The Economist (07/12/2018) - FOR YEARS President Donald Trump has been itching to withdraw from the North American Free Trade Agreement (NAFTA), a trade deal between America, Canada and Mexico. But as long as negotiations about a revamp continued, he held off. The day after signing a new deal on November 30th, rebranded the USMCA, he announced that he would “shortly” indulge himself and terminate the original deal after all. That would force Congress to choose between the USMCA and a NAFTA-less world.
“If Trump’s new NAFTA is so great, why does he need to resort to brinkmanship to ram it through Congress?” asked Ron Wyden, a Democratic senator. The answer is that many do not think the new deal is so great. The AFL-CIO, a union of unions, calls it incomplete. Nancy Pelosi, the minority leader in Congress and probably the next speaker, says it is a “work in progress”. Some Republicans express misgivings. Mr Trump wants to silence such voices.
If this plan fails, and the Democrat-dominated House votes down the USMCA next year, it may be in part to deny Mr Trump a foreign-policy success. But Democrats also have substantive complaints. The biggest is that, though the labour standards in the new pact are tougher than in the old version (or than in the Trans-Pacific Partnership, or TPP, which was negotiated under Barack Obama and dumped by Mr Trump), many regard the enforcement provisions as too weak.
Older trade deals involving America allow any member that thinks another is breaking the terms to launch an official dispute. Once various procedural hoops have been jumped through, the parties pick five from a roster of judges, who decide whether there has been wrongdoing. But in NAFTA that process has been broken for years. After Mexico launched a dispute against America over sugar in 2000, America refused to fill vacancies on the roster, in effect blocking the dispute’s resolution. There have been no state-to-state disputes within NAFTA since.
Over time, other problems with this template have emerged, including the possibility for defending countries to slow down procedures. A dispute over labour standards between America and Guatemala under a different trade deal, for example, was delayed temporarily when Guatemala claimed that the two had not agreed on the meaning of choosing the final panellist “by lot”, and demanded meetings before a panel could be picked.
The concern is that the USMCA does not fix those problems, and that this was intentional on the part of American negotiators. (There were attempts to fix them in the TPP.) Since NAFTA’s enforcement mechanism broke down, disputes that should fall under it have been taken to the World Trade Organisation instead. But the Trump administration is undermining that, too.
Tough rules are painful when wielded against you, but useful when holding others to account. The Trump administration may think it can get the best of both worlds, by retaining its ability to block panels in case Mexico or Canada sue, and by using the same bullying tactics as it has with China when it has a problem of its own. But bypassing the judges attached to the USMCA risks delegitimising American complaints about unfair trade practices.
By threatening a choice between the USMCA and the chaos of a lapsed NAFTA, Mr Trump wants to convince critics to ignore their worries that the new deal lacks teeth. But if he terminates NAFTA he will face legal challenges from the private sector, in particular over his authority to withdraw from a trade deal without the approval of Congress. Who would win is uncertain. What is clear is that the fight over North American trade is not over.
Read more at https://www.economist.com/finance-and-economics/2018/12/08/donald-trump-is-strong-arming-congress-into-accepting-the-new-nafta