Will Trump Torpedo North American Trade?
The negotiations that remade the North American Free Trade Agreement were, as one participant put it, a series of “near-death” experiences. For more than a year, starting in 2017, envoys from the United States, Canada and Mexico met to determine the future of a trade alliance worth billions of dollars. They have clashed over everything from labor laws to the details of duty-free imports, while repeatedly thwarting President Donald Trump’s threats to withdraw from the deal. By the fall of 2018, they were finally ready to sign what became the United States-Mexico-Canada Agreement. But first they had to decide how long the agreement would last.
NAFTA It was a so-called “forever deal”: as with all major U.S. trade agreements, its terms were permanently fixed. This frustrated Trump’s trade czar, Robert Lighthizer, who believed that NAFTA had led to thousands of job losses and a growing trade deficit. Lighthizer wanted the USMCA to have an escape route: a review mechanism, or perhaps a fixed duration. He therefore proposed that the agreement expire after four years.
In his book “No Trade Is Free,” Lighthizer described his offer as “an aggressive opening bid.” Mexican and Canadian officials thought it was crazy: no company would expose its investments to a deal that could end so quickly. Even prominent Republicans have expressed opposition. But Lighthizer found an ally in Jared Kushner, Trump’s top adviser on Mexico. Kushner had come to view trade negotiations as a game of mutual bluff; The key to success, he said, was to make your counterparts believe you were going to jump off a cliff.
On August 25, 2018, Kushner invited Mexican Foreign Minister Luis Videgaray to his home in the upscale Kalorama neighborhood of Washington, DC. As he recalled in his own memoir, “Breaking History,” negotiators were scheduled to meet the next morning, and both sides were running out of time: the Americans were eager to submit the deal to Congress before the midterm elections, and the Mexicans needed to reach an agreement before a new president took office.
Kushner made a proposal that he and Lighthizer approved. The agreement would remain in force for sixteen years, but after six years the countries would meet for a review. “If the parties agreed to an extension,” Kushner suggested, “the term of the agreement would be reset for an additional sixteen years.” If they did not agree, “a ten-year termination period would begin to ring.” Videgaray left after midnight, after agreeing to consult with Mexican President Enrique Peña Nieto.
In the morning, everyone gathered in Lighthizer’s office across the street from the White House. “Let me share with you a proposal,” Kushner began – a theatrical gesture since Trump and Peña Nieto had already been briefed on the plan. By the end of the meeting, negotiators agreed to include a review mechanism, ending more than a year of grueling negotiations. Soon, Trump stood in the Rose Garden, hailing the USMCA as “the most modern, current, and balanced trade agreement in the history of our country.”
For Mexican officials, one of the keys to accepting the deal was that the review would be triggered after six years instead of four: They predicted that Trump would serve two consecutive terms and leave office before the deadline. In the meantime, they believed, the treaty would protect their country’s economy from a hostile administration. It turned out they were wrong. Trump returned to the White House four years later than expected, and the USMCA review is scheduled for next July, just seven months away. During Trump’s second term, his protectionist agenda has been even more aggressive and erratic than before. Most indications suggest that what will take place between now and the summer is less an overhaul of America’s crucial trade relations than a comprehensive renegotiation.
In the years since the signing of the USMCA, Mexico and Canada have become the United States’ largest trading partners. Millions of jobs depend on this economic alliance, whose trade exceeds 1.8 trillion dollars. Officials are already shuttling between their different capitals to discuss what the parties could get out of it.
As the negotiations began, I met with Ildefonso Guajardo Villareal, a former economy secretary who led Mexico’s USMCA negotiations during his tenure. A small, elegant man of sixty-eight, Guajardo has been involved in every major trade deal Mexico has signed since. NAFTA. He has built a reputation as a formidable negotiator, once praised by Kushner for his ability to transform “technical problems into intractable solutions.” Now he seemed happy to be out of the fight. “I have a trip coming up to Palm Beach,” he told me in an airy Mexico City cafeteria.
