Hard line on NAFTA takes a softer turn
MODERATION: Draft notice from Trump contains no extreme campaign rhetoric
Just as he pledged on the campaign trail, President Donald Trump is attempting to rewrite the rules that govern trade between the U.S. and its neighbors. But he’s finding, as he has on health care and immigration, that making consequential changes is harder than promising them.
The set of rules in question is the 23-year-old North American Free Trade Agreement between the U.S., Canada, and Mexico, which Trump called the “worst trade deal maybe signed anywhere.” But the White House circulated a draft of the notice that must be issued to Congress 90 days before any talks can begin, and the changes proposed in it are relatively minor.
“We’re all scratching our heads as to what exactly they might do,” says Tony Bennett, president of the Texas Association of Manufacturers. “How do you try to fix something that ain’t broke?”
Any potential overhaul has perhaps the largest conse-
for Texas, which depends heavily on trade with Mexico, both as a market for the state’s goods and as a source of laborintensive components for higher-end products. Over the past few months, Trump has talked about imposing a 20 percent border tax or ditching NAFTA altogether.
Trump’s deputies, however, have softened their rhetoric recently. National Trade Council chairman Peter Navarro said this month that he wanted North America to become a regional manufacturing “powerhouse,” a reassuring signal to the multinational companies that have used the rules to construct complex, integrated supply chains that move parts, products and finished goods across borders.
Accordingly, the draft notice to Congress contains no hint of the extreme measures that Trump proposed on the campaign trail, sticking instead to procedural improvements and new chapters for sectors that didn’t exist in the 1990s.
Ironically, many of the potential tweaks were written into the 13-nation Trans-Pacific Partnership trade deal with Asia, which Trump slammed on the campaign trail and kiboshed in his first few days in office.
“The sense is that we’re not moving towards these draconian measures, or blowing up NAFTA, or anything like that,” says Christopher Wilson, deputy director of the Mexico Institute at the Wilson Center, a Washington think tank. “I think we’re headed to a long, small negotiation.”
Any attempts to drastically restrict trade would have run into a firewall of Texas lawmakers who hold key positions in Congress, such as Sen. John Cornyn, the Senate majority whip, and House Ways and Means Committee Chairman Kevin Brady of The Woodlands, who have made clear that any changes to NAFTA should expand rather than curtail trade.
Mexico itself is unlikely to agree to anything that would be damaging to its economy or its national pride — especially while the Trump administration is also pursuing other initiatives Mexicans dislike, such as deporting undocumented immigrants and building a wall on the border.
But it may not object to changes proposed in the administration’s draft notice, since Mexico was already on board with the TPP, which served the purpose of updating NAFTA.
Still, Al Zapanta, president of the U.S.-Mexico Chamber of Commerce, doesn’t expect the negotiations to move quickly.
“I do not think the whole discussions on NAFTA will be for another six months,” Zapanta says. “There will be meetings, there will be positioning, but when you look at the secretary of state, and the secretary of homeland security, their focus was on immigration and border security.”
Basic questions around the negotiations still remain, such as whether Canada will be a part of them.
As the process grinds forward, companies that depend on NAFTA have made it clear to their elected officials how much the trade deal matters to them. Mexican officials are pleading with Texas’ state legislators to support the trade deal that binds the two economies together.
One politician has been oddly quiet: Texas Gov. Greg Abbott, who has said little about trade while strongly supporting Trump on immigration and border security issues.
His office did not respond to a request for comment, but in an interview with economic development trade journal Site Selection this month, he expressed confidence that the president wouldn’t do anything that would harm the state.
“If policies were implemented that would be bad for trade and hurt jobs, he wouldn’t do it, because that would cause him to fail in his goal,” Abbott said. “We can improve on NAFTA in ways that will be beneficial to Texas and the U.S. on the one hand and Mexico on the other.”