By Jacob M. Schlesinger and Peter Nicholas
WASHINGTON -- The Trump administration is debating whether to
issue a formal threat to withdraw from the North American Free
Trade Agreement, as part of its strategy to renegotiate the
23-year-old pact with Mexico and Canada, according to White House
officials.
It is unclear whether President Donald Trump will take the
dramatic step of issuing a Nafta withdrawal notice -- and even if
he does, whether he would actually follow up by pulling the U.S.
out of agreement. The pact requires any party to give six months'
notice for withdrawing.
But two people familiar with White House deliberations said the
option would be discussed at a meeting Wednesday of the National
Economic Council.
The White House "is taking a look at all options," said one of
these people. The person noted that Mr. Trump regularly attacked
Nafta as "a disaster" on the campaign trail, and has continued to
do so in the early days of his administration.
As his presidency nears the 100-day mark this Saturday, the
White House is scrambling to show that Mr. Trump has moved to meet
many of his campaign promises, including reorienting U.S. trade
policy.
A Nafta overhaul "is a major campaign pledge of the president
and he's spoken about it throughout the first 100 days," this
person said.
The internal discussion, first reported Wednesday morning by
Politico, touched off a swift backlash from American business
groups and members of Congress, rallying to try to quell the
prospect before it gains traction inside the White House.
The mere speculation of a Nafta pullout jolted financial
markets, with the Mexican peso falling 1.7% to its biggest daily
loss since January. The Canadian dollar, which has been battered by
trade tensions with the U.S. this week, also edged 0.3% lower.
A spokesman for Mexico's Economy Ministry, which handles trade
issues, said the ministry had no comment as the report isn't
official information.
Earlier Wednesday, Canadian Foreign Minister Chrystia Freeland
told reporters in a conference call that Canada "was ready to come
to the table" to begin talks on a revamped Nafta. Until then, she
said she wouldn't comment on the state of Nafta talks.
Mr. Trump and his aides have made no secret of their desire to
launch a formal renegotiation of Nafta as soon as possible, to
recraft it in a way that would somehow slow, or even reverse, the
flow of manufacturing investment to Mexico, and to curb the U.S.
trade deficit with its southern neighbor. In recent days, Mr. Trump
also has ratcheted up his criticism of Canada, accusing it of
unfair trade in dairy and moving to impose curbs on lumber imports
from Canada.
The open question is just how far Mr. Trump is willing to go to
try to pressure the two countries to offer concessions to the U.S.,
and to do so quickly. Advocates of a withdrawal notice appear to
see it as a club to get extra bargaining leverage, not necessarily
as a plan to really pull out of the agreement, which could create
disorder across the continental economy that has integrated over
the past two decades with supply chains woven around Nafta
provisions.
Business leaders are warning the White House that a formal
withdrawal threat could backfire, especially with in Mexico, where
Mr. Trump's steady threats against the country over the past two
years have stoked political turmoil ahead of next year's
presidential election, feeding support for an anti-U.S. populist
candidate.
"Withdrawing from Nafta would have disastrous consequences for
U.S. businesses and workers, benefiting our competitors in Europe
and Asia, including China," said Joshua Bolten, chairman of the
Business Roundtable, which represents some of the biggest U.S.
firms. Led by George W. Bush's former chief of staff, the group is
working with the administration on as many fronts as possible to
avoid a collapse of Nafta.
Several business groups and lawmakers in Washington were
rallying their members on Wednesday to try to talk the
administration out of the threat.
"There are some things that sound good politically but are
potentially dangerous in the real world," said Kent Bacus, an
official with the National Cattlemen's Beef Association, whose
members rely heavily on exports across both borders. "For the U.S.
beef industry, withdrawing from Nafta is one of the most dangerous
moves we can make at this time."
Republican lawmakers also moved to try to block the president
from taking such a momentous step on Nafta. Texas Rep. Kevin Brady,
the top trade lawmaker in the House, issued a statement saying he
supports Mr. Trump's desire to renegotiate Nafta, but added that
"this important agreement should stay in place as we continue to
improve it."
Arizona Sen. John McCain, whose border state has benefited
heavily from Nafta, tweeted: "Withdrawing from #NAFTA would be a
disaster for #Arizona jobs & economy..."
Mr. Trump and senior trade officials have started work on a
process that would renegotiate Nafta, modernizing the agreement and
adding provisions they say could help balance trade with Mexico.
Mr. Trump in recent days has expressed impatience with
congressional procedures that have delayed the start of
negotiations until at least late this summer.
Congressional rules prohibit Mr. Trump from launching a Nafta
renegotiation until the Senate has confirmed his trade
representative, which it has yet to do. And even then, the
administration has to give Congress a 90-day notice before starting
the negotiations.
The trial balloon of the withdrawal threat seems aimed at
creating more urgency, both on Capitol Hill and in Canada and
Mexico -- especially as Mr. Trump nears his 100-day mark Saturday.
Lobbyists who have spoken to the White House said they've been told
that the administration is eager to announce something on Nafta by
the weekend -- at least a plan to renegotiate, possibly coupled
with a pullout threat.
Mr. Trump plans to hold a 100-day rally Saturday in Monessen,
Pa., where he laid out his "America First" trade program during the
presidential campaign last June.
"I'm going to tell our Nafta partners that I intend to
immediately renegotiate the terms of that agreement to get a better
deal for our workers," he said in that speech. "If they do not
agree to a renegotiation, then I will submit notice under Article
2205 of the Nafta agreement that America intends to withdraw from
the deal."
While Mr. Trump would have to clear renegotiation with Congress
and the Nafta partners, he can unilaterally withdraw the U.S. from
Nafta in six months on his own.
Still, Mr. Trump can't undo the U.S. law that implements the
agreement without help from Congress, trade lawyers say. Thus,
withdrawing from Nafta could lead to a protracted fight with
Congress, and the possibility of uncertainty over tariff levels and
which Nafta provisions would continue to apply.
Without Nafta, tariff levels between the U.S. and its two
partners would likely rise from zero to the levels agreed to among
nations in the World Trade Organization.
An actual withdrawal from Nafta would lead to wide uncertainty
and to the reorganization of supply chains in industries like autos
and textiles. American farmers could be among the biggest losers if
tariffs were to return on products shipped to Mexico, a top market
for U.S. agriculture.
Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and
Peter Nicholas at peter.nicholas@wsj.com
(END) Dow Jones Newswires
April 26, 2017 19:26 ET (23:26 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.