[CTC] Republicans tell Trump to hold up on NAFTA withdrawal

Wed Apr 26 18:45:13 PDT 2017

Republicans tell Trump to hold up on NAFTA withdrawal

By Tara Palmeri  <http://www.politico.com/staff/tara-palmeri>, Adam Behsudi <http://www.politico.com/staff/adam-behsudi> and Seung Min Kim <http://www.politico.com/staff/seung-min-kim>
04/26/17 11:32 AM EDT

Updated 04/26/17 05:01 PM EDT

http://www.politico.com/story/2017/04/26/white-house-nafta-withdraw-trump-237632 <http://www.politico.com/story/2017/04/26/white-house-nafta-withdraw-trump-237632>
The Trump administration is considering an executive order on withdrawing the U.S. from NAFTA — and initial reaction on Capitol Hill to the planned move has been mostly negative.

A draft order has been submitted for final stages of review and could be unveiled late this week or early next, two White House officials told POLITICO. The effort, which still could change in coming days as more officials weigh in, would indicate the administration’s intent to withdraw from the sweeping Clinton-era pact by triggering the timeline set forth in the deal.

The approach appears designed to extract better terms from Canada and Mexico. But it raises the possibility the Trump administration could walk away from one of the largest trade deals on the planet after having already pulled the U.S. out of the proposed Trans-Pacific Partnership, a 12-nation deal that the Obama administration saw as a way to cement American influence over Asia-Pacific trade.

“I think we’d better be careful about unintended consequences,” said Senate Majority Whip John Cornyn.

President Donald Trump pledged on the campaign trail to renegotiate or otherwise withdraw from NAFTA, a trade deal signed in 1994 by former President Bill Clinton that removes tariffs and allows for free flow of goods and supplies between the North American triumvirate. Trump in recent weeks has stepped up his rhetoric against the trading partners, returning to threats he had shied away from since taking office and once again vowing to terminate the agreement all together.

“NAFTA’s been very, very bad for our country,” he said in a speech last week in Kenosha, Wis. “It’s been very, very bad for our companies and for our workers, and we’re going to make some very big changes or we are going to get rid of NAFTA once and for all.” 

Peter Navarro, head of Trump’s National Trade Council, drafted the executive order in close cooperation with chief White House strategist Steve Bannon. The order was submitted this week to the staff secretary for the final stages of review, according to one of the White House officials. 

The draft executive order could be a hardball negotiating tactic intended to pressure Mexico and Canada to come to the table to renegotiate NAFTA and make concessions that are more to Trump’s liking. But once Trump sets the withdrawal process in motion, the prospects of the U.S. turning its back on two of its most important trade partners suddenly become real.

Early returns from Capitol Hill lawmakers on both sides of the aisle were not encouraging and suggested that a go-it-alone move from the White House without Congress’ backing could cause trouble down the road, as the administration looks to strike a series of nation-to-nation “America First” trade deals. 

No fewer than four influential Republicans said the White House should hold up, with GOP Sen. John McCain of Arizona saying that such a move would have “the worst possible impact” on his state.

“I’d be glad to have renegotiation of some of the terms of it, because a lot of time has passed,” McCain said, arguing that a withdrawal would “be disgraceful and a disaster.”

Cornyn speculated about whether the draft order was a negotiating tactic. But a withdrawal from the deal, he added, wouldn’t jive with what Commerce Secretary Wilbur Ross told him personally.

“It’s inconsistent with what Wilbur Ross had told me previously about their intention, which was to update NAFTA, not to withdraw from it,” the Texas lawmaker said, adding that he would want to “reconcile” that with the news coming out of the White House today. 

Sen. Jeff Flake, another Republican from Arizona, said a withdrawal would be devastating to the country as well as to his state. “It’s not a zero-sum game,” he said.

Sen. Lindsey Graham admitted to being skeptical of NAFTA initially, but the South Carolina Republican said the pact has brought benefits to the economy. “Trying to negotiate NAFTA makes sense, withdrawing from it doesn’t,” he said.

Senate Finance Chairman Orrin Hatch, who oversees trade in the upper chamber, said he would “have to look at what they’re trying to do” before he could offer an opinion.

Rep. Ron Kind, a pro-trade Democrat who serves as chairman emeritus of the moderate New Democrat coalition, said a NAFTA pullout would be especially painful for American farmers, for whom the deal has proven to be a boon.

