Reports the White House was finalizing an executive order to withdraw the U.S. from the North American Free Trade Agreement sent shockwaves through the markets and export-reliant sectors of the economy, including agriculture, on Wednesday.
However, after President Trump spoke with leaders from Canada and Mexico on Wednesday night, the White House issued a statement saying Trump had instead agreed to renegotiate NAFTA, at least for now.
“At the end of the day, he basically said the same thing he’s always said. ‘I’m going to renegotiate it and if I don’t like it, I’ll rip it up.’ He’s said that a thousand different ways,” says Mark Warner, a Canada-U.S. trade lawyer based in Toronto, in the interview below.
“I try to go right down the middle and say ‘look, the guy wants some changes to it, and there are going to be some changes to it.’ There’s no point getting excited about each little comma splice,” he continues.
So what could those changes look like?
To get an idea, it helps to look at some of the constraints Trump is facing.
First, he will be working on an eight or nine month timeline before Mexico’s government enters a general election, after which the focus of U.S. legislators will soon shift to midterm elections, notes Warner.
If he wants some quick wins, Trump probably has authority to make minor tweaks by executive order, assuming he comes to an agreement with Canada and Mexico, explains Warner. But if Trump wants to make more broad changes — the kind that he and members of his administration have referred to — it will require the much slower and hard-to-control Congressional approval process.
“The difficulty that he has, or is coming to terms with, is the broader the set of negotiations he wants to do, the more you have to negotiate with Congress,” says Warner.
Priorities for Trump include rules of origin in the auto sector, which would please his supporters in upper Midwest states. Changes to NAFTA’s Chapter 19 antidumping and countervailing provisions, which have helped Canada on the softwood lumber file, are also high on the list.
Concessions agreed to during the Trans-Pacific Partnership negotiations, including updated or new terms in areas such as dairy and the online economy, could easily be re-packaged, notes Warner.
“The easiest thing for him to do is try to take as many of the updates as he can from TPP, hope that Canada and Mexico will go along with them…and then try to finesse rules-of-origin,” he says.
Warner joined RealAg Radio on Thursday to discuss this week’s developments surrounding NAFTA, Canada’s strategy on U.S. relations, and how the renegotiation process could unfold: