The challenge of deciphering Donald Trump’s intentions for Nafta were on full display Wednesday in Washington.
There was Trump, who veered within minutes between killing the North American Free Trade Agreement, saving it or breaking it into two-way pacts. Then there was U.S. Commerce Secretary Wilbur Ross, who hours later repeated contentious proposals that some call poison pills. Meanwhile, Trump ally Newt Gingrich was advising observers to ignore the bluster and expect the pact’s salvation.
Decoding such messages was the task before Canadian Prime Minister Justin Trudeau, who heard the full range of Trump’s views during his visit to the White House on Wednesday. Trudeau—whose country is the U.S.’s top export market—has led a sprawling lobbying effort to save Nafta. He’ll meet with the deal’s other major player, President Enrique Pena Nieto, on Thursday in Mexico City.
“It’s possible we won’t be able to make a deal, and it’s possible that we will,” Trump said in the Oval Office, before he was asked about a bilateral deal. “It’s possible we won’t be able to reach a deal with one or the other, but in the meantime we’ll make a deal with one. But I think we have a chance to do something very creative, that’s good for Canada, Mexico and the United States.”
No ‘Tea Leaves’
The fate of a deal that underpins $1.2 trillion in annual trade is so uncertain that Trudeau’s predecessor, Stephen Harper, warned in his own speech Wednesday that companies should start planning for the U.S. to pull out. Trudeau, for his own part, cautioned against speculation and emphasized the prospects for an agreement.
“We are very aware that there are other potential paths out there,” Trudeau said, when pressed on a possible collapse of talks. “My optimism towards Nafta, towards a renegotiation, isn’t based on personality or reading political tea leaves. My optimism is based on the fact I know how good it has been.”
While Trump campaigned on killing Nafta, mostly citing the U.S.’s trade deficit with Mexico, he’s facing resistance at home. The U.S. Chamber of Commerce has pledged to fight any pull-out and the House of Representative’s powerful Ways and Means Committee is flexing its muscle to defend the accord.
The panel was “dedicated to ensuring these negotiations are successful,” Chairman Kevin Brady said while Trudeau made a rare visit to the committee. “We have to provide certainty for investment to succeed to create jobs and grow our economies.”
Trump’s musing included a potential end of the deal. “I’ve been opposed to Nafta for a long time in terms of the fairness,” he said, adding: “I think Justin understands this, if we can’t make a deal, it will be terminated and that will be fine.”
Brady cited expanded market access for U.S. dairy farmers, stronger intellectual property protection and customs barriers as key to reaching a deal. Another lawmaker, Richard Neal, urged Canada to open its restricted market to U.S. cultural industries.
Ross, speaking at an event at Dentons law firm in Washington, singled out several divisive subjects for action. They include rules of origin, which govern how much of a product must be made in Nafta countries to get its benefit; dispute settlement processes such as Chapter 19, favored by Canada and targeted for elimination by Trump; sanitary controls; medical and pharmaceutical rules; and technical barriers to trade.
Ross played down talk of getting a deal by December, saying “there’s no precise deadline.” He said the likelihood of passing a deal would drop after the so-called fast-track authority expires in July.
“We’ve not yet gotten to the hard part,” Ross told Dentons’ senior business adviser, James Moore, a former Canadian minister who sits on Trudeau’s Nafta advisory panel. Moore pressed him on why the Trump administration use of trade deficits to judge the deal’s success, which he called a “simple binary approach to scoring.”
“Let’s just agree to disagree,” Ross replied.
Gingrich and Harper
As Trudeau and Trump met, a pair of former leaders from the two sides switched national roles as Nafta’s optimist and pessimist. Gingrich played down the prospects of Trump walking away from Nafta up while Harper warned the risk was real.
“Blowing up Nafta guarantees chaos, and guarantees you lose jobs,” Gingrich told the Dentons event, joking that Trump “has a sliding scale of ‘worst deals”’ that must be taken with a grain of salt. The U.S. strategy was “aimed at improving the American position in the treaty, not aimed at blowing it up.”
Harper, whose Conservatives governed Canada from 2006 to 2015, warned that companies should be studying the consequences if the deal collapses.
“I don’t think that it’s going to be adequate for President Trump to have an agreement that he can’t in some concrete way say is going to improve the lives of some of these masses of people who voted for him,” Harper said. “It has to be a lot more than some kind of technical revamp and I think that’s going to be tough to get to.”
Thursday’s Nafta agenda includes talk on sanitary rules, services trade, state-owned enterprises, the environment, financial services, telecommunications and government procurement, where the U.S. has also submitted a controversial proposal, according to an agenda obtained by Bloomberg.
The U.S. “wouldn’t be wasting all this time if we weren’t hopeful” that a deal could be reached, Ross said. But he stressed that Trump needed fundamental changes.
“As you’ve seen in the media, from time to time he’s expressed a total willingness to depart from Nafta, should it become necessary,” Ross said. “We don’t hope it will. We don’t desire that it will. We don’t believe that it will. But it is at least a conceptual possibility.”