Tag Archives: NAFTA


By Stephen Lande

On the 1st of July, voters in Mexico will go to polls to elect a new president. Both the Mexican and U.S. governments should emphasize the importance of completing at least the substance of a new NAFTA agreement before then.

The Obrador Factor

The danger is that without a full or substantive agreement in place before the end of April or early May at the latest, negotiations will take an electoral hiatus.  If the current, left-wing front runner, Manuel López Obrador, popularly known as AMLO wins, the considerable progress that has already been made in the negotiations will be lost.

He is the candidate who is most skeptical of NAFTA since he supports more self-sufficiency in agriculture by cutting imports from the U.S., and reducing foreign investment in the energy sector. The likelihood of AMLO becoming the next president of Mexico is increasing since the other two candidates are poised to split the opposition vote. Even if one of the two pro-NAFTA candidates – Ricardo Anaya Cortés for the PAN (National Action Party) and José Antonio Meade Kuribreña for the PRI (Institutional Revolutionary Party) were to drop out, AMLO, might still be the winner. All he needs is a plurality. Mexico does not require a runoff. It is also worth noting that AMLO is running as an outsider, and we seem to be living in the age of outsiders. It is outsiders who have been the most recent winners in India, the United States, and France, and they have done extremely well in other European elections, most recently in Germany and Italy.

An AMLO win in the July election in Mexico, however, would not necessarily mean the end of NAFTA. He has not said he would tear it up. If there was a completed agreement in place or even only an agreement on substancewhen he takes office, AMLO may decide to go with it. After all, he will have a host of other priorities for reform in Mexico, and he may not want to get bogged down. It is worth remembering that President Bill Clinton pushed only for cosmetic changes in the original NAFTA, which had been negotiated by his predecessor, the first President Bush – even though in the previous election, he had expressed many misgivings about the draft agreement. In addition, the dislocation brought on by the current renegotiation would only continue and possibly intensify.

On the other hand, if major elements of the revised NAFTA are still unsettled in July, AMLO may want them to reflect his left-wing views. To say the least, those positions would complicate an already difficult negotiation. And even if an agreement under those circumstances were possible, it would probably be less expansionist than the current agreement or the modernized agreement now being negotiated.

Steel and Aluminum Announcement

Any inordinate delay in a negotiation is fraught with danger, as with wine making or mackerel, waiting too long could result in vinegar or stinking fish. Note what happened to the Free Trade Agreement of the Americas and the Doha Round last century and the TPP last year.

The longer the negotiations drag on, the greater the possibility that there will be an intervening event that will prevent a successful conclusion. For example, until last week, there was no question that momentum was building towards an agreement. Then came an announcement on steel and aluminum restrictions which would have a serious impact on Canada. The current indication is that the announcement will not prove fatal to the NAFTA talks since President Trump and his United States Trade Representative (USTR), Ambassador Lighthizer, have indicated that Canada and Mexico would be exempt from restrictions if the modernization negotiations were completed in a few months. In fact, in a strange way this deadline may move the negotiations forward. However, the longer one waits, the greater the chance that an exogenous matter will intervene and derail the process.

Also, the President is under pressure to either conclude the negotiations successfully or withdraw from the agreement. More than one year has elapsed since he assumed office, and he has not yet acted on his electoral commitment to either leave or fix NAFTA. Since the new president of Mexico will not formally assume office until later in 2018 and because it will take time for him and his team to gear up for negotiations, negotiations are not likely to resume until sometime in 2019. Given President Trump’s temperament, it is doubtful that negotiations will be allowed to extend into a third year.

Leave It to The Negotiators

The suggestion here is that, currently, it is best to leave the negotiations to the negotiators. An agreement appears to be within reach, especially between Mexico and the United States. One should not be misled by negotiating statements emphasizing the remaining differences, the slow progress, and the unwillingness of the other NAFTA countries to offer meaningful concessions. This is normal negotiator talk to keep the pressure on the other side to make concessions in the final phases of negotiations.

These tendencies are reinforced by the Trump method of negotiating through attention getting tweets. Although one does not know whether they are part of an overall strategy or simply a whim of the moment, one positive result of the tweeting is that the President demonstrates toughness to his supporters while allowing his negotiators to be flexible.

