Paul Frazer

Let­ter From the Swamp: NAFTA is Dead; Long Live NAFTA

Policy - - In This Issue - Paul Frazer

Don­ald Trump’s im­plau­si­ble pres­i­dency has al­tered ev­ery as­pect of life in Wash­ing­ton, from how the White House is cov­ered to how and whom lob­by­ists lobby. As vet­eran trans­planted Cana­dian Paul Frazer writes, when the go­ing gets fre­netic in the NAFTA ne­go­ti­a­tions, the Cana­di­ans should just chill.

The Trump ad­min­is­tra­tion’s first sum­mer has been atyp­i­cal for Wash­ing­ton, DC. When­ever we think the White House might be on track, an­other po­lit­i­cal me­teor sud­denly ap­pears and knocks ev­ery­thing off bal­ance. The ob­ject is not from outer space but from the very heart of the pres­i­dency. This is the pat­tern the pres­i­dent set on his first day in the White House and from week to week we wit­ness more chaos over­all and mi­nor progress on the pres­i­dent’s key agenda is­sues.

In Wash­ing­ton, long-awaited NAFTA ne­go­ti­a­tions be­gan against a back­drop of sig­nif­i­cant leg­isla­tive fail­ures, dogged po­lit­i­cal scan­dals and an on­go­ing set of in­ves­ti­ga­tions reach­ing into the pres­i­dent’s in­ner­most cir­cle.

The three NAFTA gov­ern­ments have mar­shalled their re­sources and have pre­pared their po­si­tion pa­pers in an­tic­i­pa­tion of an un­cer­tain out­come.

They have can­vassed their re­spec­tive stake­hold­ers, know their ne­go­ti­at­ing “asks” and have iden­ti­fied their “lines in the sand”. The po­lit­i­cal cal­cu­lus has been made in each cap­i­tal to de­ter­mine ne­go­tia­tors’ pa­ram­e­ters. Open­ing state­ments have been made; we know the gen­eral out­line of pri­or­i­ties and have a sense of the rhetoric that will at times por­tray the na­ture of the dis­cus­sions.

There will be ten­sion and, at times, high drama; this will not be a sur­prise. As in pre­vi­ous ne­go­ti­a­tions, po­lit­i­cal lead­ers will not only fo­cus on pri­or­i­ties and out­comes but must re­main open to shifts in stake­holder de­mands and be sen­si­tive to what com­pro­mises will be ac­cept­able at home. Dig­i­tal com­merce, in­tel­lec­tual prop­erty rights, dis­pute set­tle­ment and phar­ma­ceu­ti­cals are—among many com­plex sub­jects—on the agenda, but it is so­cial me­dia that will bring a very dif­fer­ent and pos­si­bly gamechang­ing el­e­ment to the ne­go­ti­a­tions en­vi­ron­ment. It will be a strategic weapon in­tended to in­flu­ence ne­go­ti­a­tions and the per­cep­tion of who has the edge.

Based on Pres­i­dent Trump’s ac­tions to date we should ex­pect the pres­i­dent to tweet ag­gres­sively to im­pact pub­lic opin­ion, speak to his po­lit­i­cal base, and serve to bring lever­age to bear on the talks. It is too early to tell to what de­gree this will be em­ployed and what ef­fect this will have on the ne­go­ti­a­tions them­selves or on po­lit­i­cal sen­ti­ment in the U.S., Canada and Mex­ico.

The re­turn of Congress ush­ers in a pe­riod of in­creas­ing do­mes­tic po­lit­i­cal dis­con­tent in Wash­ing­ton. Al­though Trump has the NAFTA ne­go­ti­a­tion he agreed to, this is very dif­fer­ent from the NAFTA with­drawal that he had as a cam­paign pri­or­ity. The U.S. en­tered ne­go­ti­a­tions at the di­rec­tion of a pres­i­dent who needs a ma­jor “win” to prove he can de­liver on a core cam­paign prom­ise. He has failed dra­mat­i­cally in his quest to pass much-her­alded leg­is­la­tion in the first eight months of his ten­ure and se­ri­ous po­lit­i­cal face is riding on these ne­go­ti­a­tions.

The pres­i­dent, if true to form, will fo­cus not so much on pol­icy as­pects but on his de­sired out­come and his po­ten­tial sig­na­ture on the doc­u­ment—pre­sum­ing there will be a doc­u­ment to sign.

Rhetoric and mar­ket­ing will be crit­i­cal el­e­ments in Trump’s sale of any new agree­ment to the vot­ers; some­thing each NAFTA leader will also need to do. But as with ev­ery­thing else about this ad­min­is­tra­tion, for Trump the ex­er­cise will be “over­sized”.

