United States: NAFTA 2.0: Time Slipping Away For Congress To Act This Year

Ongoing negotiations to rewrite the North American Free Trade Agreement remain bogged down, but even if U.S., Canadian and Mexican trade ministers strike a deal in the coming weeks, Congress may not be able to approve it this year.

House Speaker Paul Ryan, R-Wisc., had set a May 17 deadline to wrap up talks on a renegotiated NAFTA in order for Congress to begin a multistep process to review and vote on the pact before the end of the year. Ryan, speaking that day during Baker Hostetler's 29th annual Legislative Seminar, acknowledged the deadline wouldn't be met. But Ryan said he hoped a deal could be concluded quickly and that lawmakers would have time to act before year's end.

Trade officials have been meeting since last summer after President Donald Trump threatened to withdraw from the 1994 pact. Trump – who said NAFTA is "the worst trade deal ever made by any country in the world" – is demanding a new agreement that would reduce America's trade deficit and increase U.S. manufacturing jobs.

Since NAFTA ended most tariffs on products traded among the three countries, U.S. exports to Canada and Mexico have more than tripled, to $1.1 trillion in 2016, and the two countries are America's largest export markets. Still, NAFTA critics say hundreds of thousands of U.S. jobs – 80 percent of them in the manufacturing sector – were lost to Mexico, where labor costs are lower.

Ratcheting up the pressure on NAFTA negotiations, Trump ordered Commerce Secretary Wilbur Ross to begin a process that could levy tariffs of as much as 25 percent on imported cars, SUVs, vans, light trucks and automotive parts. Mexico and Canada are the largest suppliers of U.S. car imports.

The NAFTA negotiations are part of a White House three-front trade war, as Trump simultaneously seeks to renegotiate trade agreements in North America, Europe and Asia.

NAFTA negotiators are racing to meet several deadlines, including a Trump-imposed target of June 1, when he said he would impose steel and aluminum tariffs on the European Union, Canada and Mexico. The United States buys more foreign steel than any other country in the world with Canada the top steel exporter to the United States and Mexico at No. 4.

Other deadlines include the July 1 presidential election in Mexico and the November midterm congressional elections in the United States. Hanging over the talks is Trump's threat to force the United States to unilaterally withdraw from NAFTA if trade ministers can't settle on new terms.

The timing is important because Congress could need six months or more to review and approve a renegotiated NAFTA. Under the 2015 Trade Promotion Authority law that establishes how trade deals are enacted in the United States, the White House must notify congressional leaders of its intent to sign a trade agreement within 90 days. At least 60 days before any deal is signed, the full text of the agreement must be made available to Congress.

Only simple majorities in the House and Senate are required to enact trade agreements. No amendments are permitted; it's a straight up-or-down vote. But before lawmakers cast their votes, numerous congressional committees will hold hearings to examine what are expected to be thousands of individual provisions – hearings that could occur as the midterm elections in the United States are heating up.

Farm- and border-state lawmakers would want to understand a new agreement's impact on agriculture, including grade and quality standards, country-of-origin labeling, and countless other provisions. Congress will also scrutinize the deal's effect on raw materials and U.S. manufacturing in the automobile sector as well as its rules on intellectual property, telecommunications, financial services, professional services, e-commerce, express delivery and more.

Ryan had said a May agreement would likely give Congress time to vote on the deal during the lame-duck session, the period after the November congressional elections but before new lawmakers are sworn in next year. But with negotiations dragging on, it's increasingly possible the 116th Congress in 2019 would have to vote on a new NAFTA – inserting a new and potentially volatile political dynamic.

If Congress votes on a NAFTA deal this year, Ryan and Republicans will be in charge of the House. But the November elections may produce a Democratic House majority in 2019, and congressional Democrats have been increasingly hostile to trade agreements – and NAFTA in particular.

While Trump has echoed some Democrats' concerns on NAFTA, like the impact on U.S. manufacturing jobs, liberal lawmakers are likely to say whatever deal Trump might strike doesn't go far enough to protect American workers.

Congressional Republicans say they won't rubber-stamp any deal the White House makes, and GOP leaders have called on Trump to back away from some of his key negotiating points, like requiring that a new agreement automatically sunset after five years unless each country explicitly renews it. If that provision or what GOP lawmakers see as adverse language on foreign investments, farm policy or a host of other issues are included in a new NAFTA agreement, its prospects in Congress could be further clouded.

One way to bypass Capitol Hill and the need for congressional approval is for negotiators to make only minor modifications to the underlying trade agreement. Sen. John Barrasso, R-Wyo., a member of the Senate GOP leadership, suggested a "skinny" NAFTA rewrite could help thread the political needle in an election year in the United States.

An agreement that wouldn't require congressional action would likely be a sigh of relief to some U.S. lawmakers, who wouldn't relish the prospect of injecting a NAFTA renegotiation vote into their re-election campaigns this fall. But Trump administration officials say the president, at least for now, is committed to wholesale changes to NAFTA.

Still, whether it's a skinny deal or a full overhaul, negotiators say they're not close to an agreement. U.S. Trade Representative Robert Lighthizer said "gaping differences" exist among the three countries and that officials "are nowhere near close to a deal." Mexican Economy Minister Ildefonso Guajardo said there's only a 40 percent chance a deal could be struck before his country's presidential election July 1.

U.S. Treasury Secretary Steve Mnuchin said negotiations could even continue into 2019.

If negotiations do drag on, Trump might be forced to persuade a different set of House leaders in 2019, including Rep. Nancy Pelosi, D-Calif., who would be in line to reclaim the speakership if Democrats win the House majority. Pelosi voted for NAFTA in 1993, but she also has criticized Trump for not following through on rewriting NAFTA "to put American families first."

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