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Renegotiate NAFTA

“A Trump administration will renegotiate NAFTA and if we don't get the deal we want, we will terminate NAFTA and get a much better deal for our workers and our companies. 100 percent."


PolitiFact is tracking the promises of President Donald Trump. See them all at PolitiFact.com.

Updates

President Donald Trump, Canada's Prime Minister Justin Trudeau and Mexico's President Enrique Pena Nieto, participate in the USMCA signing ceremony at G20 in Buenos Aires, Argentina on Nov. 30, 2018.
President Donald Trump, Canada's Prime Minister Justin Trudeau and Mexico's President Enrique Pena Nieto, participate in the USMCA signing ceremony at G20 in Buenos Aires, Argentina on Nov. 30, 2018.

Trump has renegotiated NAFTA, awaits congressional approval

After two years of negotiations, President Donald Trump signed a new treaty with Mexico and Canada to replace what he called "the single worst trade deal ever approved in this country," the North American Free Trade Agreement.

The most important hurdle remains to be cleared, however: Congress must pass the deal for it to go into effect.

Trump formally signed the United States-Mexico-Canada Agreement, or USMCA, alongside former Mexican president Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau at the G20 summit in Buenos Aires, Argentina, on Nov. 30.

Trump will need the next House speaker to bring the legislation before the Democrat-controlled floor. Former Speaker Nancy Pelosi impeded trade deals with Colombia, Panama, and South Korea in 2007 by blocking precisely that step, according to Phil Levy, senior fellow on the global economy at The Chicago Council on Global Affairs.

If the House Rules Committee finds Trump met the requirements of Trade Promotion Authority, the 2015 law that governs U.S. trade negotiations, the trade deal would need a simple majority in the House and Senate. No amendments would be allowed, nor any filibusters. If TPA is deemed not to apply, then Congress does not need to move the bill forward. It could also be amended, and filibustered in the Senate.

Democrats and Republicans in both chambers have voiced reservations; Democrats see insufficient protection of American jobs and workers, and some Republican free traders see it as overly protectionist.

To turn up the heat on Congress, Trump has threatened to terminate NAFTA.

"I'll be terminating it within a relatively short period of time," Trump said shortly after the signing ceremony. "We get rid of NAFTA. It's been a disaster for the United States."

Trump could invoke Article 2205 of NAFTA to leave the pact. That opens up a six-month window during which he could change his mind. The administration has already threatened withdrawal for the same reason, but never followed through.

Whether Trump can simply withdraw the United States from NAFTA is subject to heavy debate. According to Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, ending implementation of NAFTA would require Congress to change U.S. laws, so Trump's own announcement might not mean all that much.

On the other hand, Trump's threat of scuttling the agreement brings forth uncertainty for businesses, which is bad news for all three economies, Kirkegaard said.

USMCA basics

Experts told us the new NAFTA varies only slightly from the old one, which came into force in 1994. Most of the new provisions favor the United States.

The USMCA touches a variety of economic dimensions. It increases the United States' reach into Canadian milk and pharmaceutical markets, bolsters labor and environmental rights, and broadens protections over intellectual property. Perhaps most significantly, it aims to substantially increase the share of car and truck parts made in North America.

Under NAFTA, a little less than two-thirds of a car's parts had to originate from North America for the car to be eligible for duty-free status. Anything short of that, and the car is not considered a "North American good."

The new agreement raises that threshold, with cars needing three-fourths of their parts originating in North America to move freely between the three countries.

The new deal also requires that at least 40-to-45 percent of the value of vehicles be produced in factories paying $16 hourly wages by 2023. That's significantly higher than Mexico's minimum wage, roughly $4.15. Under NAFTA, no such wage provision existed.

The new deal also allows the United States to supply the equivalent of 3.6 percent of Canada's dairy market tariff-free, up from the existing 1 percent. It also eliminates a milk ingredient pricing policy that incentivized Canadian cheese producers to use local ingredients.