“Dairy is exported a lot into Mexico right now, so if we lose that market ... it would wipe out perhaps half of our milk producers overnight,” said Kind, whose home state of Wisconsin is known for its dairy. “And we are selling a lot of agriculture products into the Mexican market, so a NAFTA withdrawal would, I think, be devastating for production agriculture, just to start with — not to mention manufacturing products that we have going down there as well.”

House Agriculture Chairman Mike Conaway hesitated to criticize the administration’s planned move. “NAFTA needs to be renegotiated, at a minimum,” the Texas Republican told POLITICO, noting that much has changed since the deal was struck. “All three economies are dramatically different than they were in the 90s when that was done, so it is an appropriate time to renegotiate.”

“The way I see it, the president is always negotiating,” he added. 

Trump’s apparent strategy to gain leverage over Canada and Mexico has put the business lobby on edge. A withdrawal could undo complex supply chains that have been built up over the deal’s 26-year history and negatively impact companies that have developed major export interests in Canada and Mexico. 

In Mexico City on Monday, U.S. Chamber of Commerce President and CEO Tom Donohue told business leaders that any NAFTA redo must “first and foremost, do no harm.” He stressed the deal should be amended rather than ended.

“We must not disrupt the $1.3 trillion in annual trade that crosses our borders,” he said. “Under NAFTA, Mexico and Canada are the top two U.S. export markets in the world — by a long shot. The jobs of 14 million Americans depend on the agreement.”

There’s also the question of how this could all play out legally. The role of Congress in the withdrawal process may be a source of debate among some legal experts, but it’s been widely assumed among most trade lawyers that the president has the authority to withdraw from trade agreements under Section 125 of the Trade Act of 1974 and does not need congressional approval to do it, said Warren Maruyama, a partner at Hogan Lovells who served as USTR general counsel under President George W. Bush.

“But this would be breaking new ground, so no one knows for sure, and it’s something that could end up in the courts,” he added.

A provision of NAFTA, Article 2205, allows a party to withdraw from the deal six months after providing written notice to the other participants. But the six-month period is not necessarily a hard deadline, and the president could take more time to provide a final notice to finally leave the deal — which would give the White House some leverage in negotiations.

“It would be starting a game of chicken,” Maruyama said. 

The overarching law that provides the president the authority to terminate trade deals — Section 125 of the Trade Act of 1974 — also requires a public hearing on the matter, unless the president determines a hearing to be “contrary to the public interest.”

Even if the process of withdrawal were to be completed, the trade act still allows for the reduced or eliminated tariffs under NAFTA to remain in place for a year in order to allow trade to adjust.

In political terms, the executive order could allow the administration to seize the advantage. Trump hasn't been able to launch a renegotiation because of political realities on Capitol Hill that center on his still-unconfirmed nomination of Robert Lighthizer, his pick to be U.S. trade representative. The administration can't start talks until it gives Congress 90 days notice, and it can't give Congress that notice until it meets with certain congressional oversight committees — and Democrats on one of those committees have been refusing to meet until Lighthizer is confirmed.

Amid the impasse over Lighthizer’s nomination, which has been caught up in an unrelated bill over benefits for miners, Trump has repeatedly taken the offensive in his campaign against NAFTA, which he's called a “job killer” and the “single worst trade deal ever." 

Earlier this week, the U.S. imposed a new tariff on softwood lumber coming from Canada. The relationship between Canada and the U.S. has been tense in recent weeks as the Canadian dairy industry prepares to implement a new pricing policy on certain products that could make it harder for American dairy farmers to compete. 

The United States’ relationship with Mexico has also been marked by increasing tension, since Trump has pledged to make Mexico pay for the wall he wants to build along the border between the two countries.

Some within the White House see drafting of the executive order as a win for the administration’s “nationalist” faction, led by Bannon, who has been sidelined in the weeks since he was removed from the National Security Council. A White House spokesperson did not respond to a request for comment.

Doug Palmer, Megan Cassella, Catherine Boudreau and Brent Griffiths contributed to this report.By Tara Palmeri  <http://www.politico.com/staff/tara-palmeri>, Adam Behsudi <http://www.politico.com/staff/adam-behsudi> and Seung Min Kim <http://www.politico.com/staff/seung-min-kim>
04/26/17 11:32 AM EDT

Updated 04/26/17 05:01 PM EDT