Article in Toronto Globe and Mail about NAFTA

Earl Fry

BYU

How U.S. politics could derail the NAFTA reboot

EARL FRY

Published Wednesday, Jul. 26, 2017 01:06PM EDT

Last updated Wednesday, Jul. 26, 2017 05:30PM EDT

Earl Fry is professor of Canadian Studies at Brigham Young University in Utah. He formerly served as special assistant in the Office of the U.S. Trade Representative.

In 1983 and 1984, I was part of the U.S. team that took part in negotiations between the government of Pierre Trudeau and administration of Ronald Reagan to develop sectoral free trade. We were unsuccessful in matching sectors, but the bilateral discussions helped pave the way for the Canada-U.S. free-trade agreement finalized by the Mulroney and Reagan governments in 1988.

On Aug. 16, the new North American free-trade agreement modernization talks will begin in steamy Washington, D.C., and all three partners hope to reach a pact before the end of 2017. The Trump administration’s negotiating points forwarded in mid-July to Congress are somewhat reasonable, even though major disagreements could occur over Buy America preferences, liberalized digital trade, Chapter 19 dispute panels, intellectual property protection and other issues.

U.S. Trade Representative Robert Lighthizer was at USTR when the 1983 Canada-U.S. discussions began. His experienced deputy over Western Hemisphere affairs, John Melle, will oversee the U.S. negotiating team. Many U.S. governors will voice support for NAFTA, with 35 states exporting more to Canada than any other country. On paper, it should not take much for the modernization process to succeed and for President Donald Trump to declare a “huge” win for all three countries, and especially his own administration.

So why am I concerned? Several reasons.

Mr. Trump is mercurial and increasingly unpopular. He likes Prime Minister Justin Trudeau and has a tolerable relationship with Mexican President Enrique Pena Nieto. However, Mr. Trump has close advisers such as Stephen Bannon and Peter Navarro, who are better suited for the 1930s era of Smoot-Hawley than today’s era of complex interdependence. Mr. Trump is still considering high tariffs on steel imports and a wide range of trade sanctions against China and other countries.

Mr. Trump might also pivot during negotiations and favour two bilateral agreements over one regional accord. If this transpired, then the old “hub-and-spoke” scenario would resurface, with the United States capturing most future foreign direct investment because of its huge domestic economy and continued preferential access to both the Canadian and Mexican markets.

Congress is also somewhat unpredictable. During my time at USTR, our officials could go to the trade subcommittees of House Ways and Means and Senate Finance and if they approved, we were assured of support on Capitol Hill. These are still important subcommittees, but many of their counterparts in Congress also want a voice on trade policy, a reflection of the growing overlap between international and domestic issues. This cacophony of voices complicates the NAFTA renegotiations and the successful ratification of the final accord.

Fortunately, “fast track” should still be in force whenever a final agreement reaches Congress. This means that only a majority vote for approval is required in each of the two chambers, instead of the two-thirds majority for treaties required in the Senate.

However, even reaching majority support may be problematic. Not long ago, most Republican legislators were supportive of freer trade. When Bill Clinton submitted NAFTA for congressional approval in 1993, a majority of Democrats in each chamber voted against the pact, even though Clinton was a Democrat. Enough Republicans rallied to the cause to pass NAFTA.

Today, many Republicans affiliated with the Tea Party and the House Freedom Caucus are skeptical about trade pacts. Furthermore, other than the nomination of Neil Gorsuch to the U.S. Supreme Court, Mr. Trump is batting .000 when it comes to attracting enough Republican support to pass high-profile legislation in the Senate. He may have to rely on some Democrats to bail him out, and Democrats loathe Mr. Trump. Any economic downturn later in 2017 would further exacerbate the approval process.

I am hoping that NAFTA will be successfully renegotiated and receive prompt approval in all three national capitals. However, it is not the slam dunk that some pundits are already predicting.

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