World·Analysis

These are the steps Trump would have to take to end NAFTA. It won't be easy

U.S. President Donald Trump plans to formally initiate the process of transforming NAFTA into a bilateral U.S.-Mexico trade agreement Friday, but faces some tough procedural and political hurdles that may yet torpedo his plans.

A lot has to happen before U.S. president can replace NAFTA with bilateral U.S.-Mexico pact

Under NAFTA's withdrawal clause, U.S. President Donald Trump must give six months' notice to the leaders of Canada and Mexico, the other stakeholders in the current pact. That would place the American withdrawal date at around March 2019. (Joshua Roberts/Reuters)

U.S. President Donald Trump plans to formally initiate the process of transforming NAFTA into a bilateral U.S.-Mexico trade agreement Friday, but faces some tough procedural and political hurdles that may yet torpedo his plans.

The revised version of the North American Free Trade Agreement that Trump laid out for reporters in the Oval Office Monday would see Canada cut loose, along with the name NAFTA, which, Trump said, carries "bad connotations."

Trump suggested that Canada might be able to sign onto the deal or strike a separate bilateral agreement if, he said, the Canadians "would like to negotiate fairly."

But a lot still has to happen before the U.S. president can set about terminating the existing 24-year-old deal, as he has vowed to do.

CBC News talked to several trade experts who explained what would happen next.

Notifying Canada and Mexico

Under NAFTA's withdrawal rules, Trump must give six months' notice to the leaders of Canada and Mexico, the other stakeholders in the current pact. That would put the exit date around March 2019.

"We don't have all the fine print yet," noted Gary Hufbauer, a former U.S. trade official and current fellow at Washington's Peterson Institute for International Economics.

"But my view is [Trump] can send the letter to the other heads of state, and I think it's very unlikely Canada will agree to all the terms that Mexico has agreed to."

Notifying Congress with a '90-day letter'

Trump has already vowed to inform Congress of his intentions on Friday. Hufbauer doubts Canada will hammer out the terms of its inclusion in the U.S.-Mexico deal by the end of the week, however. The so-called 90-day letter to be presented to Congress would announce an agreement to revise NAFTA into a U.S.-Mexico bilateral agreement, which Canada would, in theory, be free to sign onto.

If the letter is sent in September, it could be signed as early as Dec. 1.

Mexican President Enrique Pena Nieto, right, seen here with Canadian Prime Minister Justin Trudeau last year, mentioned Canada's absence from the deal on his call with Trump Monday. (Alfredo Estrella/AFP/Getty Images)

"There's no chance that Congress will ratify the agreement this calendar year," Hufbauer said.

Especially not if the Democrats meet polling expectations in November's U.S. midterms and flip control of the House, he said.

Chances are slim, he said, that Congress would ratify a new deal after the November midterms, given the complexity of what's involved in such a task.

"That takes us into 2019," he said. "And you have to ask yourself, who is going to be running the House in 2019?"

Release of the full text

Within the 90-day consultation period, the full text of the new agreement must be published 60 days before it can be signed. That likely means the documents will be made public by around Sept. 30, said Dan Ujczo, a trade lawyer specializing in Canada-U.S. relations.

Legal scrutiny would likely ramp up at that time.

"Congress will want to ensure that Canada has every opportunity to come into this deal," Ujczo said. "So, I think there's going to be significant pressure by Congress on the White House to get Canada into this deal before the formal text gets published on Sept. 30."

By October, Ujczo warned, the ability for Congress to hold the line on keeping Canada in a trilateral agreement will start to diminish as the midterm elections approach. Lawmakers enticed by "pet projects" in the agreement in principle might stop holding out for Canada and take a U.S.-Mexico deal to buttress against a protracted trade war with China, he said.

Congressional challenges

If Trump's Republicans don't retain a majority in Congress, Hufbauer said, "chances of getting this U.S.-Mexico thing ratified without Canada signing on are going to be very small."

The biggest reason, in his mind, is purely political.

"Why in God's name would they approve a trade agreement negotiated by Trump? Whatever it is," he said. "Democrats in Congress haven't liked trade agreements for 25 years."

In a statement Monday, U.S. Senate finance committee chairman Orrin Hatch noted that "a final agreement should include Canada." Hatch had suggested in February that Congress could override Trump by passing a "veto-proof" bill to preserve NAFTA.

Friendly neighbours

Don't count out Canada's allies south of the border, particularly in states like Ohio, New Jersey, Michigan and Pennsylvania.

"Congress would react very badly," said former U.S. trade representative Carla Anderson Hills.

"They're about to run for election. This will be horrific to think that we no longer have preferential access to our northern …neighbours."

U.S. Representative Tim Ryan of Ohio says he would like to see a revised NAFTA include Canada. ( Gary Cameron/Reuters)

As much as Canada, the U.S. and Mexico share integrated supply chains and practical reasons for wanting to preserve a trilateral agreement, the very idea of kicking Canada to the curb in a renegotiated NAFTA also just rubs some members of Congress the wrong way.

"Philosophically, we believe it's important for Canada to be part of the program," Democratic Ohio congressman Tim Ryan said an interview. "Details can be worked out that are mutually beneficial for both sides."

NAFTA's Chapter 19 dispute resolution process has been a sticking point for the U.S., which wants to eliminate it against Canada's objections, but despite that, Ryan said, Canada-U.S. relations are important for symbolic, economic and national-security reasons.

"It's still mind-boggling to many of us who saw that the president just kind of picked a fight with Justin Trudeau," Ryan said, referring to Trump's undermining of the Canadian prime minister at last June's G7 summit in Quebec.

"Many of us down here have a lot of respect for [Trudeau] and like him a lot. We thought that was kind of out of left field."

Legal hurdles

Trade lawyers have long debated whether the U.S. president can unilaterally kill a trade deal. Jennifer Hillman, a former general counsel at the office of the U.S. Trade Representative (USTR), was unequivocal.

"It's a no," she said. "The president doesn't have the authority to withdraw without Congress. It took an act of Congress to get into the NAFTA; it will take an act of Congress to get out of it."

A Constitutional clash

Part of the legal debate over whether Trump can cancel NAFTA on his own comes down to some Constitutional crossover.

The Commerce Clause, or Article 1, Section 8 of the U.S. Constitution, grants Congress the power "to regulate commerce with foreign nations."

"So, if you see NAFTA as a commerce agreement, that means Congress gets a say," Hufbauer said.

But Article 2 refers to presidential executive powers, which have been interpreted by the U.S. Supreme Court as overseeing treaties that deal with foreign affairs.

In a litigation over NAFTA, Hufbauer explained, the Supreme Court would have to decide where the split falls.

Supply chains between Canada and the U.S. are highly integrated. (Wilson Ring/AP Photo)

"Does this agreement principally come within the Article 2 powers of the president, or the Article 1 powers of the Congress?" he said.

A 'Zombie NAFTA'?

Hillman, the former U.S. Trade Representative, noted that a "phantom" or "zombie" NAFTA can continue to exist. That's because even if Trump technically succeeded in withdrawing from NAFTA, the original agreement is still filled with statutory text.

"All those statutory protections are still on our books, and it wouldn't be repealed unless Congress chooses to repeal them," she said.

This would leave a situation in which the U.S. is no longer part of the pact, but the regulations of NAFTA remain in place.

About the Author

Matt Kwong

Reporter

Matt Kwong is a Washington-based correspondent for CBC News. He previously reported for CBC News as an online journalist in New York and Toronto. You can follow him on Twitter at: @matt_kwong

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