It's official: US will renegotiate, not exit, NAFTA

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Dive Brief:

  • President Donald Trump told both Canada’s Prime Minister and Mexico’s President he intends to renegotiate the North American Free Trade Agreement (NAFTA), not leave it, according to a White House readout of the two phone conversations on Wednesday.
  • The news comes after leaked reports claimed The White House was considering a full exit to meet the President’s campaign pledge.
  • However, Bloomberg reports that the President told White House reporters he would still be willing to terminate the trade deal if he’s “unable to make a fair deal.” The President also notes  a quick withdrawal would be a shock to the system. 

Dive Brief:

Speculation on whether the President will exit NAFTA is old news, but all signs — including an official White House statement — point to a renegotiation. However, the most important step in this process did not come from the President’s words, but from a U.S. Senate committee’s recent approval of Robert Lighthizer as nominee as U.S. Trade Representative (USTR).

Since the days of the Presidential campaign, Mexico, Canada and the U.S. have been aligned in renegotiating the regional trade agreement. In fact, Mexico began its internal process within two weeks of Trump’s tenure as President. Had the U.S. began its own process at that time, official talks could have started as early as May.

Yet, the U.S. did not begin its process then because it could not. Trade negotiations are typically led by Congress, but historically the role has been delegated to the Executive Branch through legislation, or the Trade Promotion Authority (TPA). Per the TPA, notice of renegotiation must be sent to Congress 90 days before talks begin, and as the nation’s lead negotiator, such a responsibility would typically befall the USTR. (Theoretically, other actions could be taken by the Executive Branch to bypass such responsibilities, but this appears to be the main reason for the renegotiations’ delay.) 

USTR nominee Lighthizer was approved Wednesday by a committee, but the full Senate must still vote to confirm the nomination, a process that could take another two weeks. Due to these procedural roadblocks, and even if Lighthizer is quickly confirmed, official talks would begin in August, at the earliest. In the meantime, we continue to wait for further official action. 

Filed Under: Regulation

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