If there's one thing President Trump has been very clear on, it's that he hates the North American Free Trade Agreement. He has called NAFTA "the worst trade deal maybe ever signed anywhere but certainly ever signed in this country." Following his election win, Trump brought Mexico and Canada back to the bargaining table to reshape the trade treaty.
The president has since threatened many times he'll pull out of NAFTA entirely if he doesn't get a deal to his liking. With seven rounds of negotiations over and no conclusion in sight, it increasingly looks like Trump will have to make good on that threat.
There's just one problem: He can't. Not in a way that would matter at any rate.
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There are actually two things at work here: There's the NAFTA treaty agreement, and then there's the domestic legislation that implemented NAFTA.
Trump can unilaterally pull us out of the first: "Under his constitutional foreign policy powers, Trump can send a letter on U.S. letterhead to Canada and Mexico saying, 'We are no longer members of NAFTA,'" Todd Tucker, a political scientist and a fellow at the Roosevelt Institute, with a focus on global economic governance and trade, explained to The Week.
But on its own, that's just a formality. Congress had to pass laws to lower tariffs and deliver all the other policies that America, Canada and Mexico agreed to: Namely, the North American Free Trade Agreement Implementation Act. Trump can't unilaterally cancel it. Constitutionally, scrapping that law would itself be legislation, requiring a congressional vote and a presidential signature, same as any other law.
In other words, if Trump announced that America was pulling out of NAFTA, it would be true in name only. Mexico and Canada would continue to get all the lower tariffs and other policy benefits of NAFTA until Congress acted.
And Trump's chances of getting Congress to act are pretty close to zero.
The main reason is that Trump's own Republican Party doesn't agree with him on trade issues. Most of the GOP would like to see lower trade barriers and even more liberalization, not the higher tariffs and nationalist retrenchment Trump is selling. The president's luck might change if Democrats retake Congress in 2018: The populist wing of the party in particular is pretty sympatico with Trump's general stance on globalized trade and the harm it's done to American workers. But no Democrat would like the optics of cooperating with this president, given how poisonously unpopular he is with the left.
On top of all of that, there's the Senate. An actual repeal of NAFTA laws would have to clear the filibuster's 60-vote hurdle. Since the chamber gives two senators to each state, regardless of size, it grants disproportionate representation to smaller rural states. And some of NAFTA's biggest fans are American agricultural businesses. (One of the less-appreciated stories of NAFTA is how cheap U.S. agricultural exports threw tons of small Mexican farmers out of work.) Any repeal of America's benefits for Canada and Mexico will lead to retaliatory repeals of those countries' benefits for America. Major U.S. agribusiness — and the senators who represent it — wouldn't like that one bit.
"The math just doesn't work out to a majority any way you slice it," Tucker said.
If the NAFTA talks collapse, what are the president's options?
Trump could declare defeat: Blame the impasse on global elites and the D.C. establishment, and hope that keeps his base fired up and his brand in good standing. But declaring defeat also seems distinctly un-Trump-like.
He could go ahead and send that purely formal letter. That would be more in keeping with Trump's instincts for showboating.
But it would also cause a lot of additional headaches. At this point, America is enmeshed in multiple overlapping trade treaties, most especially the World Trade Organization (WTO). If Trump sent his letter, Canada and Mexico would still get sweeter trade deals under U.S. law than other WTO members. But there would no longer be an official treaty justifying that special treatment. Under WTO rules, lots of other countries could then pick fights with the U.S., demanding the same deal.
Trump could get really brazen, and illegally instruct the Commerce Department to charge Mexico and Canada higher tariffs as if Congress had repealed NAFTA, even though it hasn't. But then the White House would likely get sued by every American business that imports anything from those two countries.
Trump's last option might be to eat some modest changes to NAFTA, and try to spin that as a win.
The administration is pushing two big ideas along these lines. It wants to roll back NAFTA's Investor-State Dispute Settlement (ISDS) rules, which basically allow businesses to sue NAFTA countries over regulations and such. Both the Tea Party right and the Sanders left hate this setup for a variety of reasons. Second, the White House wants to alter NAFTA's rules of origin; force Canadian and Mexican businesses to buy a lot more parts and inputs from America, rather than from abroad.
But while Canadian popular opinion is generally with American opinion on the ISDS rules, Trudeau's government prefers watered-down procedural changes. And Mexico still sees ISDS as a way to attract more foreign investors.
Meanwhile, both countries hate the rules of origin change, since it would make doing business more expensive for their companies. According to Tucker, the latest reports from the NAFTA talks suggest the Trump administration has given up on the latter idea.
That leaves milquetoast changes, like updating NAFTA to deal with e-commerce and what not.
Basically, all of Trump's options are bad for Trump. The president has just been dealt a bad hand on NAFTA. But it'll be interesting to see how he plays it.
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