For two years, first as a candidate and then as president, Donald Trump has vowed to rip up the existing trade pact with Mexico and Canada if he could not negotiate a better deal.
Now,
with those negotiations imperiled over U.S. demands, it appears that
Trump may not have the legal authority to keep that promise.
Because
the North American Free Trade Agreement was implemented by legislation
that passed both chambers of Congress in 1993, it would take a new act
of Congress to end U.S. participation.
At
least that’s the view some NAFTA proponents are taking. Others
disagree, and believe Trump, under a 1974 law, has the ability to
withdraw – although his doing so would almost certainly bring legal
challenges.
Jon
Johnson, who helped negotiate the original NAFTA for the Canadian
government, said he personally believes Trump lacks the authority to
pull out on his own, but in any event is certain that Trump taking that
step would generate an ugly fight over separation of powers in the
United States. “Unless he had the concurrence of Congress, it would be a
real mess,” he said.
Wendy
Cutler, who worked for 30 years in the United States Trade
Representative’s office, said the president has the ability to withdraw
but that it’s unclear what would happen to the schedule of tariffs that
were approved under the agreement. “Different lawyers have different
views on this,” said Cutler, who ended her tenure in the office as
deputy trade representative under former President Barack Obama.
Trump
has stated that he has the authority to pull the U.S. out of the
two-decade-old trade deal. “I do not have to go back to Congress or to
the Senate,” Trump told Mexican President Enrique Peña Nieto according
to a leaked transcript of a phone call last year. “I do not need the vote of 400 people. I have the powers to do all of this.”
The
issue of Trump’s authority is boiling to the surface now because the
sixth round of re-negotiations is set to begin this weekend in Montreal.
The U.S. has angered both Mexico and Canada with what those nations are
calling “poison pill” demands that seem more designed to sabotage the
talks entirely than achieve an equitable resolution.
The
U.S., for instance, is insisting that NAFTA automatically expire after
five years unless it is reauthorized – a change that Canada and Mexico
do not support. Nor do the two countries support a U.S. demand that
automobiles must have 50 percent of their content manufactured in
America to avoid tariffs. Currently, cars must have 62.5 percent of
their content made in the three-country trading bloc to avoid customs
duties, but there is no country-specific content requirement.
Trump
has argued that he wants trade to be “fair” and “reciprocal” – neither
of which appears to apply in the requested automobile rule.
“I don’t think they’re arguing to anybody that it’s fair,” Johnson said. “I think they’re arguing that they want it.”
He
said that some disputed items – such as Canada’s stiff tariffs on dairy
products – had actually been addressed in the lengthy negotiations on
the Trans-Pacific Partnership, a 12-country agreement that had included
all three of the NAFTA members in addition to countries in east Asia and
South America. Trump withdrew from that agreement shortly after taking
office a year ago, but it had never been approved by Congress. (The
remaining 11 nations are now moving forward with the agreement without
the U.S.) Despite that, Canada could well agree to terms similar to
those it accepted on dairy in the new NAFTA talks, Johnson said.
The
biggest obstacle to those negotiations, he added, was Trump’s repeated
attacks on the agreement itself. “He made a huge deal out of what a
horrible deal NAFTA was,” Johnson said. “It was the worst deal ever. It
was terrible. You pick your adjective. He used them all.”
Both
farming interests and the business community have lined up solidly in
favor of keeping NAFTA, arguing that millions of U.S. jobs would be lost
if supply chains that run back and forth across two borders are
suddenly disrupted.
Perhaps
responding to those warnings, Trump’s message on NAFTA now has become
more mixed – at times suggesting that a good deal will emerge from the
new negotiations while occasionally continuing his long-standing
disparagement.
“NAFTA is a bad joke!” Trump wrote in a Twitter statement last week.
“I
don’t know where he stands on it. And I don’t think Mr. Trump knows
where he stands on it,” Johnson said. “I think Mr. Trump changes his
mind day to day.”
As in so many other areas, the root cause of the problem appears to be Trump’s fundamental ignorance about policy details.
Trump
claimed expertise on the matter because his branded clothing was
manufactured overseas and because foreigners often buy condominiums in
his branded buildings. Despite this, Trump as a candidate and then as
president has continued to make confusing and baseless assertions about
trade. In meetings with German Chancellor Angela Merkel, Trump appeared
to believe the U.S. had a separate trade agreement with Germany, which
it does not. He has accused South Korea – which also has a free trade
agreement with the U.S. – of taking advantage of American taxpayers.
And, most famously, he has repeatedly conflated the U.S. trade deficit
with the nation’s accumulated debt.
“The
fact that he keeps insisting that trade deficits mean we’re being
ripped off is a clear, clear sign that he understands nothing about
trade,” said Monica de Bolle, a macroeconomist and trade expert at the
Peterson Institute. “You’re not getting ripped off. Countries have trade
deficits when they consume more than they produce.”
Trump,
she believes, is being driven by the narrow slice of his supporters who
see international trade as the basis of their woes. “Trump is trying to
appease everybody who thinks they lost their job in the manufacturing
sector because of trade,” she said. “That’s why this sounds so ‘Alice in
Wonderland-’ like.”
Christopher
Wilson, an expert on Mexican trade with the Wilson Center, said the key
to resolving the negotiations will be finding something relatively
innocuous to Canada and Mexico that Trump can claim as a win.
“Something
the Trump administration can call a victory, something for the American
worker, that doesn’t damage the economies of North America,” Wilson
said, but then added: “I don’t think there’s a clear vision of what a
win looks like that doesn’t involve a withdrawal.”
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