Politics·Analysis

Trump's threat of a bilateral deal with Mexico may be empty. Here's why

As news broke Monday of a U.S.-Mexico breakthrough in the NAFTA talks, the Canadian government's statements to the media all ended with the same line: "Canada's signature is required." But is it, really? Or could Donald Trump get his U.S.-Mexico Free Trade Agreement after all?

Mexico says it's doing everything it can to help Canada, but 'certain variables' are beyond its control

U.S. President Donald Trump bragged about negotiating tough Monday, saying he wanted to dump the name NAFTA because of its bad connotations. But does he also want to dump Canada from the trade pact? (Kevin Lamarque/Reuters)

As news broke Monday of a U.S.-Mexico breakthrough in the NAFTA talks, the Canadian government's statements to the media all ended with the same line: "Canada's signature is required."

But is it, really?

Or could U.S. President Donald Trump get his U.S.-Mexico Free Trade Agreement after all, cutting Canada out?

Legal opinions are split on whether Trump has the authority to go it alone with Mexico or whether the U.S. is obligated to continue negotiations with three parties. 

No matter how many times senior Mexican and Canadian officials or even influential Republicans reassure Canadians the North American Free Trade Agreement will remain trilateral, it's hard to calm nervous stomachs when Trump offers brash musings like this:

"I think with Canada, frankly, the easiest thing we can do is do tariffs on their cars coming in," Trump told reporters Monday.

"It's a tremendous amount of money and it's a very simple negotiation that could end in one day, and we take in a lot of money the following day. But I think we'll give them a chance to probably have a separate deal. Or we could put [Canada] in this deal."

Notice how the only option for which the Trump administration has Congressional authority is mentioned last — almost as a final resort — instead of what it was supposed to be: the primary mission for negotiators over the last 12 months.

CBC's Rosemary Barton fact checks some of Trump's statement about the bilateral trade with Mexico:

U.S. President Donald Trump said a lot in announcing his trade deal with Mexico, but how much of it was true? 1:55

Canada wasn't at the table for the last month, so it's unclear how much it knew in advance. But it boils down to this: a suggested agreement in principle is on the table. Trudeau's government has to decide whether it wants in and on what terms.

If it does want in — and Foreign Affairs Minister Chrystia Freeland sounded upbeat about the progress toward that outcome as she arrived at talks in D.C. Tuesday — Trump's threat to keep Canada out will be hard to execute

'This is real'

"Recall that NAFTA requires six-month notice before a withdrawal," Jennifer Hillman, a former general counsel in the U.S. Trade Representative's office wrote on Twitter.

What's more, the U.S. Congress hasn't been notified of a bilateral deal with Mexico, she said.

If the U.S. wants to pull out of NAFTA and turn its "preliminary agreement in principle" into a bona fide trade deal, there's a process for that, but Trump hasn't been following it. 

But maybe it's wrong to assume the Trump administration cares about the process it's supposed to follow.

Met by reporters outside the White House Tuesday morning, the head of Trump's economic council waved off suggestions that Trump's bilateral approach isn't legitimate as far as Congressional approval is concerned.

"Are we going to go through legalese?" Larry Kudlow said, acknowledging he's "not a trade lawyer." 

"You've got to have some patience! This is real! Believe me. Don't think this is something that's somehow going to go away. It's not."

American officials acknowledge they need a creative workaround to get a deal with Mexico alone.

"How you do that is something that we're still in the process of looking at ... just as a technical matter," one U.S. official said Monday on the condition of anonymity. 

Even if Congress is enticed to approve a trade deal with Mexico alone, the original NAFTA has to be terminated first. 

American legal experts are split on whether Trump's executive powers allow him to terminate NAFTA without Congress.

Rules-based system?

International trade rules — ones the U.S. helped establish at the World Trade Organization — were supposed to discourage protectionist measures such as last spring's steel and aluminum tariffs

And yet, the Trump administration carried on, relishing the threat of tariffs as leverage in negotiations not only with Canada and Mexico but also other key trading partners, such as South Korea and the European Union. 

In other words, established rules and processes might not be enough to stop the Trump administration from doing something it's determined to do.

But that doesn't mean Canada's helpless here. Trade negotiations involve not only law, but politics.  

Before Monday's announcement, Canada and Mexico seemed to be pursuing a "hang together or hang separately" philosophy, vowing as recently as last month not to settle for bilateral deals.

But then came the August invitation — to Mexico alone — to come to Washington for what turned out to be a marathon negotiating session, now in its fifth week. Canadians were told it was meant to break the U.S.–Mexico logjam in the automotive chapter of trade talks. It now appears to have been so much more.

'Do what's right for Mexico'

Outgoing Mexican President Enrique Pena Nieto dialled into the Oval Office for Trump's announcement Monday. He noted Canada's absence several times. But he also congratulated negotiators as if something had been finalized.

Did this signal a betrayal?

Mexico's ambassador to Canada, Dionisio Perez Jacome, told CBC News Network's Power & Politics the Mexicans will do everything they can to help Canada, but "certain variables we don't control."

That echoed Foreign Minister Luis Videgaray's Monday claim that "we put all our effort, 24/7, to promote that Canada continues to be a part of this agreement."

U.S. Trade Representative Robert Lighthizer marched over to the White House with Mexico's secretary of the economy Idelfonso Guajardo for Trump's announcement Monday. Guajardo had said a major issue remained in the talks but never specified what it was. (Luis Alonso Lugo/Associated Press)

One U.S. official summed it up this way: "Mexico is in a position where they want to protect their markets, and they'll hopefully do what's right for Mexico."

If NAFTA fell apart, the official said, the Mexicans still have an agreement with Canada: the revised (now without the U.S.) Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP.

Videgaray may have meant to be reassuring when he said a failure on Canada's part to finish negotiations this week "does not preclude the possibility of Canada joining later."

The problem with joining "later," in the world of international trade negotiations, is that the price of admission typically goes up, not down.

Will Congress help?

What does work in Canada's favour is time. Canada's next federal election is a year out while the U.S. and Mexico have more urgent political concerns.

If an agreement isn't reached in time for the Pena Nieto government to sign on its way out the door, the next, more nationalist and left-leaning administration in Mexico might want to change it.

The Trump administration, for its part, needs to look like a successful trade deal-maker in the face of its critics running for Congress in November's midterm elections.

Canadian Foreign Minister Chrystia Freeland, seen here with German Foreign Minister Heiko Maas, was on government business in Europe when the U.S.-Mexico deal was announced. She quickly changed her plans and arrived in Washington Tuesday. (Bernd von Jutrczenka/dpa via Associated Press)

Canada's friends in Congress have spoken out on its behalf this week.

But words are not deeds: with the exception of one non-binding vote in the Senate earlier this summer, none of the legislation that would begin to tie Trump's hands on trade has passed.

U.S. Trade Representative Robert Lighthizer wants to craft a deal that gets "overwhelming support" from both Democrats and Republicans.

Parts of what Mexico agreed to seem tailored to appeal to Congress: union-backed Democrats want tough labour regulations for Mexico; politicians who receive significant backing from the pharmaceutical industry back longer drug-exclusivity periods. 

But time might have already run out for this Congress to vote on NAFTA's successor agreement. As midterms approach, the trade skepticism that propelled Trump into office hasn't gone away.

For now, Canada's back at the table in Washington, with some tough decisions ahead. 

About the Author

Janyce McGregor

Parliamentary Bureau

Janyce McGregor has covered Canadian politics for CBC News since 2001. Send news tips to: Janyce.McGregor@cbc.ca

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