyky, a former U.S. trade negotiator, said it typically takes three to four years to nail down a deal, including a year and half worth of statutory timelines built into the process.
First, the President must give Congress 90 days’ notice before starting talks. He must also provide 180 days’ notice before signing the deal, 105 days for the U.S. International Trade Commission to review the agreement and issue a report on its economic effects and 60 days’ notice to Congress on changes to the law necessitated by the deal.
“You can’t move faster than that without a legislative amendment – and that’s not allotting the time the negotiations take,” said Prof. Bollyky, who teaches law at Georgetown University.
To speed things up in the case of a renegotiation, Mr. Trump would have to persuade Congress to change the law to hand him more power or shorten the timelines.
When he was working on trade agreements with South Korea and Australia during the presidency of George W. Bush, Prof. Bollyky said, he frequently went back and forth with congressional staff and stakeholder groups.
When NAFTA was first negotiated, then-president Bill Clinton had to negotiate separate side deals on labour and the environment to placate demands from legislators.
Sharyn O’Halloran, a trade expert who advised the Mexican government during the 1990s NAFTA talks, said extensive changes to the deal would have to go through Congress because they would require changing U.S. laws.
“The provisions of the agreement would still be domestic statutes,” said Prof. O’Halloran, who teaches political economics at Columbia University. “If you wanted to change the domestic-content requirements in a product, that would require a change in law. If you wanted to put a 20-per-cent tariff on Mexican exports, that would require a change in law.”
Mr. Trump’s Republican Party has 52 of 100 Senate seats, meaning he would need strong caucus solidarity and possibly some help from the Democrats to push through major NAFTA changes.
“Particularly with this razor-thin majority,” Prof. O’Halloran said, “these are not easy things to do.”Report Typo/Error