In point of fact, the negotiators have been the heroes of the day. They were faced with a highly charged political atmosphere at the launch of the negotiations. NAFTA had been widely and strongly criticized, particularly U.S. concessions to Mexico. In the United States, withdrawing from NAFTA was an element in President Trump’s election campaign in 2016, and one frequently mentioned by the President since.

Lighthizer’s Good Work

In this regard, the role of Ambassador Lighthizer should be recognized. Despite having his hands full with a full trade policy agenda, going well beyond NAFTA, he has been able to focus on the NAFTA negotiations. This is even more amazing when one considers that as a result of delays in Congressional approvals of his deputies, he has been forced to operate the agency virtually alone. In the circumstances, he was fortunate that the USTR staff is considered among the most professional and hard-working in Washington, but a large amount of credit is due to the managerial ability of Ambassador Lighthizer himself.

Originally an outsider to the Trump team, he now has the confidence of the President. This may be crucial to concluding the negotiations ¬ when Presidential support of the final package will be critical. If Lighthizer believes the deal meets the campaign criteria for a renegotiated NAFTA, there is a solid chance the President will accept his assessment. Also, Presidential intervention may be required either to sell a compromise to hard-liner Trump supporters or to pressure Mexico or Canada into making final concessions.

The U.S. Private Sector

The private sector – particularly the trade associations – also deserve credit. America’s withdrawal from TPP led to the expectation that it was only a matter of time when NAFTA would be next. The Administration’s statements blaming U.S. job losses on NAFTA suggested that it might be. In short, NAFTA was on life support, with only the smallest chance of recovery. Yet since President Trump’s assumption of office, political support for NAFTA has increased significantly. This is due in large part to the private sector which, by focusing on NAFTA’s constituents in key states, has made everyone – the public and the politicians – aware of the serious dislocations that would follow quickly on the heels of a U.S. withdrawal from NAFTA.

A Guide for Success

It would help now if America’s private sector could shift its focus. So far, the major business groupshave focused on demonstrating the advantages of NAFTA. They have been particularly successful in border and agricultural states, where Trump’s support is strong and withdrawal from NAFTA could undermine his prospects for reelection.

The private sector’s priority now should be urging the Administration to complete the negotiations quickly and getting an agreement in place before the Mexican election. If not, and if the current front runner wins, one of two outcomes appears likely. One is that the differing positions of Presidents AMLO and Trump will make negotiating a modernized agreement impossible. The other is that they cobble together an alternative, new agreement. Such and agreement, however, would inevitably be at a much lower degree of ambition than that which seems possible today.

The building blocks for a successful negotiation are in place. The well-considered negotiating strategy laid out by the lead negotiators, have seen steady progress, notwithstanding the political rhetoric. The negotiators have kept their eyes on the ball. They have moved toward completion of the less disputed chapters and ironed out many of the issues in the more difficult ones. Where the original objective was “do no harm” in the NAFTA negotiations, they have reached the point where a truly improved NAFTA now seems within reach.

This does not mean that successful renegotiations are assured. There is still strong opposition to staying in NAFTA both within the White House and among core Trump constituents. Indeed, recent changes within the White House may have dampened the prospects for a deal.

As for the President, he has yet to move on from his campaign position that “NAFTA’s a horrible deal; we’re renegotiating it. I may terminate NAFTA, I may not – we’ll see what happens. … Any renegotiation must provide a better deal for our workers and companies.” This means the question is still open.

Thus, the private sector’s support for a timely and successful conclusion of negotiations is particularly important. Those in the Administration who argue that NAFTA modernization will meet the President’s goals to make NAFTA more effective in promoting manufacturing and US employment must be reinforced. The challenge for the private sector, of course, is how to support the Administration’s effort to conclude the negotiations while continuing to fight those Administration proposals they oppose.

A three-prong approach is suggested.  In some areas – automotive rules of origin and a sunset clause for example – Canada and Mexico can be relied upon to take the same line as the strongest U.S. business groups. There are other issues, however, issues which are not deal breakers for Mexico and Canada,  where the positions of the U.S. government and America’s leading private sector groups are still far apart. These include U.S. proposals to opt out of investor state dispute settlement (ISDS) and some government procurement obligations.

A second prong could be areas where the U.S. private sector should recognize that there are some issues where the Mexican and Canadian governments will accede to U.S. positions which the U.S. private sector opposes.  The major U.S. trade associations and their members should recognize that they cannot win on all the issues under discussion and my lose on these.  Although they should continue to advocate for their positions, they must send the clear signal that failure to achieve all their goals will not prevent them from supporting a timely conclusion of the agreement.