For the United States, the NAFTA ne­go­ti­a­tions will play out in a do­mes­tic set­ting of gen­eral chaos, leg­isla­tive bat­tles, ma­jor­ity party dis­unity, mi­nor­ity party ex­is­ten­tial strug­gles, Con­gres­sional in­ves­ti­ga­tions and the work of an in­de­pen­dent coun­sel. Bat­tles in the Congress and dis­agree­ment with the White House over the fed­eral bud­get, the debt ceil­ing, tax re­form and more health care de­bate will ab­sorb large amounts of po­lit­i­cal oxy­gen.

It will be very dif­fi­cult to in­su­late the ne­go­ti­a­tions from the daily events of a tur­bu­lent and po­lit­i­cally charged U.S. cap­i­tal.

We can’t min­i­mize the daily dis­trac­tion these fac­tors cre­ate for a pres­i­dent so in­ti­mately in­volved and who so openly and force­fully rebels against any chal­lenge to his stand­ing and that of his fam­ily. He is in­creas­ingly un­der siege and his ac­tions speak to the threat he per­ceives at hand. His in­cli­na­tion will be to cre­ate dra­matic dis­trac­tion to serve his self-preser­va­tion.

The Congress by law has an im­por­tant voice on the process and sub­stance of NAFTA ne­go­ti­a­tions. Many leg­is­la­tors are highly skep­ti­cal and in some crit­i­cal quar­ters there is out­right op­po­si­tion to key fea­tures of the ex­ist­ing agree­ment. The on­go­ing an­i­mos­ity across the po­lit­i­cal aisle and the dis­unity within the Re­pub­li­can party col­lide with a pres­i­dent who in­eptly deals with a Congress he can­not con­trol and with which there is an ever-widen­ing po­lit­i­cal gap.

Cana­dian and Mex­i­can lead­ers must take these fac­tors into se­ri­ous con­sid­er­a­tion and de­ter­mine what they can do to af­fect the broader en­vi­ron­ment while si­mul­ta­ne­ously pur­su­ing what will be tough ne­go­ti­a­tions on a wide range of sen­si­tive na­tional is­sues.

Based on Pres­i­dent Trump’s ac­tions to date we should ex­pect the pres­i­dent to tweet ag­gres­sively to im­pact pub­lic opin­ion, speak to his po­lit­i­cal base, and serve to bring lever­age to bear on the talks.

The ad­min­is­tra­tion would like to con­clude the NAFTA agree­ment by early 2018. This is very op­ti­mistic given the con­gres­sional cal­en­dar, po­lit­i­cal re­al­ity and cer­tainty of unan­tic­i­pated events. In some of the ar­eas to be ne­go­ti­ated, es­pe­cially in ar­eas new to NAFTA, there may be el­e­ments of the Trans-Pa­cific Part­ner­ship (TPP) pack­age that can be rea­son­ably trans­ferred to NAFTA, en­abling rel­a­tively swift agree­ment on se­lected im­por­tant ar­eas.

How­ever, no one can pre­dict when this fre­netic pres­i­dent will ag­gres­sively insert his views on any gen­eral and/or spe­cific as­pects of the ne­go­ti­a­tions. Tweets are not pol­icy but they will im­pact the at­mos­phere of

the ne­go­ti­a­tions, impinge on the U.S. ne­go­ti­at­ing team’s daily ef­forts and play with the psy­ches of the Cana­dian and Mex­i­can ne­go­tia­tors.

Pres­i­den­tial tweets can put ev­ery as­pect of the NAFTA ne­go­ti­a­tion to the test of pub­lic scru­tiny. We can ex­pect Trump, in­creas­ingly iso­lated po­lit­i­cally, to wade force­fully into the ne­go­ti­a­tions in his own way.

The chal­lenge for ne­go­tia­tors and po­lit­i­cal lead­ers will be to see these tweets for what they are—elec­tronic out­bursts sig­nal­ing the pres­i­dent’s per­cep­tion of events and/or his im­me­di­ate sense of the pre­car­i­ous­ness of his sit­u­a­tion. These im­pulses will re­flect his ev­ery in­stinct to de­feat the other two part­ners in the ne­go­ti­a­tions. In his view, suc­cess will be on his terms; any prod­uct will have to have his stamp all over it. Can Canada and Mex­ico avoid ris­ing to the bait or in some cases play these fac­tors to their ad­van­tage?

For Canada, as For­eign Af­fairs Min­is­ter Chrys­tia Free­land put it on Au­gust 14, “the soft­wood lum­ber ne­go­ti­a­tions will con­tinue in par­al­lel with the NAFTA ne­go­ti­a­tion”. The po­lit­i­cal and strategic chal­lenge will be in­creased. We know how soft­wood has had a cor­ro­sive im­pact on the bi­lat­eral re­la­tion­ship. If Cana­di­ans see the U.S. foot drag­ging, carp­ing from the Congress, and less than good faith on soft­wood, this is­sue could re­gret­tably in­fect the NAFTA ne­go­ti­a­tions.

Canada must main­tain its en­er­getic strategic ad­vo­cacy in the United States. Ottawa, the prov­inces and other Cana­dian stake­hold­ers must con­tinue to travel the coun­try tar­get­ing Wash­ing­ton and else­where those lead­ers crit­i­cal to Cana­dian in­ter­ests.

