LOOKING FOR A NAFTA WIN
Trump needs to regain strength
It’s hardly a summer blockbuster, but “Summary of Objectives for the NAFTA Renegotiations,” published on Monday by the U.S. Trade Representative, is kind of pleasant reading, at least in so far as what it doesn’t say. Namely, it doesn’t, in and of itself, spell the end of the North American Free Trade Agreement.
To Canadian negotiators, who will join their American and Mexican counterparts in Washington, D.C., next month to begin talks, the USTR’s wish list might suggest just how far the White House has backed off from Donald Trump’s anti-trade campaign rhetoric. This was the guy who, on the stump, assailed NAFTA as a killer of jobs, companies, currencies and even puppies. OK, I made the puppies thing up, but he did call NAFTA “perhaps the greatest disaster trade deal in the history of the world.”
Well, times have changed, and the USTR wish list is hardly a protectionist screed. Its list of objectives are fairly consistent with previous U.S. trade policy, and are described in language employed by free traders for a long time. There’s some bafflegab in the preamble suggesting NAFTA has inflated America’s trade deficit with Canada and Mexico, but the document throws down no gauntlets. Though it does express an ambition to address “non-tariff barriers” to trade, there’s no specific mention of Canada’s precious agricultural supply management system, or of protection of other industries through ownership restrictions, or of softwood lumber. At one point, it even offers that renegotiating NAFTA can “benefit the economies and populations of the United States and of our trading partners.”
It’s all very Kumbaya, really. We won’t know what this new spirit of beneficence means for Canada and NAFTA until negotiations begin, but at the moment, fears the Americans want to scrap the deal look unfounded. Perhaps more important, the negotiating position of Canada and Mexico is stronger than it was two months ago, when Trump sent official notice to Congress that he would seek to reopen the trilateral accord.
Politically, Trump has been weakened by legislative bumbling and scandal. The repealand-replace debacle over Obamacare has deepened divisions within the Republican Party and revealed the president’s inability to foster meaningful consensus. On trade, there are already conflicts: senators John McCain and Ben Sasse opposed the confirmation of Trump’s pick for trade representative, Robert Lighthizer. (Lighthizer was still confirmed, after a long delay, with bipartisan support.) On the other hand, NAFTA is one of the exceedingly few areas where Trump might find common ground with soft-on-free-trade Democrats. But with his popularity plunging and his administration racked by investigations over Russia’s election meddling, he might not find many Dems willing to play ball. As well, on substance, the published objectives from the USTR likely don’t draw a hard enough line to sway the opposition across the aisle.
Trump, however, needs a win. If NAFTA renegotiation is going to be it, then he must walk a fine line. On the one hand, he has to deliver enough change to claim victory, not to mention consistency with his campaign rhetoric; on the other hand, he has to try not to further alienate old-school, free-trade Republicans whose support he may need. Even worse for him, selling a new NAFTA to Congress will take political acuity, strong negotiating skills and moral suasion — none of which Trump seems to possess in abundance.
On the surface, the administration’s weakness should put Canada and Mexico in a good negotiating position. If they’re smart, they will use it to help Trump get a deal that he can sell to Congress and the American people.
Why would they want to do that? For one thing, despite a few points of contention, several elements of the USTR list make good sense: for example, modernizing NAFTA to better account for digital trade and cross-border data flows, and more effective ongoing co-operation among the partners. Ironically, a lot of this stuff had already successfully been negotiated — in the Trans Pacific Partnership agreement. If only Trump hadn’t pulled out of the TPP as his first presidential act, he would already substantially have what he’s (officially) looking for in a new NAFTA, only with a lot more countries.
Oh well, better NAFTA than nothing, I guess.
The other reason to help the U.S. get a deal is straightforward: the alternative could be worse. Trump might be weak politically, but he’s still president, and the president has a lot of power when it comes to trade. The Trade Act of 1974 gives the White House extremely broad authority. The president can name other countries currency manipulators, invoke punitive tariffs for unfair trade practices and withdraw from trade agreements — all unilaterally.
That’s a big stick, and if Trump can’t swing a deal, his base would probably love to see him use it. Canada and Mexico shouldn’t take that possibility lightly.
Politically, Trump has been weakened by legislative bumbling and scandal. The repealand-replace debacle over Obamacare has deepened divisions within the Republican Party.