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Shortly after joining with the leaders of Mexico and Canada in Buenos Aires to sign a new trade accord to replace the North American Free Trade Agreement (NAFTA), President Trump declared that he would also “formally” terminate NAFTA itself. Trump said he would act “shortly,” though as of this writing, he has not done so. But his vow signaled that he plans to play hardball in winning approval of the new trade agreement, known as the US-Mexico-Canada Agreement, or USMCA for short, in Congress, by presenting lawmakers with what he thinks will be no viable alternative.
To add to the pressure on Congress, the United States Trade Representative, Robert Lighthizer, has informed its members that the USMCA text was final, not to be reopened to accommodate legislative concerns. He was effectively signaling to House Speaker Nancy Pelosi and others who might seek changes in the USMCA—to strengthen protections for labor, for example—that they could not be confident that NAFTA would continue to exist in the absence of approval of the USMCA.
But Lighthizer’s pronouncement and Trump’s vow to kill NAFTA ignore the lessons of the past quarter century on trade: Major trade agreements—the original NAFTA, the pact with Peru, and the Korea-US Free Trade Agreement (KORUS)—were only ratified after horse-trading between Congress and the president. Since the USMCA was written without much input from Democrats, the agreement hardly seems destined for easy passage now that Democrats control the House of Representatives. Trump’s view is that reluctant Democrats should take his way or the highway, that highway being a world without NAFTA at all, in which tariffs snap back to disruptive levels.
How realistic is Trump’s plan to terminate NAFTA? He can act unilaterally, but such a step could well provoke a flurry of complicated lawsuits.
Following an earlier volley of termination threats, I argued in a blog post in October 2017 that Trump has the letter of the law on his side. He can certainly notify Prime Minister Justin Trudeau and President Andres Manuel Lopez Obrador, invoking NAFTA Section 2205, that the United States will withdraw six months hence.
In accordance with the fast track provision of Trade Promotion Authority, Congress is supposed to vote the USMCA up or down, without amendments, within 90 legislative days of the introduction of implementing legislation—an event that may not occur before early 2019, because drafting the implementing legislation will likely consume more than a month. However, juxtaposition of the 6-month termination letter and the fast track timeline implies that congressional deliberations should be concluded while NAFTA termination is still pending.
But Speaker Pelosi created ample precedent for ignoring the fast track timeline in 2008, when she overrode TPA procedures for the Peru, Colombia, and Korea free trade agreements. Assuming she is re-elected speaker in January, what she did to President Bush in 2008 she could do again to President Trump in 2019. As justification, Pelosi could cite the scant consultation between the administration and congressional Democrats before the USMCA text was finalized.
If USMCA is either rejected by Congress when the 6-month termination date arrives, or the vote has not yet been taken, and Trump declares NAFTA dead and gone, what then?
The Trump administration will face multiple lawsuits, filed by business firms, states, senators, and members of Congress, all claiming that Trump lacks the authority to impose tariffs on imports from Canada or Mexico, or to rescind other features of the NAFTA Implementation Act of 1993 (H.R. 3450). Moreover, both H.R. 3450 and the Trade Agreements Act of 1974 outline congressional consultation procedures that the president should follow prior to re-imposing tariffs on Canada and Mexico.
If Trump takes his time on the imposition of new tariffs, North America could reach the middle of 2020 before the politically and commercially disruptive event date. A presidential election will then be in sight, which could be reason for further delay.
But if Trump attempts to circumvent court review and congressional consultations by invoking other statutes to revive pre-NAFTA tariffs,[1] he could spark a congressional firestorm. Article I, section 8 of the US Constitution gives Congress, not the president, jurisdiction over foreign commerce. Congressional outrage could in turn foster sweeping legislation to restrain the president.
Congress enacted several statutes over the past century that gave the president multiple powers to restrict foreign commerce. But those delegated powers could be constrained by fresh legislation attached to a single “must pass” bill. That prospect, together with the adverse financial and business consequences of new tariffs, could well persuade the president to think again.
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1. For example, Section 232 of Trade Expansion Act of 1962 (the law invoked to impose steel and aluminum tariffs, and possibly auto tariffs) or Section 301 of the Trade Agreements Act of 1974 (the law invoked to impose penalty duties on a wide range of imports from China).
