NAFTA Modernization Under Consideration

On March 28, the Trump Administration sent a draft notice of intent to renegotiate the North American Free Trade Agreement (NAFTA) to the House and Senate trade committees. The draft notice outlines many familiar areas, while revealing areas of departure from past trade policies. The outline also shows that the effort may result in a substantial undertaking. This would undoubtedly take a great deal of time, but time is tight given the political and statutory timelines ahead.

In the U.S., Trade Promotion Authority (TPA) states that implementing legislation must be introduced prior to July 1, 2018, if the administration wants fast track procedures to apply. Coinciding with that deadline is renewal of TPA itself, which could be extended to 2021 without objection from either the House or Senate; otherwise it will expire. This may tee-up a likely referendum on the proposed negotiations come next summer with political capital spent on creating a bipartisan coalition of supporters in Congress.

Meanwhile, the Mexican government faces timing challenges as well. Mexico has reportedly informed the administration that it would like the negotiation to be completed by December 2017, with elections set to take place next July. The ramifications of negotiations drifting into Mexican elections could result in a political minefield. The leading candidate in the Mexican presidential election seeks to be more inward and Mexico’s Secretary of Foreign Affairs, Luis Videgaray Caso, who would serve as the lead negotiator, has not ruled out political ambitions himself. In such case, he would have to step down from his post in December, six months prior to the election, which would throw a wrench in the process, as well as the ambition.

 The question at hand is, what is achievable in the time available? Time is of the essence to build constructively and establish rules in areas that have seen significant transformation such as digital trade and e-commerce. This will foster the future of the trilateral relationship and set the stage for additional trade negotiations ahead.