Canadian Prime Minister Willing to Renegotiate NAFTA
Canadian Prime Minister Justin Trudeau is willing to renegotiate NAFTA with the U.S. after president-elect Donald Trump takes office, Trudeau said (here). “If Americans want to talk about NAFTA, I’m happy to talk about it,” The Toronto Star quoted Trudeau as saying. The news sparked concern among U.S. economists on a Nov. 10 post-election trade panel hosted by the Georgetown University McDonough School of Business on Capitol Hill. Georgetown international business and economics professor J. Bradford Jensen said it’s not clear whether reworking the trade deal with Canada or Mexico would boost U.S. job numbers, raising the possibility that such a move could even cause more jobs to move overseas. Other elements of Trump’s potential trade policy described during the campaign, such as substantially raising tariffs, could motivate other nations to respond in kind, causing the U.S. to lose yet more jobs, Jensen said.
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If the U.S. takes a tougher tariff position with regard to Chinese goods, it should at least try to open up services trade with that country, Jensen said. During the first Republican primary debate, Trump suggested the U.S. should assess a tariff rate of up to 45 percent in response to any Chinese currency manipulation (see 1601150029). Jensen said he heard “secondhand” from people who have been on panels with Trump advisers that the Trump team didn’t seriously plan to level any 45 percent tariffs, and that references to that number were merely an “opening bid” for his campaign. “What’s the ask? Is the ask to send back all those T-shirt and toy and tennis shoe jobs?” Jensen said. “It’s not clear what the objective is.” The Trump campaign didn’t immediately comment.
Jensen and Wendy Cutler, former Office of the U.S. Trade Representative official and current vice president of the Asia Society Policy Institute’s Washington office, added that the Trans-Pacific Partnership (TPP) in essence is a rewritten NAFTA. TPP vastly improves upon NAFTA in the areas of customs, intellectual property, digital trade and state-owned enterprises, Cutler said. Along with Jensen, she questions Trump’s goals of renegotiating it. “If it’s an unbalanced tariff deal, I think that negotiation’s going to be over very quickly, and it’s not going to be successful,” she said. Daniel Griswold, co-director of the Program on the American Economy and Globalization at the Mercatus Center, said a decade of evidence indicates Trump will maintain his disfavor for the deal once in office and surround himself with some of the like-minded U.S. economists while he’s in office.
NAFTA Article 2205 allows parties to withdraw with six months’ written notice, at which point the agreement would stay in effect between the remaining parties -- that is, between Canada and Mexico if the U.S. were to pull out. The U.S.-Canada Free Trade Agreement would come back into effect (see 1611090010). Whether U.S. withdrawal would require Congress to give its approval by repealing legislation is unclear, according to a blog post by Barnes/Richardson attorney Larry Friedman (here). Under 19 USC 3451, if a country withdraws from NAFTA, the amendments made to implement the deal “cease to have effect with respect to that country." It’s unclear whether “that country” can be the U.S. withdrawing from NAFTA, or whether it applies only to U.S. implementation of Canadian or Mexican withdrawal, Richardson said. If the former, Congress would not have to act to repeal NAFTA implementation legislation. If the latter, it would.