NAFTA Renegotiation Backgrounder

On May 18th, the United States Trade Representative sent to Congress formal notice that the Trump Administration intends to enter into re-negotiations of the North American Free Trade Agreement (“NAFTA”) with Mexico and Canada. This formally begins the renegotiation process which cannot take place until after 90 days.

Trump Administration Notification to Congress

“USTR will now continue consultations with Congress and American stakeholders to create an agreement that advances the interests of America’s workers, farmers, ranchers, and businesses.” USTR will publish a notice in the Federal Register requesting public input on the direction, focus, and content of the North American Free Trade Agreement negotiations.

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CRS – NAFTA Overview

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Do Changes Require Congressional Approval

It is unclear whether the President could implement a renegotiated agreement on other matters (e.g., border security and dispute settlement provisions)under existing authority without Congress making changes to U.S. statutory law.

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Washington Post – What it’ll take to renegotiate NAFTA

Congress has at least 90 days to review the president’s memo and offer suggestions. The bulk of this review occurs within trade negotiation subcommittees in the House and the Senate, but other committees that cover trade-sensitive products will weigh in, too.

Politico: The Trade Deal We Just Threw Overboard: Donald Trump wants to rewrite NAFTA, but someone else already did. Here’s how it went down

There was never a formal announcement of “NAFTA Modernization Talks.” There were no presidential tweets mocking the original agreement. But behind the scenes, President Barack Obama’s negotiators spent more than three years haggling and battling to update and upgrade the 1994 deal, and they eventually got a lot of what they wanted. Canada reluctantly agreed to give American farmers modest but unprecedented access to its tightly protected dairy industry; Mexico grudgingly agreed to labor reforms with more bite than NAFTA’s toothless union protections. The new deal opened up service sectors like insurance, accounting and express delivery where the United States tends to excel, along with e-commerce and other digital industries that didn’t exist when NAFTA was born. The United States also secured new restrictions on government-owned businesses, new protections for intellectual property and new safeguards for the environment.

But none of those hard-won concessions are going into effect. That’s because the Obama team negotiated all of them as part of the Trans-Pacific Partnership, the 5,500-page Asia-oriented trade agreement among the three NAFTA nations and nine other Pacific Rim countries. TPP was at the heart of Obama’s strategic “pivot to Asia.” But Trump saw it as another fleecing of America, and with great fanfare he yanked the United States out of TPP during his first week in office, before Congress could even vote on whether the deal should take effect. That means its upgrades to NAFTA—regarding dairy, labor and everything else Mexico and Canada agreed to—are probably moot.

CRS Report on NAFTA

NAFTA was controversial when first proposed, mostly because it was the first FTA involving two wealthy, developed countries and a developing country. The political debate surrounding the agreement was divisive with proponents arguing that the agreement would help generate thousands of jobs and reduce income disparity in the region, while opponents warned that the agreement would cause huge job losses in the United States as companies moved production to Mexico to lower costs. In reality, NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters. The net overall effect of NAFTA on the U.S.economy appears to have been relatively modest, primarily because trade with Canada and Mexico accounts for a small percentage of U.S. GDP. However, there were worker and firm adjustment costs as the three countries adjusted to more open trade and investment.