Trump Administration Backs Off Intention to Leave NAFTA

Yesterday it was revealed that the Trump administration was preparing an executive order to begin the process of withdrawing from NAFTA. Yesterday evening, the administration started getting push-back from prominent GOP Senators and Congressmen. This morning the administration says that leaving NAFTA is not in the offing.

President Donald Trump told the leaders of Canada and Mexico Wednesday he was not immediately planning to end the North American Free Trade Agreement, a pact which he railed against as a candidate and as recently as last week declared was harmful to US workers.

In a description of Trump’s phone calls to Prime Minister Justin Trudeau and President Enrique Peña Nieto, the White House said Trump “agreed not to terminate NAFTA at this time and the leaders agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation of the NAFTA deal to the benefit of all three countries.”

This is the current spin:

I received calls from the President of Mexico and the Prime Minister of Canada asking to renegotiate NAFTA rather than terminate. I agreed..

— Donald J. Trump (@realDonaldTrump) April 27, 2017

…subject to the fact that if we do not reach a fair deal for all, we will then terminate NAFTA. Relationships are good-deal very possible!

— Donald J. Trump (@realDonaldTrump) April 27, 2017

By affirming his intention to reopen the agreement with Trudeau and Peña Nieto, Trump is able to fulfill a 100-day pledge to “announce my intention to renegotiate NAFTA.” But the announcement offers less populist punch than withdrawing from the agreement outright, a move that could cause major disruptions to the economies in Canada, the US, and Mexico.

As I noted yesterday, the free trade regime of NAFTA is only useful if it is actually based on free trade. When industries are subsidized, either to cripple US import (like with Canada’s dairy industry) or to allow unfair competition (like with Canada’s softwood lumber exports) then you no longer have a free trade agreement. You have a protectionist and predatory trade policy being protected by a treaty.

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