American wine producers will also benefit from grocery store shelf space in British Columbia, which was previously inaccessible.

Trump's promise to renegotiate NAFTA has moved along considerably. With approval of Congress as the final hurdle, we rate it In the Works.

Sources:

Email interview with Phil Levy, senior fellow at the Chicago Council on Global Affairs, Dec. 10, 2018

Email interview with Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics, Dec. 10, 2018

Email interview with Edward Alden, senior fellow at the Council on Fore­­­ign Relations, Dec. 10, 2018

Washington Post, Lawmakers wary of Trump's threat to cancel NAFTA, Dec. 2, 2018

PolitiFact, Is the new NAFTA the biggest trade deal ever, as Donald Trump said?, Dec. 1, 2018

PolitiFact, Donald Trump's new NAFTA: A fact-checker's guide to the trade deal, Oct. 1, 2018

Washington Post, Uncertainty surrounds White House agreements on trade with China, North America, Dec. 3, 2018

AP, Trump's new NAFTA faces skeptics in now- Democrat-led House, Nov. 29, 2018

Politico, Democrats could control trade deal's fate, Dec. 10, 2018

The Hill, President gets win as trade deals pass, Oct. 13, 2018

Youtube, President Donald Trump Signs USMCA Trade Deal With Mexico, Canada To Replace NAFTA | NBC News, Nov. 30, 2018

Vox, Trump wants to bully Congress into accepting a new NAFTA, April 20, 2018

Vox, Trump has threatened to withdraw from NAFTA. What's next?, Dec. 4, 2018

Sixth round of NAFTA renegotiation set for January 2018

Talks to renegotiate the North American Free Trade Agreement are scheduled to continue in January. The upcoming meeting will be the sixth round of discussions so far among the three nations party to the trade deal: Canada, United States and Mexico.

Trump has criticized NAFTA (in effect since 1994) as the "worst" deal ever made by the United States and blamed it for the loss of manufacturing jobs and a trade deficit.

After negotiations in November, U.S. Trade Representative Robert Lighthizer said that while progress had been made to modernize NAFTA, he was "concerned about the lack of headway."

"Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result," Lighthizer said in a November statement.

Lighthizer said teams involved in the renegotiation would meet in December in Washington and that he hoped partners would "come to the table in a serious way" for "meaningful progress before the end of the year."

Lighthizer's office did not respond to PolitiFact's Dec. 22 requests for more information.

A trilateral statement issued after an October round of negotiations acknowledged that proposals presented by the parties had "created challenges" and that there were "significant conceptual gaps" among them.

Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau both said in October that their countries were not planning to walk away from negotiations, despite speculations that some proposals would lead to that, The Globe and Mail reported.

Though seven rounds of discussions were initially planned, additional rounds will be scheduled through the first quarter of 2018, according to the October statement.

The next meeting to renegotiate NAFTA is set for Jan. 23-28, 2018, in Montreal, Canada. As talks continue, this promise remains In the Works.

Sources:

Office of the U.S. Trade Representative, Trilateral Statement on the Conclusion of the Fifth Round of NAFTA Negotiations, November 2017

The Globe and Mail, Trudeau in Mexico: A guide to his NAFTA goodwill tour, published Oct. 12, 2017, updated Nov. 12, 2017

Office of the U.S. Trade Representative, Trilateral Statement on the Conclusion of the Fourth Round of NAFTA Negotiations, October 2017

 

Fourth round of NAFTA negotiations set for mid-October

The fourth of seven planned rounds of talks to renegotiate the North American Free Trade Agreement is scheduled to start Oct. 11 in the United States.

Representatives from the three countries involved in the agreement — the United States, Mexico and Canada  — have also met in Canada and Mexico and in September jointly said they have made "significant progress."

"In particular, meaningful advancements were made in the areas of telecommunications, competition policy, digital trade, good regulatory practices, and customs and trade facilitation," the countries said in a trilateral statement after the third round of negotiations in September.