A third prong could be labor.   It is not clear how hard the U.S. will push for reforms of Mexican labor practices.   If the U.S.  makes changes in Mexican labor practices a make-or-break issue, the private sector should refrain from involving itself in those negotiations.

This may be the time for trade associations and their members to begin considering where they may have to compromise and the best way to alleviate the deleterious impact of measures they oppose. At least in private, they  might consider fallbacks, including compromises and alternative measures.   For example,  a possible fallback for the absence of U.S. to allow third-party arbitration in investor-state disputes could be unilateral Mexican and Canadian commitments to allow such cases to be considered by the World Bank’s arbitration bodies.

Again, the U.S. private sector may have to accept some disappointments, but that would be a small price to pay for getting the NAFTA talks essentially wrapped up in a timely fashion. And who knows: as Lighthizer claims, a compromise on investor-state and labor might bring some added Democratic votes in support of a revised NAFTA. That would be a welcome change from the current situation, where trade bills either pass by the narrowest of votes or languish in legislative limbo because of the partisan divide.


I have not said much about Canada’s role in these negotiations. For the U.S., the talks with Canada are every bit as tough or may even be tougher as the negotiations with Mexico.

US access for dairy exports into Canada and trade remedy arbitration are the best examples of intractable U.S.-Canada issues. But the timeline is not so unforgiving since the U.S.-Canada FTA will continue in effect even if the U.S. withdraws from NAFTA. Let me be clear. I am not advocating this position, but, at the end of the day, it may be necessary.

It would be foolish to just assume that the NAFTA negotiators will in fact manage the kind of success they need. Failure is always a possibility. So, we are left with the adage: “where there’s a will, there’s a way”. Personally, I think the will is there. As for the way, that is not clear yet. It is the job of the negotiators to find it. However, chances of the final agreement being accepted will be strengthened by strong private support of their efforts even if there are cases where private sector demands are not met.

Stephen Lande is the President of Manchester Trade. A former U.S. Foreign Service Officer, he has been involved in international trade since the 1960, was the first Assistant USTR and served as chief bilateral US trade negotiator in the Office of the U.S. Trade Representative.



With NAFTA in doubt…

“[T]he health of the U.S. apple industry is hanging on a stem.”
Jim Bair
October 24, 2017 (on-line publication date).

Editor’s note. It has been almost three weeks since we published the last TTALK Quote on October 6. We apologize for the unexplained silence, but the TTALK Quotes aren’t dead. They were just sleeping.

Sauvie Island Apples rkm photo


Our last entry focused on tomatoes or love apples, and it had been our intention to follow that with a quote about real apples, the kind that give us apple pie, cider, and a nice crunch when you bite into them. And then earlier this week, with an op- ed in The Wall Street Journal, the president of the U.S. Apple Association, Jim Bair, gave us this quote.

To say the least, Mr. Bair profoundly disagrees with President Trump’s assessment of NAFTA – you know, “worst trade deal ever made.” As Mr. Bair put it, “Our growers know it is the best apple trade deal to date.” Here are some of the numbers he provided:

$4 billion – the value of U.S. apple sales “at the farm gate,” i.e., wholesale;

$15 billion in related downstream activity.

We know you are going to read the article, but this paragraph deserves to be quoted here in full:

“Since the agreement took effect, the U.S. apple industry has quadrupled and doubled its exports to Mexico and Canada respectively. These top export markets bring $450 million in additional value to our growers and packers annually. In total, the U.S. apple industry exports a third of the 240 million bushels of apples it harvests each year.”

The Perishable Goods Provision. Mr. Blair kept his argument to the big picture. He talked about NAFTA as a whole and the consequences to his industry if the agreement were to go away, either through a U.S. withdrawal from NAFTA or through some other breakdown.

In our last entry, however, the one on tomatoes, we focused on a specific U.S. negotiating objective, namely this one on trade remedies and perishable goods:

“Seek a separate domestic industry provision for perishable and seasonal products in AD/CVD [antidumping and countervailing duty] proceedings.”

In doing so, we took note of the fact that Florida’s two senators, Senator Bill Nelson, a Democrat, and Senator Marco Rubio, a Republican, had written to Ambassador Lighthizer in support of just such a provision.

