Can Trump end NAFTA?

Threats to pull out of NAFTA could ring hollow, analysts say, as Congress may have final say on agreement's future.

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    Trump has labelled NAFTA 'the worst trade deal' ever signed by the US [Kevin Lamarque/Reuters]
    Trump has labelled NAFTA 'the worst trade deal' ever signed by the US [Kevin Lamarque/Reuters]

    What is NAFTA?

    NAFTA, which came into effect at the beginning of January 1994, lifted tariffs on virtually all goods traded among the US, Canada and Mexico. 

    Trilateral trade between the NAFTA countries has exceeded $1tn annually in recent years, according to a 2017 report by the US Congressional Research Service.

    US President Donald Trump has threatened this week to dump the nearly 25-year-old North American Free Trade Agreement (NAFTA), making it the latest deal to be targeted as part of his "America First" trade strategy.

    On Friday, President Trump notified Congress of his plans to sign an agreement with Mexico in 90 days to replace NAFTA.

    And despite earlier suggestions that he may cut Canada out of the agreement altogether, Trump is hoping Ottawa can be brought on board too. 

    Talks to keep Canada in the bloc broke up on Friday but are expected to resume next week.

    On Monday, a preliminary deal with Mexico was announced.

    "They used to call it NAFTA," he said from the White House. "We're going to call it the United States-Mexico trade agreement. We'll get rid of the name NAFTA."

    But analysts say Trump may face a number of obstacles, particularly from Congress, if he moves forward with plans to scrap the trilateral treaty all together without a replacement deal on the table.

    Congress eventually would have to approve any agreement.

    Can Trump withdraw from NAFTA?

    Under Article 2205 of the NAFTA, a country can withdraw from the agreement by providing a six-month notice to fellow signatories.

    This means Trump could, in theory, send a letter of notice to Canada and Mexico indicating his intent to withdraw but, according to Gary Hufbauer, a senior fellow at the DC-based Peterson Institute for International Economics, the president would first need congressional approval to actually terminate US involvement.

    "The letter is not self-executing, it will take a separate step to actually terminate … that's when we will get the first level of congressional resistance," Hufbauer said. "Trump has to get Congressional power to withdraw."

    According to Hufbauer, that's because NAFTA only entered into force at the beginning of January 1994 after ratification by Congress the month before.

    Although the 1974 Trade Act grants US presidents the authority to unilaterally withdraw from trade agreements, the fact that NAFTA was implemented through legislation suggests Congress must also sign off on any changes to the agreement, including a withdrawl, according to experts.

    It remains unclear, however, whether Congress would definitively have the final say on any attempt from Trump to pull out of the deal, and legal experts have speculated that if Trump does try to withdraw, the case may end up in the courts.

    If it was determined that Trump would need Congressional approval, many believe that the president would have a hard time convincing politicians that withdrawing from the agreement is right way to go.

    Laura Dawson, director of the Washington-based Wilson Center's Canada Institute, told Al Jazeera it's unlikely Trump would find a favourable audience among current politicians for pulling out of the pact.

    "Trump can launch the letter of notice, he has had that in his back pockets for many months, but I don't think he can complete that action, [because] it requires a level of congressional support that he just doesn't have," Dawson said.

    In January, dozens of politicians from Trump's Republican party - which currently controls both the House of Representatives and the Senate - urged the president not to withdraw from the treaty, stating a "wide range" of US industries had benefited from the agreement.

    Can Trump present a bilateral deal instead?

    At the crux of the matter is whether Trump will be able to secure a deal with Canada, as well as Mexico.

    The Trump administration has given Canada a hard deadline of Friday to agree to a new deal.

    With Canada on board, Trump could take a NAFTA 2.0 style deal to US politicians, increasing his chances of congressional approval for what would essentially amount to an update to the current agreement.

    Should Canada, the US's largest export market, opt not to agree to revised terms, however, Congress may take a number of avenues to block Trump from doing anything other than sticking by the existing version of the deal.

    Without Canada, Trump would give up his ability to get a "up or down" vote without any amendments in Congress as any new deal would need a full vote. 

    "Congress is constitutionally responsible for trade and the Trade Promotion Authority is for a trilateral deal, not for a bilateral deal," Dawson said.

    "So they could have a bilateral US-Mexico proposal kicked back to the kerb."

    Therefore, the president could also face several challenges if he wants to implement separate deals with Canada and Mexico instead.

    What happens if NAFTA is terminated?

    Even if Trump is able to convince Congress to scrap the existing deal all together, a number of laws passed as part of the December 1993 NAFTA Implementation Act are likely to live on regardless unless new legislation is drafted to change them.

    "NAFTA was put in place by enabling legislation and there were many pieces of that legislation that are permanent," Robert Scott, a senior economist at the DC-based Economic Policy Institute (EPI), told Al Jazeera.

    Several provisions on issues ranging from government procurement to environmental and labour standards were signed into law as part of the Implementation Act, and would outlive any US withdrawal absent of a concerted congressional effort to amend or abolish them.

    Washington would however, according to the act, be free from NAFTA tariffs should it pull out of the deal.

    For Trump, that is likely to be seen as a major political incentive, Dawson said.

    "This is about him showing his base that he is fulfilling campaign promises," she said.

    Trump has been an outspoken critic of NAFTA in the past, labelling it "the worst trade deal" ever agreed to by the US in September, 2016, while campaigning for the presidency.

    Hufbauer, for his part, agreed with Dawson's assessment: "The primary objective [for Trump] is to state, coming up to November's midterm congressional elections: 'I promised I would get rid of NAFTA, I have gotten rid of NAFTA,' that's the big banana."

    US vs the world? Trump's trade rifts

    Counting the Cost

    US vs the world? Trump's trade rifts

    SOURCE: Al Jazeera News


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