NAFTA Questions and Controversy

The US recently elected Donald Trump as the next president in a surprising upset, resulting in a flurry of questions surrounding his policies and campaign rhetoric. In particular, many are asking if the US president has the authority to withdraw from NAFTA. Trump has for some time promised to renegotiate or end US involvement in the North American Free Trade Agreement (NAFTA). But experts are mixed on just how much authority the executive has over this trade deal. Much is being written on NAFTA questions.

The NAFTA Controversy

NAFTA was enacted in 1994 amidst controversy. The agreement virtually eliminated tariffs between Canada, the US, and Mexico and made it easier for US firms to invest in Mexico. Since then, direct investment from the US to Mexico went from $2.5 billion USD in 1993 to $9.3 billion in 2014, according to the United Nations Conference on Trade and Development. Mexico now provides a haven of inexpensive, skilled labor for US manufacturers who export their finished goods to other global markets or back to the US market. This is the pinning of the controversy and NAFTA questions as some in the US are pressing for renegotiations of NAFTA.

During the 2008 presidential election, both Hillary Clinton and Barak Obama suggested they would scrap the trade deal, but later softened their tone. In 2012, Republican nominee, Mitt Romney, suggested he would withdraw from NAFTA. But because such a move would disrupt so many US businesses doing business in Mexico, campaign rhetoric like this typically goes nowhere. Donald Trump, however, has made it a centerpiece of his campaign to withdraw from NAFTA. And so the question must be asked: is this constitutionally and legally possible?

The Primary NAFTA Question

Does the president of the United States have the authority to unilaterally withdraw from NAFTA? Experts are not agreed on this point. The US hasn’t backed out of any trade agreement in 150 years. While some insist that Congress must be involved, others believe this is not legally necessary. Although Congress typically approves of or disapproves of such things, some have pointed out that the specific wording of Article 2205 of the trade deal merely allows for a notice of six months from any signatory to withdraw from NAFTA. So there is nothing in international law prohibiting an executive from unilaterally withdrawing from the agreement.

But within US law, the question is more complicated. Generally, the US Constitution divides authority between both the executive and legislative branches to affect international agreements. Many experts have generally insisted that, at most, the Congress would have to sign off on such a withdrawal. However, the president does have the authority to unilaterally withdraw from NAFTA under Section 125 of the Trade Act of 1974, according to Warren Maruyama, a former policy maker in DC. He argues that Congress delegated much of their authority to the president in such matters, and that the law grants the president “termination and withdrawal authority” with a six-month notice.

Whether or not President Trump would exercise such a bold move remains to be seen. Experts generally conclude that such an unprecedented departure from the traditional cooperation between executive and legislative branches would result in instant backlash from powerful US companies who benefit from trade with Mexico. According to trade lawyer, Gary Horlick, “US importers would take the US to court the next day.”

From a practical perspective such a decision would have the purpose of returning jobs back to the US and strengthening the US economy but its effect would be just the opposite.  As Alan Russell, the President of Tecma recently stated, “No one man, no one term, no one president can slow the dynamics of commerce between our two countries.”

So, NAFTA Questions will continue throughout 2016 where we believe the result will be meaningful negotiations to cure troublesome issues in NAFTA for both Mexico and the US and trade between Mexico and the US will continue unhampered.

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