But what is good for Florida tomatoes is not so good for Northwest apples. On September 20, 2017, a sizeable subset of the Pacific Northwest delegation wrote to Ambassador Lighthizer urging him NOT to pursue a new provision for perishable and seasonal goods. They wrote:

“Given that there are serious, unresolved stakeholder concerns about the negative impact of such a provision on U.S. exports and jobs, we ask that you not move forward with this proposal.”

Much of the punch of their argument is contained in these sentences:

“[G]rowers, packers and shippers in the Pacific Northwest produce more than three quarters of the fresh apples and cherries, and approximately 84 percent of the fresh pears, grown in the United States. Mexico and Canada are the top export markets for apples and pears, with about 15 percent of the apple crop and 20 percent of the pear crop, worth approximately $442 million, shipped to our southern and northern neighbors each year.”

And this one:

“We expect that Canadian and Mexican industries, including the tree fruit industry, may take advantage of such a provision – [that is, the provision on seasonal and perishable goods that is now a tabled U.S. negotiating objective] – to restrict exports of U.S. products.”

There were 13 signatories to that letter, including –
From Oregon: Senator Jeffrey Merkley (D), Senator Ron Wyden (D), Rep. Kurt Schrader (D), and Rep. Greg Walden (R); and
From Washington: Senator Maria Cantwell (D), Senator Patty Murray (D), Rep. Denny Heck (R), Rep. Jaime Herrera Beutler (R), Rep. Suzan DelBene (D), Rep. Rick Larsen (D), Rep. Dan Newhouse (R), Rep. David Reichert (R), and Rep. Cathy McMorris Rodgers (R).


The items mentioned above can each stand alone. That said, we are likely to hear a great deal more about these and all of the other NAFTA issues in the months ahead. Even so, we are tempted to tack on four, somewhat disparate observations.

Retaliation. We have no quarrel with the letter to USTR from the members of the Northwest Delegation, certainly not with their concern that if the U.S. makes life more difficulty for, say, Mexican exporters of tomatoes, Northwest tree fruit exporters are bound to feel some countervailing pain. We suspect they are right. It is troubling however–not wrong but troubling – that so much of the discussion of possible NAFTA permutations hinges less on possible new provisions of law and more on a fundamental notion of practical reciprocity, an “eye-for-an-eye” sort of thing.

Perishable Products and the WTO. The WTO doesn’t get a lot of mention in today’s intense NAFTA discussions. It did come up, however, in a private conversation we had in the wake of our earlier reference to America’s NAFTA negotiating objective on perishable goods. The wise voice on the other end of the phone pointed out that, in its considerations of antidumping and countervailing duty issues, the WTO looks at annual trade. There is no provision for seasonal trade.

“Bilateral agreements should be WTO-plus,” our colleague said, meaning even more favorable to trade. “This would be WTO-minus.”

China. China may seem a non-sequitur in this discussion of North American trade. But when it comes to apples, China is the elephant in the room. According to a relatively current USDA estimate, the world will produce some 77.2 million tons of apples this year, more than half of them – 43.5 million tons — will be from China.  China is the world’s largest apple producer; the U.S. is number 2, with roughly 4.6 million tons.

Yes, China does buy a fair amount of apples from the U.S., but China’s exports here are growing – and if by here we mean North America – then you can add China to the list of countries that are eyeing the possible failure of NAFTA for new export opportunities for themselves.

Apples Nearby. Finally, a word about Sauvie Island , the apples pictured above and the trees below. They are hors de combat as far as this discussion is concerned, which is to say they are not exported. They are not even sold in grocery stores. These are pick-your-own apples from Douglas Farm on Sauvie Island. Just north of Portland, Sauvie Island on the Columbia River is one of America’s largest river islands and home to an array of farms, growing everything from corn to strawberries and apples to pears. The Douglas Farm is one of those and well worth a Sunday stroll if you are out this way.

At Douglas Farm, Sauvie Island rkm photo


Is NAFTA Rotten is the op-ed the Wall Street Journal published on October 25 by Jim Bair, the president of the U.S. Apple Association, it argues that NAFTA has been important for U.S. apple growers and its demise would be a disaster. This was the source for today’s featured quote.

A Letter from the Pacific Northwest is a link to the September 20 letter mentioned above from members of the Oregon and Washington delegations, urging USTR not to pursue a new NAFTA provision on seasonal and perishable products.

U.S. Apples is the website of the U.S. Apple Association.

