U.S. cancels NAFTA, then not, cancels, then not?

WASHINGTON — First, Donald Trump threatened to rip up NAFTA. Then he didn’t. This week he did again. Now, he’s saying he won’t. But maybe, he says, he’ll change his mind again and rip it up if he can’t get a good deal. What’s going on? “A negotiating ploy,” said Gary Hufbauer of the Peterson Institute, a top U.S. expert on the North American Free Trade Agreement.

“True to Trump’s style. The only surprise was the quick reversal (this week).” It’s not only Trump’s style. It’s basic negotiation theory. It involves the concept of negotiating clout stemming from the power to walk away. It belongs to whatever party least fears the WATNA — the acronym for Worst Alternative To A Negotiated Agreement.

And right now, it seems, some people aren’t sweating the WATNA.

For starters, there’s the U.S. Congress. Trump needs Congress to move and it hasn’t. It’s not only slow-walking the appointment of a trade czar, but has yet to approve a notice that would allow negotiations to start in 90 days. Canada’s stance is wait-and-see.

Trade expert Laura Dawson explains the basic challenge for the U.S. president: He needs other parties to be worried.

“The alternative to a renegotiated NAFTA has been the status quo. And the status quo is not too bad (for them),” said Dawson, the head of the Canada Institute at Washington’s Wilson Center.

“Traditional negotiating theory says, ‘Well, if you make that alternative much worse, by going to no agreement at all, then you might put your opponent in a more precarious position.””

Trump briefly moved in that direction this week.

Stories suddenly appeared in the Washington Post, Politico, CNN and the New York Times saying sources within the White House were seriously considering a draft executive order to cancel NAFTA.

The mere rumour of it happening had an impact.

It shaved almost two per cent off the Mexican peso and a third of a cent off the loonie. Congress expressed alarm. Business was up in arms. Barnyard squeals emanated from every imaginable sector of the agriculture industry: pork producers called the idea devastating, corn producers called it disastrous and the head of the U.S. grains lobby said he was shocked and distressed.

Within a day, Trump had withdrawn his finger from the trigger.

He insisted he’d been one or two days away from issuing a withdrawal notice, but had a change of heart during evening phone calls with the leaders of Canada and Mexico.

Trudeau said the president seriously raised the possibility.

“He expressed that, yes, he was very much thinking about cancelling,” Trudeau told reporters.

“We had a good conversation last night ... (I told him) disruption like cancelling NAFTA ... would cause short- and medium-term pain for a lot of families.”