By the end of July, Pres­i­dent Trump’s per­sua­sive pow­ers with the Re­pub­li­can con­gres­sional ma­jor­ity had se­verely di­min­ished. His threats to Se­na­tors iden­ti­fied as weak sup­port­ers or op­po­nents on health care re­form and re­peal had lost their im­pact. The Congress has demon­strated that on for­eign af­fairs it will pass leg­is­la­tion that both di­rects and con­strains the pres­i­dent, no­tably on the eco­nomic sanc­tions pri­mar­ily aimed at Rus­sia.

It is a tru­ism that ev­ery state­ment and ev­ery vote in the House and the Se­nate is de­ter­mined in the end not by party loy­alty but on the ba­sis of po­lit­i­cal sur­vival. In­di­vid­ual de­ci­sions are made ac­cord­ing to the po­lit­i­cal cal­cu­lus of each rep­re­sen­ta­tive or se­na­tor con­sid­er­ing con­stituent in­ter­ests and sen­ti­ments and how a vote will af­fect his or her re-elec­tion prospects.

For the 435 Mem­bers of the House, the Novem­ber 2018 mid-term elec­tions loom large and evoke a de­gree of skit­tish­ness about re-elec­tion. Those Se­na­tors not up for re-elec­tion un­til 2020 are more im­mune from the im­me­di­ate threats; for the mo­ment their time-frame is like a bul­let­proof vest when it comes to at­tacks from the pres­i­dent and his acolytes.

The mood in Wash­ing­ton is gloomy; ev­ery­one feels pum­meled on a daily ba­sis. Pres­i­dent Trump is un­der siege and the Congress is in­creas­ingly de­fi­ant of the White House. Re­pub­li­can com­mit­tee chairs, es­pe­cially in the Se­nate, are flex­ing their po­lit­i­cal mus­cles. They have many ways to out wait a pres­i­dent, to deny him timely con­fir­ma­tions of those nom­i­nated to se­nior po­si­tions or to thwart his bud­get and pol­icy wishes. They, with their House coun­ter­parts, set the con­gres­sional agenda; in some cases the agenda for the rest of 2017 is set very much in stone. This leaves lit­tle room for the pres­i­dent to in­flu­ence or bully Mem­bers of Congress to fol­low his com­mands.

The Congress has a strong voice on NAFTA and we should ex­pect that voice to be loud and clear re­gard­less of Trump’s ne­go­ti­at­ing pri­or­i­ties. The Congress is show­ing greater de­ter­mi­na­tion to more fully play a sep­a­rate and equal role vis-à-vis the White House. Se­na­tors and House Mem­bers are more knowl­edge­able (in part thanks to Canada’s ac­tions) about the fun­da­men­tal im­por­tance of NAFTA trade and in­vest­ment. Their broad pri­or­ity is that the ne­go­ti­a­tions do no harm to the eco­nomic and trade re­la­tion­ship crit­i­cal to the eco­nomic well-be­ing of their dis­tricts or states. They will not eas­ily be rolled by the pres­i­dent on these is­sues.

Given what we have wit­nessed these last eight months, NAFTA ne­go­tia­tors will strug­gle to keep the talks at the ta­ble and less in the realm of pub­lic po­lit­i­cal mud wrestling that the White House seems to fa­vor. At the end of the day, as some may spec­u­late, per­haps the NAFTA we know be­comes the “non-NAFTA” and is called the “North Amer­i­can Agree­ment on Eco­nomic Pros­per­ity and Job Cre­ation” eagerly mar­keted across the United States as a huge win for the Pres­i­dent. As in other suc­ces­sions: NAFTA is dead; long live NAFTA.

Se­na­tors and House Mem­bers are more knowl­edge­able (in part thanks to Canada’s ac­tions) about the fun­da­men­tal im­por­tance of NAFTA trade and in­vest­ment. Their broad pri­or­ity is that the ne­go­ti­a­tions do no harm to the eco­nomic and trade re­la­tion­ship crit­i­cal to the eco­nomic well-be­ing of their dis­tricts or states. They will not eas­ily be rolled by the pres­i­dent on these is­sues.

Paul Frazer is Pres­i­dent of PD Frazer As­so­ciates in Wash­ing­ton, DC where he ad­vises Cana­dian cor­po­rate and pub­lic sec­tor clients on how best to pro­mote and pro­tect their in­ter­ests in the United States. He is a for­mer Cana­dian diplo­mat and has served as Min­is­ter, Pub­lic Af­fairs at the Cana­dian Em­bassy in Wash­ing­ton, and on post­ings in New York, War­saw, and Prague (as Am­bas­sador).

Adam Scotti photo

Prime Min­is­ter Trudeau and Pres­i­dent Trump prior to their joint news con­fer­ence at the White House on Fe­bru­ary 13.

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