Negotiating Objectives takes you to the NAFTA negotiating objectives published by USTR earlier this year.

Delicious Fruit is a USDA estimate of apple production globally and in selected countries.

The Douglas Farm is a link to the website of the Douglas Farm on Sauvie Island.

Originally published on October 26 as TTALK Quote No. 61 of 217.

© 2017 Global Business Dialogue, Inc.






“Here in North Florida, tomato worship is our warm weather religion.”

Diane Roberts
July 26, 2009


This  quote is from a charming NPR report on tomatoes by Diane Roberts that was published back in July of 2009. In fact, our thought had been to write something today (October 6)  about the other kind of apples, with varieties from Gala to Granny Smith, in a word, the real ones. That’s not to say that tomatoes are not real. They are. And there is a real enough connection these days between the two, as the U.S. growers of each stake out different positions in the NAFTA negotiations.

We’ll save our discussion of apples until next week. Today it’s tomatoes, starting with a little more from that delicious piece by Diane Roberts. In modern French, the word for tomato is la tomate, but the French used to call tomatoes pommes d’amour, apples of love. Discussing the history of these red goddesses of the kitchen, Ms. Roberts wrote:

“When the Spanish brought tomatoes to Europe in the 16th century, people didn’t know what to make of them: They might be poisonous. On the other hand, they might be some kind of aphrodisiac like the mandrake root.”

Then she brought her readers up to date:

“Here in North Florida, tomato worship is our warm-weather religion. Fields and farmers markets are piled high with tomatoes in the colors from amethyst to chartreuse, smelling of heaven; we eat them raw with a little rice vinegar, cooked in a tart or simmered in a sauce.” 

All very idyllic. And, we wouldn’t challenge a word of it – not visually, not aesthetically, and certainly not gastronomically.

Tomatoes and Trade Policy. When it comes to trade policy, however, there is an old controversy that may or may not ever be resolved, but it will certainly become more prominent in the months ahead. It is not just about tomatoes. Northwest berry growers have similar issues, but the Florida tomato growers are at the top of the vine, so to speak, when it comes to trade in perishable products.

Fearing increased competition from Mexico, they were opposed to NAFTA when it was being debated in Congress back in 1993, and they have not been happy with developments under the agreement since it went into effect in January 1994. An August article on the Stewart and Stewart website sets out the problems as American tomato producers and others see them. The firm also has something to say about how those problems might be solved. Some illustrative passages follow.

The Problem. Stewart and Stewart begin their explanation of the problem this way:

“Producers of perishables and seasonal agricultural products are particularly susceptible to damage from trade surges and various forms of unfair trade practices. If their products are forced to compete with dumped or subsidized product, or if import surges saturate the market either before or during a marketing season, domestic producers are unable to store their product and wait until prices rise to normal levels.

“Likewise, only a brief window – at times just days – exists in which to sell perishable products.”

And those aren’t the only problems. As the Stewart and Stewart article also points out, U.S. tomato growers often cannot even get the benefit of that famous downward sloping demand curve. They offered this explanation and example:

“The situation of producers of perishable and cyclical products is worsened as a concentrated retail structure in the United States and internal company operating procedures typically result in retailers not changing prices of perishable and cyclical prices at retail to reflect falling prices … .”

“In January 1996, prices of fresh tomatoes plummeted to as little as $0.04 per pound (from prices that more typically range from $0.25 to 0.40 per pound) at the farm level in the United States due to large volumes of imports from Mexico, while retail prices remained in the $1.00 to $1.80 per pound range.”

The NAFTA Renegotiation. The effort to come to agreement on a revised North American Free Trade Agreement would seem to be moving at a brisk pace. Three of the seven anticipated negotiating rounds have been completed, and the next one, the Fourth Round, is slated to be held next week (October 11-15 in Washington). We don’t know whether the negotiators have formally taken up the issue of perishable products or not, but it is a hot topic among the stakeholders.

More to the point, it is on the list of negotiating objectives that USTR published in July. It comes under the heading of Trade Remedies. The relevant sentence reads:

“Seek a separate domestic industry provision for perishable and seasonal products in AD/CVD [antidumping and countervailing duty] proceedings.”

