Prospects dim for Trump NAFTA victory before midterms



Robert Lighthizer is pictured. | Getty Images

Robert Lighthizer is rapidly reaching the point where it will no longer be possible to reach a trade deal in time for U.S. lawmakers to vote this year. | Peter McCabe/Getty Images

MEXICO CITY — President Donald Trump is running out of time to make good on a high-profile campaign promise to have a reworked NAFTA completed this year with congressional approval.

His chief trade negotiator acknowledged as much on Monday as talks with Mexico and Canada wrapped up here. He ticked off the coming Mexican presidential elections on July 1, elections in Ontario and Quebec and, of course, the looming midterm elections in the U.S. in November.

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“We continue to stress the need to act quickly,” U.S. Trade Representative Robert Lighthizer said during a news conference at the end of the seventh round of talks on revamping the North American Free Trade Agreement.

Trump won election in 2016 vowing to pull out of NAFTA, which took force in 1994, unless Canada and Mexico agreed to renegotiate the pact. His anti-NAFTA message particularly resonated in Rust Belt states like Ohio, Pennsylvania and Michigan. If he fails to deliver on NAFTA changes, union and other traditionally Democratic voters who backed him in the 2016 election would have little incentive to cross party lines again to help him hold on to Republican majorities in both the House and the Senate during the midterms.

But as soon as the talks began last August, it was clear there was little hope of striking a final deal by the end of 2017. Instead, Canada and Mexico strongly resisted a number of controversial U.S. proposals to drastically change the terms of the pact in areas like auto trade, investment protections and government procurement.

That pushed the talks into 2018, with countries agreeing to an informal deadline of March 31 in the hopes of wrapping up a tentative deal before political campaigning was in full force in the three countries. Now, after many rounds of talks involving hundreds of trade officials, only six out of 30 chapters have closed.

Consequently, Trump could head into the midterms without achieving a victory on one of his signature campaign issues. That’s because of the 2015 Trade Promotion Authority, or TPA, a law that requires the U.S. Trade Representative’s office to follow a number of steps in order to submit NAFTA 2.0, or any trade agreement, to Congress for a straight up-or-down vote without any amendment.

Lighthizer is rapidly reaching the point where it will no longer be possible to reach a deal in time for U.S. lawmakers to vote this year. Faced with that possibility, Trump might be tempted to give six-months’ notice that he is withdrawing from the pact, despite the concerns that would raise among business leaders and Republicans.

“The thing I think we haven’t focused on enough is the combination of our midterm elections and the TPA timing,” Lighthizer told reporters in Mexico City, referring to fast-track legislation. “It’s seven or eight months, best-case scenario, between agreement in principle and voting.”

Lighthizer must formally notify Congress 90 days before signing the final NAFTA 2.0 agreement. In addition, once the agreement is signed, the U.S. International Trade Commission must do a study on its economic impact. It has 105 days to complete the report. That’s a combined period of 195 days.

So, even if a deal is reached at the next round in April, the earliest Congress is likely to vote on the pact is in October.

If talks conclude in the next “month, or month and a half or something,” then it would still be possible to push the deal through Congress in time to get a vote on it during the lame-duck session, before the new members took office, Lighthizer said. But “if we don’t get something done in the next month or two, we’re going to be in a position where it’s going to be pushed into the next year,” he said.

However, congressional leaders may be reluctant to put the agreement to a vote shortly before the November midterms, particularly if the terms of the deal are at all contentious.

In addition, Mexican presidential candidates will begin formal campaigning in April ahead of a July vote, although the current administration of Enrique Peña Nieto has until Nov. 30 to continue negotiations.

Negotiators closed three more chapters in Mexico in recent days, covering the issues of: good regulatory practices, administration and publication, and food safety and animal and plant health measures. Still, that brings the total number of closed chapters to six, just one-fifth of the expected 30 or more chapters expected in the final agreement.

The top trade officials of all three countries, however, emphasized that some outstanding issues could be wrapped up quickly. For example, negotiators are already close to finishing work in a number of other areas such as telecommunications, digital trade, state-owned enterprises and financial services, and have agreed to add a new chapter on energy to the agreement, Mexican Economy Minister Ildefonso Guajardo said.

The negotiation “does not depend on political calendars or the nature of the presidential elections. It’s the responsibility of the government to stay at the negotiating table until something is accomplished,” Guajardo told reporters at the close of the talks.

Further complicating the timeline, Trump vowed last week to impose a 25 percent tariff on steel and 10 percent tariff on aluminum from countries around the world, including Canada and Mexico. The two free-trade partners were excluded from similar tariffs imposed by President George W. Bush in 2002, which were eventually struck down.

Trump said on Monday that Mexico and Canada could avoid those tariffs by agreeing to a new NAFTA deal. But that’s the equivalent of Trump saying, “If you want me to obey the old [NAFTA] rules, you’ve got to agree to new ones,” Phil Levy, a senior fellow at the Chicago Council on Global Affairs, said, quoting a joke floating around on Twitter.

Both Mexico and Canada have protested the idea of being included in the steel tariffs, with Guajardo calling it the “wrong way” to incentivize the creation of a new NAFTA.

Canada also reminded the U.S. that it is a crucial military ally. “As the No. 1 customer of American steel, Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable,” Canadian Foreign Minister Chrystia Freeland added. “Should restrictions be imposed on Canadian steel and aluminum products, Canada will take appropriate responsive measures to defend our trade interests and workers.”

But she also offered an upbeat assessment of the progress of the talks.

“We are beginning to make headway on some of the more challenging issues. At Round 6 in Montreal, Canada offered creative ideas to initiate a discussion about these areas. That discussion has been constructive and it continued here in Mexico City. We are making progress, but we do have significant work ahead,” Freeland said.

Lighthizer acknowledged the difficult political calendars coming up for each of the three countries and said he understands “that these talks are not easy for anyone.”

“Each of us has our own political concerns,” he said. “But we are at the point where we have very important decisions to be made.”

Sabrina Rodriguez contributed to this report.

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