Trade Compliance

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Trump Goes From “Tweaking” to Possibly “Terminating” NAFTA

Posted April 26, 2017

President Trump is considering an executive order withdrawing the United States from the North American Free Trade Agreement that is in the “final stages of review” and could be unveiled late this week or early next week, according to reports today by Politico and various other news sources.

Citing unnamed White House officials, the executive order – apparently crafted by Peter Navarro, head of the National Trade Council and Steve Bannon, Trump’s chief strategist – would unilaterally abrogate the trade pact under the provisions of NAFTA Article 2205, which states “a Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties.”

It is unclear, however, whether Trump would need the U.S. Congress to sign off on such an action, with some constitutional law experts believing that it would be entirely within the purview of the executive branch and others disagreeing. In either case, quitting NAFTA would at some point require Congress to repeal the agreement’s underlying statutory elements such as its enacted implementing legislation.

What would happen next is also fraught with uncertainty since the United States has not withdrawn from a trade agreement since 1866 when, ironically perhaps considering the present cross-border trade tensions, it abrogated the Canadian-American Reciprocity Treaty.

Some have speculated that signing (or threatening to sign) the order could merely be a hardball negotiating tactic meant to ramp up the pressure on Canada and Mexico and signal to Trump’s restive political base that he is serious about taking a tough stance on America’s trading partners.

The move comes not long after Trump abruptly reversed course on his often-repeated campaign promise to label China a currency manipulator and follows more than a week of increasingly hostile trade bluster directed instead towards Canada over contentious issues like dairy and lumber.  

While signing an executive memorandum last Thursday, Trump reiterated his factually baseless claim that NAFTA has been “a disaster for our country” and said “we’ll be reporting back some time over the next two weeks as to NAFTA and what we’re going to do about it.”

And in a thoroughly bizarre, rambling interview with the Associated Press over the weekend, the president said “I am very upset with NAFTA, I think NAFTA has been a catastrophic trade deal for the United States.” Accordingly, Trump stated that “I am going to either renegotiate it or I am going to terminate it,” and cryptically warned “if they don’t treat fairly, I am terminating NAFTA.”

However, while the Trump administration had sent a draft notice to Congress at the end of March that broadly outlined how it planned to renegotiate NAFTA to fix what it views as serious deficiencies in the deal, the following day it backtracked from the document, saying it was “not an accurate statement of where we are at this time.” Since then, supposedly because U.S. Trade Representative nominee Robert Lighthizer hasn’t yet been confirmed by a full Senate vote, the White House has done nothing more to advance the process (that Trump recently disparaged as being “absolutely ridiculous”) of formally notifying Congress of its intent to renegotiate NAFTA that would then trigger a 90-day countdown to the start of formal talks.

Further confusing matters, U.S. Commerce Secretary Wilbur Ross, the administration’s point man on the NAFTA talks, has said that trade disputes over two commodities that are not even currently encompassed by NAFTA somehow demonstrate that the trade deal “has not worked as well as it should” and has also said that he expects to complete a “rewrite” of the agreement within the year, a goal that most experts think is highly improbable.