Further, as those who favor such a provision are quick to point out, this particular U.S. negotiating objective flows directly from the law. That point was made recently by Florida’s two senators, Senator Bill Nelson (D) and Senator Marco Rubio (R). In a letter to Ambassador Lighthizer of August 31, they wrote:

“[W]e urge you to formally propose a NAFTA fix that would allow regional growers to use seasonal data for antidumping and countervailing duty (AD/CVD) cases.”

Pointing to the relevant law, they argued that:

“[A]ny agreement expecting fast track authority in Congress needs to meet the negotiating objectives set out in the Bipartisan Congressional Trade Priorities Accountability Act of 2015 (P.L. 114-26), including ‘eliminating practices that adversely affect trade in perishable or cyclical products, while improving import relief mechanisms to recognize the unique characteristics of perishable and cyclical agriculture.’

“Failure to meet these objectives would clearly not meet the standards Congress has set for trade agreements and would threaten the viability of a renegotiated NAFTA.”


We shall keep these comments short. We should note first that neither every industry nor every Member of Congress is on board with the U.S. negotiating objective cited above. Not at all. We’ll consider that issue more closely in the next entry when we take up the topic of North American apple trade. Apples aside, however, when it comes to North American agriculture, Mexico has a very strong hand to play, as it is the top export market for a range of U.S. commodities, including wheat, pork (by volume), and dairy.

The issues surrounding perishable products are complicated enough, and that complexity is but a small fraction of the complexity that is the full NAFTA renegotiating effort. We  have no idea how the entire exercise will play out, and we readily confess that our principal concern is not with any specific provision but with the whole. One way or another, we hope the negotiators find a way to preserve the principal features of the agreement.

Returning to perishable commodities, we’ll conclude with two separate thoughts. It is an open question as to whether USTR will be able to bring home the bacon on this one, that is, to satisfy its own negotiating objective. No country will get all it wants. But the ability to choose from a range of options would seem to increase the likelihood of success, and in that respect the article by Stewart and Stewart is helpful. They offer several ideas, from the changes in AD/CVD law mentioned above, to continent wide marketing orders, to self-initiation of certain cases by the U.S. Government.

Finally, there is politics. Heaven forbid that anyone should act out of political motives in this process, but Florida’s place in American politics is worth bearing in mind. It is the third largest U.S. state by population. The first is California with 39 million people. Next is Texas with almost 28 million. And then comes Florida with 20.6 million. Unquestionably, however, Florida is the number one, quintessential swing state. The significance of that would be hard to overstate. Its agricultural sector has just suffered devastating losses from Hurricane Irma, and in 2018 the state will elect a new governor and possibly a new Senator. (His long history and solid approval rating suggest that Senator Nelson, a Democrat, will hold on to his seat, but he will have to defend it.) So, it seems a fair guess that when the Florida delegation clears its throat, the Administration will pay attention.


Tomato Worship takes you to the 2009 NPR report that was the source for today’s featured quote.

The Problem of Perishables is a link to the Stewart and Stewart article cited above.

From the Florida Senators is a link to the August 31 letter to Ambassador Lighthizer from Florida’s two senators, Senator Bill Nelson and Senator Marco Rubio.

The NAFTA Negotiating Objectives as published by the Office of the U.S. Trade Representative on July 17, 2017.

Originally published on October 6, 2017 as TTALK Quote No. 60 of 2017

© 2017, Global Business Dialogue, Inc.



“Even if President Trump has the authority to trigger U.S. withdrawal from the NAFTA without formal congressional approval, it is unclear whether withdrawal would automatically terminate the North American Free Trade Agreement Implementation Act.”

White & Case Authors:
William Clinton, Scott S. Lincicome,
Brian Picone, Richard Eglin, and William Barrett

On August 30, 2017, the above-named authors from the law firm  White & Case posted a paper on the firm’s website with the title “Termination or Modification of U.S. Trade Agreements.” In light of President Trump’s repeated threats to withdraw from the North American Free Trade Agreement and other trade deals, their paper could hardly be more timely, more important, or more provocative.

The paper deals with the full range of U.S. trade agreements, from U.S. membership in the World Trade Organization, to NAFTA, to bilateral agreements like KORUS, the U.S.-Korea Free Trade Agreement. While there are striking similarities in how the relevant laws handle the issue of withdrawal for different agreements, there are some significant differences as well. Over and above all the bits of legal language is the fact that “there is almost no precedent governing the legal provisions at issue here.”

The authors make that point in the very first paragraph of their paper, and they also make this one:

“[T]he provisions of these laws that govern potential U.S. withdrawal from FTAs do not expressly grant the President authority to withdraw from them.”

