Former Undersecretary for International Trade Predicts Trump Will Withdraw US From NAFTA

Ripping up NAFTA was one of President Donald Trump's biggest applause lines at his campaign rallies, and it's hard to see him walking away from that, given its importance "for the people he feeds off," said Grant Aldonas, a Commerce Department undersecretary for international trade during the George W. Bush administration, speaking Feb. 13 at the National Association of Foreign-Trade Zones conference. He encouraged attendees to lobby Congress to modernize and preserve NAFTA, but he noted that their arguments have to take into account the power of populism and the uncertain political environment as midterm elections approach. "You can see that [uncertainty] in retirements, especially on the Republican side," he said. "People are dealing with politics they don't recognize."

In some regards, the ongoing negotiations to reshape NAFTA have been encouraging, he said. The U.S., Canada and Mexico have made a lot of progress on a lot of issues, including digital trade. "The problem is there's a series of issues that are essentially non-negotiable demands laid down by [U.S. Trade Representative Robert] Lighthizer," he said. For example, demanding that U.S. content of North American automobiles reaches 50 percent, and jettisoning the Investor-State Dispute Settlement process are not in America's economic interest, Aldonas said. However, he said, reaching agreement on ISDS based on legitimate critiques would be attainable if that were the U.S. goal. But Aldonas, who praised Lighthizer as whip-smart, said these demands are creating political space for Trump to withdraw from the FTA altogether.

Aldonas, currently a senior adviser to the Center for Strategic and International Studies, said he has known Trump since the real estate mogul's Atlantic City casino days, and said "his negotiating style is to keep people off-balance." Even though Congress is putting a lot of pressure on Trump to stay in NAFTA, Aldonas said he's pessimistic about that outcome, because Trump "is not actually a businessman, he's a showman." While Aldonas was generally negative about the ability of pro-trade administration officials to influence Trump, he said that if Defense Secretary Jim Mattis could make an argument that NAFTA is important for U.S. security, he might save the pact.

But if not, Aldonas said, advocates might be able to convince Republicans that the end of NAFTA will depress Republican voter turnout in 2018. Then Congress may stand up to Trump post-withdrawal. The U.S. Constitution gives Congress the power to regulate international trade, and NAFTA's implementing legislation does not give any executive authority to withdraw, he said. Republican Congress members "are already at the point where they're differentiating their political future from the president," he said.

The fallout from withdrawing would be dramatic. Aldonas, who started his career as a diplomat in Mexico, believes it would strengthen the anti-U.S. leanings of Andres Manuel Lopez Obrador, who may well be the next Mexican president. Canada would not just return to the Canada Free Trade Agreement, he believes, but officials there would try to get a better deal on countervailing and antidumping duties than are in CFTA. "So it's not as clean as it kicking back in," he said in response to a question from International Trade Today. "If you think it's easy to go back to that relationship, given dairy, given lumber, what went on with Boeing and Bombardier -- that is silly."