Trump does about-face on threats to NAFTA
U.S. president won’t ‘terminate’ pact, seeks to rework rules to benefit all
U.S. President Donald Trump has told the leaders of Canada and Mexico that he will not pull out of the North American Free Trade Agreement.
The White House made the surprise announcement in a read-out of calls Wednesday between the world leaders.
The White House says the president “agreed not to terminate NAFTA at this time.”
Instead, Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto “agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation” of the trade deal to “the benefit of all three countries.”
Trump has blamed NAFTA for American job losses and says he believes “that the end result will make all three countries stronger and better.”
Earlier Wednesday, the White House was telling U.S. media that it was mulling a notice of withdrawal from NAFTA, applying shock treatment on other parties to get cracking on negotiations under the threat of having the trade deal obliterated.
The administration had complained lately that American lawmakers were dragging their feet on naming a trade czar and had been excessively slow in approving the 90-day legal notice to kick off negotiations.
But a move such as exiting NAFTA would appear more dramatic thantangible. But one thing’s certain: the move would scare people.
“It would be a nothing. But it would be inflammatory,” said Jon Johnson, a negotiator in the original Canada-U.S. trade agreement, a government adviser on NAFTA and now a C.D. Howe Institute analyst. “I suspect many in the press would freak. I would.”
He pointed out that NAFTA does not have an automatic-exit clause.
Its only reference to withdrawal is a single 34-word sentence, Article 2205, which says: A party may withdraw after providing six months’ written notice, which means that any president declaring a pullout would simply be allowed to do it six months later.
What a withdrawal threat could do is frighten multiple actors: Canadian and Mexican negotiators, U.S. lawmakers and markets. A Canadian official said last week the government doesn’t intend to be intimidated: “We have time. And we don’t freak out.”
But markets appeared slightly jolted by the latest news. The Canadian dollar lost more than a third of a cent Wednesday and the Mexican peso got hit harder: it was down more than 1.5 per cent on the day.
There were also jitters in Congress. Pro-NAFTA senators urged Trump to be careful.
The Republican majority whip, Sen. John Cornyn, warned: “I think we’d better be careful about unintended consequences.”
Sen. John McCain told CNN, of a NAFTA withdrawal: “It will devastate the economy in my state (Arizona) … I hope he doesn’t do that.”
One trade expert said he viewed this as a negotiating tactic — a threat to Congress.
“I think he is bluffing,” said Canada-U.S. trade lawyer, Mark Warner.
“I think by threatening a nuclear option he is hoping to get Congress to speed up … (and) stop getting in way. If there is an executive order, it’s probably more likely to be weaker than his rhetoric.”