They further explain that:

“[E]ach U.S. trade agreement is actually governed by three different U.S. laws: the Trade Act of 1974; the specific version of TPA [Trade Promotion Authority] in effect at the time of the agreement’s implementation; and the act implementing the agreement’s specific commitments into U.S. law. In some cases, these laws contradict each other on the question at issue (e.g., tariff modification), thus raising significant questions regarding the proper statutory interpretation.”

You will want to read the full article for yourself. We’ll note here just one other observation from it. The White & Case authors have stated their uncertainty about the status of the act implementing NAFTA if the President were to withdraw from the agreement. We have made that today’s featured quote because we think it a question worth thinking about. It is also worth mentioning that the situation is somewhat clearer with respect to KORUS and other bilateral FTAs, because, as the White & Case paper explains, “the implementing acts state that the provisions set forth therein have no legal effect upon termination of the relevant FTA.”

Of course, if the U.S. pulling out of NAFTA is just a bit of scary rhetoric with no basis in reality, then maybe we can forget about the questions raised here. Or maybe not. Here we shall limit ourselves to the issues relating to NAFTA, leaving other agreements, such as KORUS and the WTO for another time.

Question No. 1.  Is it realistic to think that President Trump might decide to pull the United States out of NAFTA?  It is. He has often threatened to do just that, and the example of TPP suggests that such threats need to be taken seriously. We hasten to add that TPP was a negotiation, not a ratified or implemented agreement, but its history is still worth noting.

More to the point, people much closer to the negotiations than your editor are clearly worried. That came through loud and clear in the compelling op-ed article in yesterday’s Wall Street Journal by Thomas Donohue, the president and CEO of the U.S. Chamber of Commerce. “This vision [of a NAFTA pull-out by the U.S.] isn’t so far-fetched when you consider the increasingly precarious state of play in the effort to modernize the North American Free Trade Agreement,” he wrote.

In the same piece, Mr. Donohue argued that “Quitting NAFTA would be an economic, political, and national-security disaster.”

Question No. 2. Does the President have the authority to pull out of NAFTA? Yes and maybe. Clearly the President thinks he has that authority, and, for the most part, the world agrees. Even Mr. Donohue said that pulling out “is within the White House’s authority.” That is not to say, however, that, if the President were to formally take the United States out of NAFTA, there wouldn’t be legal challenges to that action. Almost certainly, there would be, and in today fractious judicial environment it is hard to say how those challenges would play out.

Question No. 3. What will Congress do? At some point, Congress will do something. The 2016 election and the current drama over NAFTA and KORUS have challenged the assumptions that underpin an array of statutes. Politically, they beg the question, does it really make sense to legislate in the belief that a free-trade oriented Executive will always face a parochial and protectionist Congress? More fundamentally, these current developments pose a Constitutional challenge. If the President can undo major trading arrangements with the stroke of a pen, arrangements that are sanctified by Congress, codified in law, and that affect the lives of millions, does Congress really have the power “to regulate Commerce with foreign nations?”

To our knowledge no Congressional leader has forcefully confronted that issue head on. Not yet.  And there may be wisdom in that.  It doesn’t really make sense for Congress to take away the President’s leverage in the middle of a negotiation.

In the wake of a U.S. withdrawal from NAFTA, however, the issue would come to the fore quickly.  In the absence of such a withdrawal, on the other hand, all of this will remain largely academic,
with this exception.  The next time Congress writes a trade bill, our guess is that they will put some fresh thinking into the issues associated with getting out of it. And we may not have long to wait. After all, the current NAFTA negotiations might be successful.  We hope they are.  And the fruits of those negotiations might need an implementing bill. Opportunity awaits.

The White and Case article  that was the starting point for this posting may not be current available on line.

Exiting Would be a Rotten Deal is the op-ed by Thomas Donohue mentioned above.

NAFTA and the President’s Promise is a link to the TTALK Quote for July 19, 2017, which focused on America’s negotiating objectives for the negotiations now underway to revise the North American Free Trade Agreement.

Originally published on September 26 as TTALK No. 59 of 2017.

© 2017, The Global Business Dialogue, Inc.



“We want to claim or reclaim some manufacturing employment that has settled itself in Mexico.”