The countries also talked about small- and medium-sized enterprises and the inclusion of a chapter on them in a modernized agreement to help support their growth and development, the statement said.

Negotiators have also discussed energy trade, gender and indigenous peoples, according to the statement. The countries anticipated completing negotiations on the competition chapter of NAFTA before the fourth round of talks.

U.S. Trade Representative Robert Lighthizer in July outlined objectives the United States seeks in NAFTA renegotiations, such as:

• reducing the U.S. trade deficit;

• improving market access in Canada and Mexico for U.S. manufacturing, agriculture, and services;

• adding a digital economy chapter; and,

• incorporating and strengthening labor and environment obligations that are in NAFTA side agreements.

The Trump administration would also work "to eliminate unfair subsidies, market-distorting practices by state owned enterprises, and burdensome restrictions on intellectual property," Lighthizer said.

The September trilateral statement said parties remained "committed to an accelerated timeline for negotiations." CNN reported in August that the seven rounds are expected to go through December but could go longer.

Trump has said he would "terminate" NAFTA if a "fair deal for all" isn't reached. Based on how negotiations are going so far, is withdrawal likely?

Generally speaking, the business community would be very much against withdrawal, said Raj Bhala, an international trade law expert, Brenneisen Distinguished Professor at University of Kansas Law School and senior adviser for law firm Dentons U.S. LLP.

If Trump withdrew from the deal, the United States and Canada would likely fall back on a previous free trade agreement in force before NAFTA, and U.S. businesses would lose duty-free access to Mexico, Bhala said.

Withdrawal from NAFTA would significantly impact U.S. farming and manufacturing states and would also disrupt global supply chains set up over the past 23 years since NAFTA went into effect, Bhala said.

PolitiFact will continue to track the NAFTA negotiation process.The fourth round of discussions is slated for Oct. 11-15 in Washington. Pending results, Trump's promise to renegotiate the agreement remains In the Works.

Sources:

Office of the U.S. Trade Representative, USTR Releases NAFTA Negotiating Objectives, July 2017

Office of the U.S. Trade Representative, Trilateral Statement on the Conclusion of the Third Round of NAFTA Negotiations, September 2017

CNN, NAFTA talks: Round 1 is over. Here's what's next, Aug. 20, 2017

Phone interview, Raj Bhala, an international trade law expert, Brenneisen Distinguished Professor at University of Kansas Law School and senior adviser for law firm Dentons U.S. LLP., Oct. 5, 2017

Twitter, @realdonaldtrump tweet, April 27, 2017

Government of Canada, Canada-U.S. Free Trade Agreement

Trump’s trade rep. sends letter to Congress announcing intent to renegotiate NAFTA

U.S. Trade Representative Robert Lighthizer sent a letter to Congress May 18 announcing President Donald Trump's intent to renegotiate the North American Free Trade Agreement.

"The United States seeks to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities under NAFTA," the letter said, adding that parts of NAFTA are outdated and do not reflect modern standards.

The goal is to modernize NAFTA so that it includes new provisions that address intellectual property rights, regulatory practices and state-owned enterprises, among other fields, Lighthizer said in the letter.

Talks with Mexico and Canada will begin "as soon as practicable," the letter said, but not earlier than 90 days from May 18.

"Today, President Trump fulfilled one of his key promises to the American people. For years, politicians have called for the renegotiation of this agreement, but President Trump is the first to follow through with that promise,"Lighthizer said in a news release.

Trump's administration will seek an agreement "that advances the interests of America's workers, farmers, ranchers, and businesses," Lighthizer added.

The letter is one element of the renegotiation process. Pending changes to the trade deal, this promise continues to rate In the Works.

Sources:

U.S. Trade Representative office, USTR: Trump Administration Announces Intent to Renegotiate the North American Free Trade Agreement, May 18, 2017

Trump reaffirms intent to renegotiate NAFTA

President Donald Trump said he's agreed to requests from Canada and Mexico not to terminate the United States' involvement in the North American Free Trade Agreement and would renegotiate instead. But withdrawal isn't completely off the table either, he said.

