Trump’s Trade Hardball Splits Senate Allies

Sens. Pat Toomey, Ron Johnson, and other free-trading Republicans aren’t enamored with President Trump’s plan to terminate NAFTA and get Congress to adopt its replacement, but simply threatening to withdraw may be all he needs.

President Trump reaches out to Mexican President Enrique Peña Nieto (left) and Canadian Prime Minister Justin Trudeau as they prepare to sign the United States-Mexico-Canada Agreement, during a ceremony at a hotel before the start of the G20 summit in Buenos Aires, Argentina on Nov. 30.
AP Photo/Martin Mejia
Dec. 6, 2018, 8 p.m.

President Trump’s threat to tear up the North American Free Trade Agreement in an effort to force congressional action on the new North American trade deal is getting poor reception on Capitol Hill, but that doesn’t mean it won’t work.

Flying back Saturday from the G-20 meeting on Air Force One, Trump announced he would soon begin the process of pulling out of NAFTA, a move that could compel Congress to either adopt the reworked agreement known as the United States-Mexico-Canada Agreement, or return to a system in which there is no free-trade agreement in place and face economic turmoil.

"That'll be terminated, so Congress will have a choice of the USMCA or pre-NAFTA, which worked very well," Trump said, according to pool reports.

If Trump begins the process soon, the move would trigger a six-month countdown period to withdraw from NAFTA, setting up a deadline some time in mid-2019 for Congress to adopt the USMCA. The deadline would put pressure on Democrats and some Republicans, who want changes to the new trade deal to avoid a drawn-out fight over the details.

“It’s hardball,” said William Reinsch, a senior adviser at the Center for Strategic and International Studies and a former congressional staffer on trade and other issues. “It’ll irritate everybody, but it will probably work.”

On Capitol Hill, the move got a chilly reception from several of the president’s allies.

“The thing I want to stress here is, I don’t think the president has the legal authority to do this in the first place,” Sen. Pat Toomey told reporters.

Toomey has outlined several changes that he wants to the agreement and likely doesn’t support any move that would limit the negotiation process.

“He can come to Congress and ask us to withdraw, but I don’t think he can do it unilaterally, so I think he’d have a fight on his hands,” Sen. Ron Johnson said of Trump’s proposal to leave NAFTA.

But one key ally isn’t opposing the strategy.

Sen. Chuck Grassley is set to head the Finance Committee—which handles trade policy—in the next Congress. Grassley told Bloomberg News in February that terminating NAFTA without a replacement would cause an “agricultural depression,” but in a conference call to Iowa radio reporters Tuesday, he appeared to back Trump’s strategy to jam through USMCA implementation.

“It’s a hard-nosed approach, but sometimes a president has to use that if he wants to get things accomplished,” Grassley said.

Trump, then-Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau signed the USMCA on Nov. 30 during the G-20 meeting. The legislatures of all three countries must approve the agreement.

Congress doesn’t have to pass the agreement per se, but legislation implementing the new trade deal. Lawmakers passed similar legislation implementing NAFTA in 1993.

Implementing legislation for the new North American trade agreement falls under “fast track” rules for trade agreements, meaning it isn’t subject to amendments and requires only a simple majority in both the House and Senate.

If Trump follows through on his threat, he may only be able to partially terminate the agreement. Some changes to U.S. law implementing NAFTA could remain in place.

Part of the issue is the vagueness of both the NAFTA agreement and the U.S. law implementing the 1993 deal regarding countries withdrawing. Article 2205 of the NAFTA language states that “a party” may withdraw from the agreement, but does not clarify whether that means the executive or legislative branch of a member country. There’s also nothing in the NAFTA-implementation bill passed by Congress that states the president needs permission from Congress to pull out of the agreement.

Experts are split on whether the president would win a court battle, though Reinsch believes Trump would. A 2016 Congressional Research Service report found that a president’s notice of termination could release the U.S. from a free-trade agreement, but questions remained about the executive’s ability to affect domestic law implementing the agreement.

Many provisions in the bill would end once the president withdrew from NAFTA, but not all, meaning that there could be a patchwork free-trade agreement still in place. Congress has implemented some NAFTA-related provisions in separate legislation, and those would remain as well.

Current law allows the president to impose new tariff structures, meaning he could raise tariffs on many NAFTA imports back to pre-1993 levels.

That doesn’t mean there won’t be changes to the agreement, though.

House Minority Leader Nancy Pelosi, who is likely to become speaker next year, met with U.S. Trade Representative Robert Lighthizer on Thursday to discuss the deal. In a statement, Pelosi said, “while there are positive things in this proposed trade agreement, it is just a list without real enforcement of the labor and environmental protections.”

Congress could demand changes, and the administration could then seek approval from Mexico and Canada, but that’s not without consequences some lawmakers may not realize, Reinsch said. That play may backfire.

“The thing that nobody ever talks about is that if you do that, there’s a price,” Reinsch said. “There’s no free lunch, and if you go back to the Mexicans and say we ‘need more on labor,’ the Mexicans will say ‘OK, what are you going to give us?’”

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