Trump Is Still Threatening To Pull Out Of NAFTA – Except Maybe He Can’t

Congress approved a law implementing the trade deal, and it is unclear whether Trump can unilaterally undo that.
YURI CORTEZ via Getty Images

WASHINGTON – 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 the U.S. 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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