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The next Congress — which could have a lot more Democrats —might be calling the shots.
Earlier this month, House Speaker Paul Ryan set a May 17 deadline for the Trump administration to submit a new NAFTA deal with Mexico and Canada to Congress for approval.
But on Thursday, the Trump administration missed that deadline — in fact, they didn’t even come close.
“The NAFTA countries are nowhere near close to a deal,” US Trade Representative Robert Lighthizer, who is negotiating a new version of the 24-year-old trade agreement, said in a statement on Thursday. He added that there were “gaping differences” between the US, Canada, and Mexico on several issues, including labor standards and intellectual property protections.
Though Ryan did say that there might be a little “wiggle room” to push back the congressional deadline, experts point out that the differences between the countries on a number of key issues are so vast that the window for congressional approval has effectively closed.
“Anything that takes us beyond this [date] just makes it impossible for the current Congress to pass it,” Monica de Bolle, a senior fellow at the Peterson Institute for International Economics, told me.
That means it’s likely that a new Congress, elected after the midterm elections in November, will be signing off on the deal. Since there’s a good chance that Democrats could take control of at least one chamber, the administration might have to take into account a whole new set of demands around issues like labor regulations to win their approval — which could push back the process even further.
President Trump’s patience could grow thin if the negotiation process takes too long. Trump has threatened on many occasions in the past to terminate the existing free trade agreement altogether if a new deal can’t be reached. And if that happens, it could cause chaos across North America — disrupting supply chains, causing the price of goods to increase, and forcing layoffs in dozens of industries.
The new NAFTA is still a long way away
After about nine months of negotiations, the US, Canada, and Mexico are far from settling on a final agreement.
Experts say that the countries appear to be at an impasse over the US’s proposal for a five-year sunset clause that would require the countries to vote every five years on whether to stay in NAFTA. Canada and Mexico are staunchly opposed to the idea since it would create enormous uncertainty for businesses’ supply chains and investors.
The US is also at odds with Canada and Mexico over its desire to get rid of the “investor-state dispute settlement” (ISDS) mechanism, a provision that allows corporations to sue foreign governments in tribunals if they think they’ve been wronged by them.
The Canadians in particular don’t want to let this go; if they do, it will likely leave them with less power to respond to unilateral trade barriers on Canadian goods by the US.
Another difference is that the US also favors more robust intellectual property protections than Canada and Mexico. They allow American corporations like pharmaceutical companies to hold patents on their products for a longer period of time and edge out foreign competition.
Sorting out these differences could take months of negotiations. There’s nothing bad about that per se, but it means that the political landscape for approving the deal is probably going to change in substantial ways before they conclude.
De Bolle estimates that had the Trump administration met Ryan’s deadline, Congress likely would have voted to approve the new NAFTA in December, after the midterm elections and during the lame-duck session — which in and of itself would have been politically controversial. Voters could get angry if newly elected lawmakers don’t get to vote on such an important issue.
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