Officials in the Trump administration said April 26 that Trump was considering signing a directive to pull the United States out of the free trade agreement, the Associated Press reported.

On April 27 via Twitter, Trump said:

"I received calls from the President of Mexico and the Prime Minister of Canada asking to renegotiate NAFTA rather than terminate. I agreed..

...subject to the fact that if we do not reach a fair deal for all, we will then terminate NAFTA. Relationships are good-deal very possible!"

Late on April 26, Trump, Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau spoke on the phone, and Trump "agreed not to terminate NAFTA at this time," said a White House readout of the call.

The three leaders will start procedures to renegotiate the trade deal, according to the White House.

Trump had previously said that the United States had "a very outstanding trade relationship with Canada." He changed his tone later saying that in Canada "some very unfair things have happened to our dairy farmers and others." Recently, the Trump administration announced new tariffs on imports of Canadian softwood lumber.

Trump during the campaign also said that if he didn't get the deal he wanted, he would terminate U.S. involvement.

Trump may be eager to start negotiations ahead of Mexico's July 2018 presidential election, trade experts told us.

"The more you get into the heart of the Mexican election season, the harder it will be for Peña Nieto to make concessions," said Edward Alden, a senior fellow at the Council on Foreign Relations.

Should Trump choose to withdraw from NAFTA, he may face political pushback, particularly from states like Texas, whose economy depends on the agreement, Alden said.

"There's no question NAFTA can definitely use an updating, it's been around for quite a while, and certain aspects of trade and services are not covered," said Marina v.N. Whitman, a professor of business administration and public policy at the University of Michigan

But undoing NAFTA, if the Trump administration chose that path, could cut profit margins for some businesses and impact prices of goods for consumers, she said.

Trump has reaffirmed his plan to renegotiate NAFTA, but isn't fully backing away from terminating the deal. For now, we continue to rate this promise In the Works.

Sources:

Twitter, @realdonaldtrump tweets, April 27, 2017

Associated Press, White House: Trump Will Not Immediately Bolt NAFTA, April 26, 2017

Phone interview, Marina v.N. Whitman, a professor of business administration and public policy at the University of Michigan, April 27, 2017

Phone interview, Edward Alden, a senior fellow at the Council on Foreign Relations, April 27, 2017

White House, Readout of President Donald J. Trump's Call with President Peña Nieto of Mexico and Prime Minister Trudeau of Canada, April 26, 2017

Journal Sentinel, President Donald Trump touts manufacturing, promises help for Wisconsin dairy farmers at Snap-on in Kenosha, April 18, 2017

Wall Street Journal, In Texas, Business Owners Hope Donald Trump's Nafta Rhetoric Is Just Talk, Nov. 28, 2016
 

Trump says provisions have slowed down NAFTA renegotiation

One of President Donald Trump's most popular economic promises was to renegotiate the North American Free Trade Agreement, which he saw as the "worst trade deal ever."

Trump said he would renegotiate the trade agreement among the United States, Canada and Mexico within his first 100 days in office. But formal talks still have not taken place.

Trump repeated his disdain for NAFTA during an April 18 visit to a manufacturing plant in Wisconsin. But he said logistics had delayed the process.

"The fact is NAFTA has been a disaster for the United States -- a complete and total disaster … Like, we wanted to start to negotiate with Mexico immediately, and we have these provisions where you have to wait long periods of time. You have to notify Congress. And after you notify Congress, you have to get certified. And then you can't speak to them for 100 days," Trump said.

Still, NAFTA is "very, very bad for our country" so changes will be made or the United States will pull out from the agreement, Trump added.

"Big things will be happening on trade with other countries over the coming months," he said.

Trump's Commerce Secretary Wilbur Ross in a March 8 Bloomberg interview said it would be "the latter part of this year before real renegotiations get underway."

