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U.S. President Donald Trump planned to cite the softwood lumber and dairy disputes with Canada as reasons for pulling his country out of the North American free-trade agreement, a draft of the executive order he was considering earlier this week reveals.
The order, which Mr. Trump planned to sign Saturday, would have sent notice within five days to Canada and Mexico that the U.S. intended to withdraw from NAFTA, the draft said. Under NAFTA's article 2205, this would have triggered a six-month countdown, after which the U.S. would have had the option of leaving the deal at any time.
"NAFTA has led to a massive transfer of wealth, an exodus of factories from our shores, successive waves of illegal immigration, and a surge in the United States trade deficit," the order reads. "At the same time, Canada has continued to exploit the American dairy and lumber industries."
The draft was obtained by the Financial Times and posted online Friday, two days after Mr. Trump backed down from signing it following pleas from Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto.
Mr. Trump had originally planned to sign the order at a rally in Pennsylvania marking his 100th day in office.
Instead, he will now sign a different order that launches an investigation into the country's trade deals. That probe, which will focus on "violations and abuses" by trading partners, will come back within six months with recommendations on how to fix current deals or whether to tear them up.
The order opens the door to renegotiating all of the U.S. trade agreements, including the terms of the World Trade Organization.
Commerce Secretary Wilbur Ross, who will oversee the investigation, told a White House briefing Friday that he was particularly concerned with the WTO, which governs trade between the U.S. and many major countries with whom it does not have a separate free-trade deal. He cited several WTO members with whom the U.S. has substantial trade deficits, including China, Japan and Germany.
He said Washington would not shy away from threatening to quit the WTO – or any other trade agreement – to get a better deal.
"It would be a funny-looking World Trade Organization without its No. 1 importer," he said.
The stillborn NAFTA withdrawal order sets a sweeping standard for the kinds of trade deals that would be acceptable to Mr. Trump. It declares agreements must "decrease America's trade deficit" and "strengthen the manufacturing and defence industrial bases of the United States." Because the U.S. consumer economy largely relies on inexpensive imported goods from other countries, making a lower trade deficit and increased manufacturing conditions of any deal would likely translate into overhauls of all of the country's current trade arrangements.
"It is the policy of this administration to renegotiate, or withdraw from, every trade agreement that does not serve the interests of the United States," it says.
The draft order marked the nadir in a week of salvoes from Mr. Trump against Canadian trade practices. First, he blasted Canada's system of price-fixing in the dairy industry as "very unfair" to American farmers. Then, he claimed Ottawa had "taken advantage" of the U.S. on softwood lumber and "outsmarted" American politicians.
Mr. Trump's climbdown drew conflicting explanations. Publicly, Mr. Trump and Mr. Trudeau claimed the latter's intervention changed the President's mind. Privately, Canadian officials confided they understood the order to be a negotiating tactic ahead of upcoming NAFTA talks, meant to crank up pressure on the other countries and push Congress to stop delaying the start of talks. Mexican Foreign Minister Luis Videgaray offered a similar explanation in a radio interview.
Mr. Trump also faced a revolt from business leaders and Republican senators alarmed by the economic damage any threat to leave NAFTA could cause. His own administration has been divided on such tactics, with a nationalist wing led by chief strategist Steve Bannon advocating tougher trade measures squaring off against a group of more business-like advisers, including Mr. Ross and economic czar Gary Cohn.
Even if Mr. Trump had signed the order, it would not have meant an immediate or inevitable withdrawal from NAFTA. Under the trade agreement's rules, a country may leave after giving six months' notice, but does not have to.