John Magnus
June 23, 2017


Like our last entry,  today’s is from the preliminary comments made by TradeWins president, John Magnus, acting as a panel moderator at GBD’s June 23 event. Earlier we shared with you his thumbnail estimation of the U.S. trade posture towards the European Union. He offered similar comments on America’s apparent goals for a revised NAFTA. The first round of NAFTA renegotiation got under way in Washington yesterday [June 16], beginning with a fairly challenging opening statement from the U.S. Trade Representative, Ambassador Robert Lighthizer. We shall turn to that in a moment.

First, though, this is as good a time as any to review the assessment that John Magnus offered back in June. “Okay, what about NAFT?,” he asked. These points were his answer:

Content, Rules of Origin. “We apparently would like to wring out non-North American content as fully as possible from the goods that have NAFTA eligibility.”

Jobs. “We want to claim or reclaim some manufacturing employment that has settled itself in Mexico.”

Trade Deficits. “And we would like to have a smaller, bilateral merchandize trade deficit with Mexico.”

Dairy. “We want to extract concession from Canada on some offensive issues, most notably dairy trade. I’ll let you decide what the word offensive modifies in all of that. It could be our behavior in relation to dairy trade.”

Investment and Trade Remedies. “We want to overhaul some of the NAFTA’s institutional provisions and dispute resolution provisions and most notably the ones that sit in chapters 19 and 11”.

Government Procurement. “We want to really have a new or continue our new mania for Buy American, meaning that we want to, apparently, refrain from deepening the NAFTA in regard to government procurement. And that matters because our NAFTA partners have some interesting requests and proposals in that category.”

The Cases. “And we seem to want to continue to treat even the highest profile trade remedy proceedings – examples: softwood lumber for Canada, sugar for Mexico – as basically matters of pure law enforcement as opposed to some part of our trade policy that we would be prepared to bargain over.”


Doubtless you have already read or read about Ambassador Lighthizer’s opening statement yesterday. Certainly, it was important, but its importance is bound to fade somewhat as the negotiations — and all that is said and written about them — move on to specific issues. But while it is still fresh, here are a few thoughts on the statement and on the negotiations now in their second day.

First, of course it was a tough statement. It had to be. It was the United States that called for these negotiations, and in a sense that was a fallback from President Trump’s threat to withdraw from NAFTA, to tear it up. And the essential toughness of the statement was in this paragraph:

“The views of the President about NAFTA, which I completely share, are well known. I want to be clear that he is not interested in a mere tweaking of a few provisions and an a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

That was near the end of his statement. The beginning was somewhat different. There he talked about the many Americans who have benefited from NAFTA. “For many of our farmers and ranchers,” he said, “Canada and Mexico are their largest export markets.” And, he added, “Many are particularly vulnerable today because of low commodity prices.”


In short, at least as we read it, it was a tough speech with a major concession: America too needs NAFTA. Yes, there is some leverage in the belief if not the fact that the other two, Canada and Mexico, need NAFTA more. But America needs it. Think of NAFTA as a leaky lifeboat in an unforgiving sea. It’s three occupants — Canada, Mexico, and the United States — may have, will have, trouble agreeing on the best way to patch it. But agree they must. Scuttling it is unthinkable (or should be).

Much as we would like to end on that rhetorical flourish, it doesn’t quite capture the larger point. NAFTA may have been a mistake. A better set of policies set in motion in the 1990s might have preserved more U.S. manufacturing jobs and led to a stronger U.S. industrial base. The challenge for today’s NAFTA negotiators, however, isn’t to rewrite the 1990s. That can’t be done. Their challenge it is to improve a system that is now deeply embedded in the economies of all three countries and to do so without disrupting the lives and livelihoods of those who have successfully adapted to it.


An Educated Guess is a link to the YouTube video of the Diplomatic Panel at the GBD EU Outreach event on June. This was the source of today’s featured quote.

Opening Statement takes you to Ambassador Lighthizer opening statement at the start of the first round of negotiations toward and an updated and revised NAFTA.

Objectives is a link the U.S. negotiating objectives for the new NAFTA negotiations, which USTR published on July 17, 2017.

About Dairy is the TTALK Quote for June 14, 2017, which focuses on the issue dairy in U.S.-Canada trade, beginning with comments from Shawna Morris of the U.S. Dairy Export Council.

Originally published on Augusut 17 as TTALK Quote No. 51 of 2017.

© 2017 The Global Business Dialogue, Inc.