In a March 10 joint press conference with Mexico's secretary of economy, Ildefonso Guajardo Villarreal, Ross said talks to change NAFTA were in the "very early stages" and that in the "next couple of weeks" he planned to notify Congress of the administration's intention to renegotiate NAFTA in 90 days.

As of April 13, renegotiation talks were still pending.

"Unfortunately, NAFTA negotiations cannot begin until Congress accepts our 90-day notification letter in compliance with the Trade Promotion Act," Ross wrote in a blog post.

In the March press conference, Guajardo said it would make sense to bring Canada to the table since it's a trilateral agreement and that Mexico would be ready to begin negotiations by the end of May, CNBC reported.

Trump and Canadian Prime Minister Justin Trudeau in a Feb. 13 joint press conference said they would discuss the trade deal in the future.

"When we sit down, as we did today and as our teams will be doing in the weeks and months to come, we will be talking about how we can continue to create good jobs for our citizens on both sides of the border," Trudeau said.

Trump said his concerns over NAFTA weren't tied as much to Canada as they were to Mexico.

"We have a very outstanding trade relationship with Canada. We'll be tweaking it," Trump said of the agreement. "We'll be doing certain things that are going to benefit both of our countries. It's a much less severe situation than what's taken place on the southern border."

Formal renegotiation of NAFTA will likely not begin during Trump's first 100 days in office, but his administration has said it's still pursuing the change in policy. We rate this promise In the Works.

Sources:

Bloomberg, Nafta Talks Likely Won't Begin Until Later This Year, Ross Says, March 8, 2017

Reuters, U.S. hopes to launch NAFTA talks in just over 90 days: Ross, March 10, 2017

CNBC, Commerce Sec Wilbur Ross aims to start formal NAFTA renegotiation process in the next few weeks, March 10, 2017

Trump wants to negotiate deal with Mexico, Canada

On the campaign trail, Donald Trump called the North American Free Trade Agreement  "the single worst trade deal ever approved in this country," and he pledged to reverse it as president.

"A Trump administration will renegotiate NAFTA and if we don't get the deal we want, we will terminate NAFTA and get a much better deal for our workers and our companies. 100 percent," Trump said at a Nov. 7 rally in Michigan.

Trump hasn't said much about what specific changes he wants to make to NAFTA, except that he wants United States imports to be exempt from Mexico's value-added tax and to end sweatshops there. So it's hard to predict what might come of bringing Mexico and Canada back to the negotiating table.

WHY HE'S PROMISING IT

Trump's pledge to renegotiate NAFTA is one reason Trump appealed to voters who have been negatively affected by the shrinking number of reliable manufacturing jobs in America over the past couple decades.

He hopes that renegotiating NAFTA would make American companies more likely to keep their factories in the United States instead of going to Mexico or other countries with cheap labor.

While some sectors of the manufacturing industry certainly took a hit from NAFTA and factories moving to Mexico, many independent analyses have found that the trade deal has had a modest effect on the American economy overall. It's caused minimal economic growth and also minimal job loss.

WHAT'S STANDING IN HIS WAY

For any sort of reconfiguring of NAFTA to take place, Canada and Mexico would have to come to the table. Canadian and Mexican leaders have said they are open to talks but not necessarily renegotiation. If they do renegotiate, Mexico and Canada likely would have a list of things they'd want from the United States.

But if the renegotiation falls through, not much would stop Trump from pulling out of the trade agreement. NAFTA gives the president the power to take America out of the deal without Congress' approval. He might, however, face political pressure and lawsuits from American businesses.

Some economists are worried that pulling out of NAFTA could do serious economic damage. Trump could spark a trade war — for example, if the United States raises tariffs on Mexico, it might retaliate with its own tariffs. Tariffs would make it more expensive to import products, meaning Americans likely would have to pay more for their goods.

TIMELINE

Trump has said he would tackle this issue in his first 100 days. If he decides to pull out of the deal completely, he would have to give Mexico and Canada a six-month notice in writing.

Sources:

See links.