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Could Trump really pull the U.S. out of NAFTA?

President Donald Trump, left, speaks with Canadian Prime Minister Justin Trudeau at the G20 Summit in Hamburg, Germany, on July 8, 2017.

Evan Vucci/AP

U.S. President Donald Trump has repeatedly threatened to "terminate" the North American free-trade agreement that governs commerce between his country, Canada and Mexico.

Mr. Trump won the presidency last year in part by blaming the pact – which he calls the "worst trade deal ever made" – for moving factory jobs out of the United States. At his behest, the three countries are currently renegotiating the deal.

The President has accused Canada and Mexico of being "very difficult" at the bargaining table and said he believes they will not reach an agreement. In that case, he says, he will tear the whole thing up.

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There is a process in NAFTA that would allow the United States to get out of the deal. But whether Mr. Trump has the power to pull out unilaterally or whether he would have to get Congress to agree is a major legal grey area.

How would "terminating" NAFTA work?

Video: Trump repeats threat to terminate NAFTA: 'Its been unfair for too long'

Under Article 2205 of NAFTA, any of the three countries can pull out with six months' notice to the other two.

Triggering 2205 wouldn't necessarily mean that the United States would have to withdraw: All it would do is give six months' notice, after which the U.S. could choose to pull out (or not).

If the United States quit NAFTA, the deal would still remain in force between Canada and Mexico.

The White House drew up an executive order in April to give six months' notice, but Mr. Trump ultimately decided not to sign it after a flurry of pressure from U.S. business leaders, Congress, members of his cabinet, Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto.

Does Trump have the power to pull the United States out of NAFTA without Congress's approval?

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This is where it gets complicated.

The power to negotiate trade deals is effectively shared between the President and Congress. Typically, Congress grants the White House the ability to do the actual negotiating, after which the finished agreement is submitted to a congressional vote. This is necessary because trade deals involve numerous policies – such as abolishing tariffs – that require Congress's approval to implement.

But what about ending a deal?

The U.S. Constitution grants Congress the power "To regulate Commerce with foreign Nations." Some scholars – including Joel Trachtman, a Tufts University professor of international law, and Jon Johnson of the C.D. Howe Institute in Toronto – argue that this means Congress has ultimate authority to decide if the United States stays in NAFTA or not.

Robert Holleyman, a former high-ranking trade official in the Obama administration, says the "prevailing view" in Washington is more nuanced: He argues that Mr. Trump could use his executive authority to pull the United States out of NAFTA, but he would then need Congress to pass a law reversing a bunch of policies that the deal brought in.

This means that, if Mr. Trump withdrew from NAFTA, some provisions of the deal – the binational panels that resolve trade disputes, for instance – would disappear immediately for the United States, while other things, such as preferential tariff treatment for Canadian and Mexican goods, would remain in place until Congress could get legislation through to repeal them.

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Either way, it is likely that an attempt to pull out would lead to a legal battle, with either members of Congress or industry taking the President to court to argue he cannot scrap the deal on his own.

What about the Canada-U.S. free-trade agreement (CUSFTA) that came before NAFTA? Would we just go back to that?

Canada and the United States signed a free-trade deal in 1987. It was superseded in 1994 by NAFTA, which brought Mexico into the pact.

The thinking in the Canadian government is that, if the United States pulled out of NAFTA, that original deal would come back into force.

This may be something of a safety net, but it has major holes.

For one, there's a withdrawal clause in CUSFTA almost identical to the one in NAFTA. If Mr. Trump wanted to, he could also pull out of CUSFTA with six months' notice.

Second, cautions Toronto trade lawyer Mark Warner, NAFTA added a lot of things that aren't in the previous deal.

CUSFTA, for instance, doesn't contain as much protection for Canada when the U.S. slaps duties on surplus products flooding the market; doesn't contain provisions for corporations to challenge government decisions that affect their business; and also contains less-clear rules of origin on the content of manufactured goods, such as cars and trucks.

CUSFTA also gave the United States the right to unilaterally withdraw from the Chapter 19 dispute resolution panels, a right it does not have under NAFTA. The panels have ruled in Canada's favour on key cases, including the long-running softwood lumber dispute, and Ottawa badly wants to hold onto them, while Washington wants them killed.

"Reverting to CUSFTA would be a Pyrrhic victory for Canada," Mr. Warner told The Globe and Mail.

What are the odds Trump actually does this? Is it all just a bluff?

The majority view among NAFTA's supporters appears to be that Mr. Trump is simply using this as a negotiating tactic. They point out that he could even go as far as triggering Article 2205 – ramping up the pressure on Canada and Mexico – but then not actually follow through on a withdrawal.

Some of Mr. Trump's comments appear to affirm this interpretation: On Monday, he told reporters at the White House that he would "probably have to at least start the termination process before a fair deal could be arrived at."

Canada, at least publicly, seems unconcerned. "Trade negotiations often have moments of heated rhetoric," Adam Austen, spokesman for Foreign Affairs Minister Chrystia Freeland, said this week.

Mr. Holleyman argues that Mr. Trump shot himself in the foot by threatening withdrawal in April and getting smacked down by businesses that are part of the Republicans' voting coalition, particularly the trade-dependent agriculture industry.

"By playing that card prematurely and getting batted down publicly by domestic US. interests, both Canada and the Mexico now see the chances of the US actually going through with withdrawal to be extremely remote," Mr. Holleyman wrote in an e-mail.

Not everyone is so sure.

Columbus, Ohio-based trade lawyer Daniel Ujczo warns that NAFTA's advocates don't seem to realize how deeply entrenched dislike of the deal is among blue-collar voters in industrial states who tipped the election to Mr. Trump. Mr. Ujczo argues it will be very difficult to make changes to the existing deal that would satisfy this constituency.

"This was a core piece of why Trump won the election, and the facts on the ground in this part of the world haven't changed," he said in an interview.

One possible scenario, he said, is that Mr. Trump's negotiators reach a deal with Canada and Mexico that Mr. Trump grudgingly accepts and publicly undermines. This could make it hard to get Congress to sign off on such an agreement, setting up a legislative debacle similar to the one over Mr. Trump's attempt to repeal Obamacare.

Jorge Guajardo, a former high-level Mexican diplomat, says a combination of Mr. Trump's longstanding belief that the United States was getting cheated in trade deals and his dislike of Mexico mean he is serious about getting out of NAFTA. During the campaign, he accused Mexicans of being criminals and promised to build a wall along the U.S.'s southern border to keep them out.

"On most issues, Trump has switched back and forth throughout his life. The only things he has been consistently are a racist and a protectionist," Mr. Guajardo said. "He has a deep-seated hatred towards Mexico and towards the Latino community. He sees NAFTA as attaching the U.S. to Mexico."

As to whether the U.S. business community will be able to restrain Mr. Trump, Mr. Guajardo is unconvinced. After business leaders abandoned Mr. Trump's advisory councils en masse following his response to racist riots in Charlottesville, Va., Mr. Guajardo argues Mr. Trump is not worried about backlash from them on NAFTA.

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About the Author
Washington correspondent

Adrian Morrow covers U.S. politics from Washington, D.C. Previously he was The Globe's Ontario politics reporter. He's covered news, crime and sports for The Globe since 2010. He won the National Newspaper Award for politics reporting in 2016. More

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