NAFTA renegotiations are going nowhere
America First, middle and last policy means no compromise, John Ivison writes.
One day last month, Donald Trump was in the Oval Office coaching his top trade negotiator, Robert Lighthizer, on the art of the deal.
“You’ve got 30 days and if you don’t get concessions then I’m pulling out,” the U.S. politics and business website Axios reported the president as saying, a reference to the U.S.-Korea trade deal.
“Okay, well I’ll tell the Koreans they’ve got 30 days,” Lighthizer replied.
“No, no, no,” Trump interjected. “That’s not how you negotiate. You don’t tell them they’ve got 30 days. You tell them, ‘This guy’s so crazy he could pull out any minute.’ And by the way, I might.”
The White House did not dispute Axios’s account — which is instructive, because the same dynamic is at play in the NAFTA negotiations.
They will enter their fourth round next Wednesday in Washington. Trump has already tweeted that both Canada and Mexico are “being very difficult” in the negotiations and he “may have to terminate.”
The question is: how can any government strike a deal with a president whose policy is America First, middle and last? The emerging consensus among trade officials and watchers is that it can’t be done.
“We will come very close to the precipice in a week in Washington — and we may go over the precipice,” predicted Lawrence Herman, a veteran trade expert.
While bread-and-butter trade issues are being dealt with quickly by the professional negotiators, the mandate from the president says the Americans have to win concessions and give up nothing. Adding to the complication is that Congress is at odds with the president, leaving the U.S. trade negotiators unsure who is calling the shots.
The overarching goal for Trump is an end to the “theft of American prosperity” in the form of unfair trade surpluses.
Canadian global affairs minster Chrystia Freeland has pointed out that Canada has a manufactured-goods deficit with the U.S., and that this country is not Trump’s problem. The message: Canada is not taking blue-collar jobs away from the U.S.
But that is unlikely to persuade Trump not to put forward proposals in Washington next week that both Canada and Mexico deem unacceptable — namely, a sunset clause that would see NAFTA 2.0 expire after five years; an end to independent bi-national panels to arbitrate disputes; and an increase in U.S. content in autos manufactured in those two countries.
In an article in The Washington Post late last month, U.S. Commerce Secretary Wilbur Ross said that while NAFTA “rules of origin” provisions were meant to restrict non-NAFTA content in goods, in fact the opposite is happening.
“If we don’t fix the rules of origin, negotiations on the rest of the agreement will fail to meaningfully shift the trade imbalance. Our nation’s ballooning trade deficit has gutted American manufacturing, killed jobs and sapped our wealth. That is going to change under President Trump and rules of origin are just the beginning,” he wrote.
The Canadian response to such provocative statements has been to smile and search for a compromise.
But how can there be compromise when none is on offer? The Americans are not trying to set the rules of the game, they are attempting to engineer specific outcomes to their advantage, without budging on any front.
Trump’s goal is to reduce U.S. trade deficits by rewriting the rules of what he calls “the worst trade deal ever.” But it’s not at all clear that the goal is achievable, even were Canada and Mexico to agree to roll over.
Herman believes the toxic political atmosphere in Washington would make it hard to get Congressional approval for a revised NAFTA. “The Republicans are deeply divided on trade policy matters and Washington insiders say few if any Democrats would ever vote for a NAFTA 2.0, whatever its terms,” he said.
The flip side of this is that it would be equally difficult for the president to rip up the existing agreement. His threat to “terminate” is a bluff.
The prevailing view is that Trump would not only need the authorization of Congress from a constitutional point of view, he would also require it to enact a slew of legal amendments necessary to put the withdrawal into effect.
We will likely know within a week whether or not negotiations are going to collapse.
But Trump will be aware that they are going nowhere — paving the way for him to go Mad Max on those perceived to be blocking his agenda.
While the existing NAFTA agreement would still be in place if talks fail, Trump could nevertheless use his executive authority to make life difficult for Canada and Mexico — for example, by taking administrative action to slow clearance at the border, or by expanding Buy American procurement policies.
An absence of goodwill in the White House would make it more difficult to settle bilateral disputes such as the BoeingBombardier spat and the softwood lumber dispute.
Canada’s best hope is the personal relationship between the president and the prime minister. By all accounts, Trump sees Justin Trudeau as a winner. And he likes winners.
It’s a thankless task, one the prime minister probably views in much the same fashion Hercules regarded cleaning out the Augean stables.