politics

Looming Deadlines Explain Why Trump Is Hurrying for a Nafta Deal

  • Trump said to want to announce framework Nafta deal next week
  • Observers say it’s probably too late to pass in this Congress

Morgan Stanley's Zezas on the Future of Nafta

The Trump administration is hoping to pull off a quick win for Nafta by aiming for a provisional pact as early as next week. A look at the political calendar explains why that’s all he’s likely to get.

Talks between the U.S., Canada and Mexico to revamp Nafta that started in August missed an initial end-2017 deadline, and have been moving slowly in 2018. But Donald Trump has been ramping up his trade agenda this year, and a conditional deal on Nafta 2.0 would be a victory for the president just months before midterm elections in Congress that will shape the rest of his term. American lawmakers and business groups want the U.S. to stay in the pact, which Trump has threatened to quit.

U.S. Trade Representative Robert Lighthizer has begun floating the idea of a deal in principle. The Trump administration is aiming to announce a preliminary deal at a summit in Peru next week, according to people familiar with the talks. That kind of stopgap would be “largely designed to keep the markets calm,” said Dan Ujczo, an Ohio-based trade lawyer at Dickinson Wright. But it would likely stop short of a formal agreement the three countries could sign, let alone embark on the arduous process of seeking approval in their respective legislatures.

In other words, Trump may get his deal in principle, but it may be months, even years, before an official updated Nafta comes into force.

Here are the important dates coming up for the talks.

April 13: The Summit of the Americas

The U.S. is pushing to announce a framework deal at a leaders’ summit in Peru from April 13-14. The administration is hosting Mexican and Canadian counterparts this week in Washington to try and achieve a breakthrough in the discussions.

May 1: Steel and Aluminum Tariffs

Trump exempted Canada and Mexico from his new tariffs of 25 percent on steel and 10 percent on aluminum indefinitely, and then added a May 1 expiry on the exemption. Unless that’s extended -- the U.S. has said it could be -- Mexico and Canada will be slapped with new tariffs and face new political pressure to dig in on Nafta.

May or Earlier: Start U.S. Process for Approval in Congress

Lighthizer has said he wants to pass a new Nafta in the current Congress. That raised eyebrows, as time is running out and may already have.

Under U.S. trade law, the administration has to clear a long set of procedural hoops before a deal can be put to a vote. Even in a best-case scenario, the process would take months. For example, the U.S. International Trade Commission has 105 days after a deal is signed to analyze the economic impact. Then there’s the fact that Lighthizer would have to actually get enough votes, which seems a tall order with big divides remaining on issues that are crucial to major U.S. states.

“Basically they’re out of time. If you look at this through the jaundiced eye of a vote counter, this goal is unachievable if they close today,” said Scott Miller, a senior adviser at the Center for Strategic and International Studies in Washington.

Ujczo said a deal could by reached in May and still theoretically jump through the hoops. “My rule of thumb is Memorial Day,” he said, referring to the May 28 U.S. holiday. Even then, it would require flawless, delay-free legislative execution and enough votes to pass.

June 7: Ontario Election

Voters in Canada’s most populous province head to the polls in June. Canadian Prime Minister Justin Trudeau relies on this region substantially for support, though he doesn’t face re-election himself until 2019. Canadian officials have never said the election is pressuring talks, but one person has: Lighthizer, who cited elections in Ontario and later in Quebec in an apparent effort to heighten the urgency.

July 1: Mexico’s Election

This election matters more. Mexicans vote on July 1 with leftist Andres Manuel Lopez Obrador the clear presidential frontrunner. He has warned he’d redo a bad Nafta deal if elected -- though his Nafta chief generally supports the deal’s continuation.

This is a crucial milestone that makes any deal after April politically difficult for Mexico, because it would land in the middle of a campaign, between governments or in the hands of a new leader. Any deal loaded with what look like concessions to Trump could both lift Lopez Obrador to power and give him a stronger mandate to reboot talks.

Sept 1: Mexico’s New Senate Arrives

Any new Nafta deal needs to be approved by Mexico’s Senate, which takes office Sept. 1 -- three months before the new president.

With Lopez Obrador’s poll performance, his Morena party is likely to have more power in the incoming chamber -- and an inclination to oppose a deal negotiated by the ruling Institutional Revolutionary Party of current President Enrique Pena Nieto. That increases the urgency to try to get a Nafta deal approved in a potential special session before September, or possibly before the current spring session ends on April 30. The new president will be inaugurated Dec. 1.

Nov. 6: U.S. Midterm Election

This date is essential. Members of Congress are unlikely to want to vote on Nafta while running for re-election, even though the accord generally has had broad bipartisan support. That means a vote is unlikely around this time. Although the current group of lawmakers could vote after election day and before the next Congress takes office in January, a shift of power could make either party reluctant to cooperate.

“What happens if you have a Democratic House, or a Democratic Senate? What happens in the Mexican elections? How solid is the Trudeau government at that point? That agreement in principle is probably not worth the paper it’s printed on,” said CSIS’s Miller.

— With assistance by Nacha Cattan

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