'Smoke and mirrors': Why the U.S. is on shaky ground when it comes to threatening Canada on NAFTA

Trump faces a heap of legal problems if he follows through on threat to swap trilateral NAFTA deal for a bilateral pact with Mexico

TORONTO — Canada’s decision on whether to sign onto a U.S.-Mexico trade agreement will hinge largely on how much stock it puts in Donald Trump’s threats to wipe out NAFTA and forge a two-way deal with Mexico.

On both counts, the president is on decidedly shaky ground, say veteran trade lawyers and negotiators on both sides of the border.

“If I were Canada, I wouldn’t sign,” said Jennifer Hillman, a former general counsel to the U.S. trade representative during Bill Clinton’s presidency. “What Trump is trying to say to Canada is: ‘You can’t have the status quo, so your choice is this agreement or nothing.’ But the question for Canada is: How credible do you think the ‘nothing’ threat is?”

After shutting Canada out of talks for weeks, the United States and Mexico reached “a preliminary agreement in principle” on Monday that included significant changes to the 25-year-old NAFTA pact.

Though talks between American and Mexican officials were thought to be limited to bilateral issues, the deal presented in the Oval Office Monday included items of key interest to Canada, including new rules on intellectual property and data protection, and a “sunset clause” that would see NAFTA expire in 16 years unless all parties agree to keep it. The announcement prompted Foreign Affairs Minister Chrystia Freeland to fly immediately to Washington to restart talks, cutting short a European trip.

Canadian Foreign Affairs Minister Chrystia Freeland arrives for talks in Washington. AP Photo/Andrew Harnik

If Canada refuses to play ball with U.S. demands, Trump said he would swap the trilateral NAFTA deal for a bilateral pact with Mexico and submit that to Congress for approval instead.

That may seem simple, but Hillman and others say it’s just not possible.

To begin with, Trump’s power to renegotiate NAFTA was granted by Congress under Trade Promotion Authority laws. That power was granted after the Trump administration notified Congress of an intent to engage in trilateral talks with both Canada and Mexico to modernize NAFTA. If Trump wants to pursue a bilateral deal with Mexico, he’ll have to provide a new notification to Congress, restarting a 90-day period during which legislators are entitled to consider the proposal, Hillman said.

“The idea is, you want to tell Congress in advance what you intend to do, so that if they object or if they want to change the negotiating objective, they have time to do so,” Hillman said. “In other words, you can’t even begin the negotiations until you’ve given the Congress 90 days.”

Once negotiations are complete, a formal text must be submitted and considered by Congress for 60 days before it can be signed, she added.

All of which suggests that legal requirements of getting a bilateral deal through Congress then would pour cold water on the Trump administration’s desire to have a deal ready in time for Mexican President Enrique Pena Nieto to get it signed before he leaves office Dec. 1.

“He gave notice of, and is required to negotiate, a trilateral agreement with Canada and Mexico,” said Carla Hills, a former U.S. trade representative who worked on the original NAFTA agreement.

“I don’t know what this administration intends to do, but that is the legal requirement and Congress would be unhappy if they were consulted on a trilateral agreement and then it didn’t come through.”

Even if Canada signs on, trade experts are highly skeptical that the fact sheets and press releases distributed by U.S. Trade Representative Robert Lighthizer Monday can be turned into a comprehensive legal text ready for congressional consideration in time for the Mexican Dec.1 deadline.

“Unfortunately, they think they can do whatever they want, but that’s not true on trade,” said Debra Steger, a former Canadian trade negotiator who help build the World Trade Organization. “On trade, presidential power is restricted by legislation.”

What about the threat to dissolve NAFTA? The question is a subject of heated debate in the U.S. Hills believes the existing NAFTA agreement does give Trump the power to pull out of NAFTA, provided six months notice is provided.

Hillman sees it differently.

“My own view is it took an act of Congress get into the NAFTA and it takes an act of Congress to get back out of NAFTA,” she said. “It’s very clear here in the United States that Trump does not have the votes or the support to simply withdraw from NAFTA.”

There are other problems. At the core of Trump’s agreement with Mexico are new agreements on the auto industry, including a requirement that 75 per cent of the content of each vehicle in the free-trade zone must come from the U.S. and Mexico in order to qualify for duty-free treatment.

“I don’t know that there’s many cars that can satisfy that because the vast majority of the autos that are traded have Canadian steel (and) aluminum and Canadian parts,” Hillman said. “When I say parts, I don’t mean little screws. I mean whole chassis, auto bodies and so, on that are made in Canada.”

Indeed Trump would likely have to rework his entire deal with Mexico if Canada were cut out, said Chip Roh, a former deputy chief negotiator on the original NAFTA deal.

“Try asking any North American auto manufacturer how many of its cars can meet those content rules without Canada. It’s not possible,” he said.

So what exactly is behind the U.S.-Mexico squeeze play?

“This is a bunch of smoke and mirrors,” said Steger. “I think Trump and Lighthizer are saying things for public consumption in order to sound tough but some of those things just aren’t real.”

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