The NAFTA Endgame Strategy

As the beginning of May looms, the pace of North American Free Trade Agreement (NAFTA) negotiations has picked up, as has discussion about the endgame—how to get an agreement through the implementation process. The quicker pace is due to the administration’s realization that the implementation process spelled out in the 2015 Trade Promotion Authority bill provides for a 195-day period between the day an agreement is announced and the day it can be sent to the Congress. (That period can be longer—the president can always delay submitting an agreement—but it can only be shorter if the International Trade Commission produces its evaluation of the agreement in less than 105 days. It did not speed up its work when it evaluated the Trans-Pacific Partnership agreement, and there is no reason to expect this time around will be any different.)

That means the administration needs to announce an agreement by May 1 or shortly afterwards if it wants a congressional vote in 2018. Given the uncertain outcome of the election, the White House is probably wise to try to get this done this year. That raises three issues for discussion:

1. Completing the negotiations, since the clock cannot start ticking until then;
2. Deciding whether to submit the agreement to Congress or try to bypass it on the grounds that it would not require any changes in U.S. law;
3. Developing a strategy for congressional passage if the bypass option is rejected.

With respect to the negotiations, there is little new to say at this point that would not be rank speculation. Most of the high-level effort appears to focus on auto rules—no surprise there, given the president’s obsession with cars and steel. That does raise the possibility of a Korea-like outcome, where the president is bought off with short-term market access concessions, and other issues are thrown over the side. It does seem that getting an agreement in the short period of time between now and the end of the month will require the United States falling off many of its poison pills, but that has not happened yet, and we must simply wait to see how that plays out.

A recent idea floating around the blogosphere is bypassing Congress—deciding that the agreement contains nothing that would require a change in U.S. law and that thus there would be no need for an implementing bill. This idea began to fade even as it was being launched both because it would seriously irritate the Congress, many members and staff of which can recite Article 1, Section 8 of the Constitution from memory, and because it would be hard for the United States to achieve its objectives without changing law.

Third, a congressional strategy will be a challenge. Right now, both parties are disgruntled and divided on trade. Democrats have decided to oppose the president on everything—the same strategy the Republicans pursued in the Obama administration—but some of them like his trade policy. The Republicans don’t like his trade policy but are afraid to oppose him. Ambassador Robert Lighthizer is making a play for Democratic votes by trying to address labor issues and dropping investor-state dispute settlement. Those moves will probably cost him more Republican votes than he will gain in Democratic votes, the latter being notorious for making aggressive demands and then voting “no” anyway. However, the context may be more important than the content. If the president, as expected, both submits an implementing bill and simultaneously announces his intent to withdraw from the current NAFTA, he gives Congress a binary choice, essentially his way or the highway. If Congress does not pass the new NAFTA, there will be nothing. The status quo, which most members of Congress probably prefer, would not be an option. That is the kind of hardball tactic that will irritate Congress, and it will come back to bite Ambassador Lighthizer later on, but it is not likely to be enough to defeat an implementing bill. So, the president could well get his way, unless, of course, the bill is so horrendously bad that even the invertebrate members of Congress vote against it. All signs are, though, that it may be bad, but it won’t be that bad, and that most Republicans and some Democrats will not be willing to stand up to the president and oppose it.

It must be mentioned again, of course, that there is a better way. Negotiate an agreement that is all upgrades with no poison pills, but the president is apparently determined to pass up that opportunity in his search for bringing the golden fleece of traditional manufacturing jobs back home. Sadly, the rest of us know that it is our workers who will end up being fleeced.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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