Kudlow Says Trump's NAFTA Withdrawal Threat Meant to Spur Congress
Leaders in Congress's trade committees on both sides of the aisle didn't seem appreciative of President Donald Trump's latest threat to withdraw the U.S. from NAFTA before its replacement is voted on. Trump, speaking to reporters on Air Force One on Dec. 2, said: "I will be formally terminating NAFTA shortly. And so Congress will have a choice of the USMCA or pre-NAFTA, which worked very well." Larry Kudlow, the president's top economic adviser, told reporters on a conference call Dec. 3 that the president said that because "he's trying to light a fire under Congress."
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Senate Finance Committee Chairman Orrin Hatch, R-Utah, who will be retiring at the end of the year, issued a statement that said Congress has the constitutional authority over trade: "While we have delegated some authority to the executive branch through legislation, this authority is limited. Threats to take unilateral action could destabilize the U.S. economy and may undermine the critical partnership between Congress and the executive with regard to trade policy." Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, responded by asking: "If Trump's new NAFTA is so great, why does he need to resort to brinkmanship to ram it through Congress?"
In the House, Democrats will control the Ways and Means Committee next year, and Trade Subcommittee ranking member Bill Pascrell, D-N.J., dismissed Trump's comment "about terminating NAFTA to pressure Congress" as a "bellow." He said it doesn't impress him. A congressional aide who asked for anonymity said that it's "hard to see how threatening to withdraw from NAFTA helps get USMCA approved. In all likelihood, we would need to get USMCA passed within six months anyway, politically, as to not run into the 2020 election. All withdrawing does is give Democrats another excuse not to cooperate."
Outside observers questioned whether Trump would ever issue such a notification. "I don’t think the administration has made that decision yet," said Edward Alden, a senior fellow at the Council on Foreign Relations. Alden said he does think it would be easier to get ratification of the U.S.-Mexico-Canada Agreement with such a withdrawal "because it would force members to vote on the new NAFTA or nothing."
Stephen Claeys, who was trade counsel for Ways and Means before becoming a partner at Wiley Rein, said this comment should be seen more as a reminder that Trump sees withdrawal as an option rather than as a sign that something's going to happen in the near term. He said there's not much point in forcing action when Congress can't do anything until it gets a draft implementing bill from the White House and an economic analysis from the International Trade Commission, which isn't due until March.
"I’m not sure how well -- at least initially -- Congress would react to that move if he were to formally take that step. But on the other hand, I could see them getting past it, saying, 'We need to get this wrapped up soon anyway.'" Claeys predicted the end of July 2019, just before the August recess, could be a likely time for a ratification vote. "Deadlines are liberating, one of my bosses a long time ago used to say."
Claeys, who served in the Republican majority for the committee, said he thinks most Republicans will vote for the new NAFTA, even though they don't like the changes to dispute settlement and the sunset clause, even though it was softened. "There’s a lot of things they don’t like in it, but the alternative, particularly if the alternative is no agreement, they’ll find their way to it," he said.
Welles Orr, who was the congressional liaison in the Office of the U.S. Trade Representative during the first NAFTA negotiating round, is upbeat about the new NAFTA's chances for passage. Orr, a senior economic trade adviser at Miller & Chevalier, said Democrats will demand changes to the text on labor enforceability, and those can be achieved in side letters. "How far they’re willing to press the administration on this is anyone’s guess," he said.
The International Association of Machinists and Aerospace Workers came out against the new NAFTA on the day it was signed, noting that while there's a plan to slow or reverse outsourcing of auto industry jobs, there's nothing for aerospace outsourcing. The union noted that United Technologies -- which is the same company Trump attacked during his campaign for sending air-conditioning manufacturing jobs to Mexico -- is closing a location in California and putting 300 people out of work at the same time it highlights its Mexico operations. "Mexico now employs between 30,000 and 40,000 aerospace workers and has become a major exporter to the U.S.," the union said. "The labor chapter as currently proposed does not come close to meeting the dramatic changes we believe are needed to end wage suppression in Mexico."
Orr said the Machinists' opposition will make it harder for the AFL-CIO to endorse NAFTA 2.0. He said if labor unions oppose the deal, Democrats will, too.