February 2017

 

By Jeremiah Baronberg

 

During the recent U.S. presidential campaign, Donald Trump made reshaping America’s involvement in international economic affairs a centerpiece of his platform. As a candidate, he specifically called out international trade—from abandoned factories to lost jobs and competitive wages—as a locus for many of the economic and societal challenges facing the country. Since being elected president, Mr. Trump has gone so far as to threaten to "tear up" or renegotiate existing U.S. free trade agreements (FTAs). He has also stated his preference for negotiating new bilateral trade pacts as opposed to broader regional agreements.

 

Can a president do all that? The answer: it's complicated.

 

Many believe Congress must also be involved. Though exactly to what degree is less clear and open to debate.

 

Under U.S. law, trade agreements are “congressional-executive agreements” created by statute, not treaty. They only have legal force once they are translated into official “implementing legislation” that must be passed by Congress and then signed into law by the president. As authorized by Congress, the president has the power to execute America’s trade laws and to negotiate and sign trade pacts with other countries. Still, ultimate authority to approve, reject, or cancel those deals and to amend U.S. trade law resides with Congress.

 

On TPP...

 

Soon after assuming office, President Trump quickly moved to issue a presidential memorandum directing the Executive branch to “withdraw” the U.S. as a signatory country to the Trans-Pacific Partnership, the sweeping trade pact negotiated by the Obama administration with 11 Pacific Rim trading partner nations. While TPP had been signed by the Obama administration in February 2016, it hadn’t yet been voted on or ratified by Congress. As a result, President Trump was able to renege on the U.S.’s continued consideration of the deal before Congress could take it up for debate.

 

Instead, President Trump has said that he is confident that he can replace TPP with a series of smaller and more narrowly focused bilateral trade agreements with individual Asian nations, such as with Japan. Notably, the president stressed that any such new agreements would include clauses allowing for a 30-day termination notice if the United States was not treated "fairly."

 

President Trump has been less vocal about the United States' ongoing trade negotiations with Europe, known as the Transatlantic Trade and Investment Partnership (TTIP).

 

On NAFTA...

 

In contrast to TPP which was never voted on by Congress, all approved U.S. trade agreements that are currently in effect have withdrawal clauses built into their terms. Based on the Constitution and U.S. trade law, a president would be authorized, technically, to “withdraw” the U.S. from a trade pact without Congressional approval. But whether such a potential “withdrawal” from an existing FTA in fact officially “terminates” an agreement’s implementing statute in all its practical aspects appears to be, however, less clear. Most likely, action by the president to terminate an exiting agreement without Congressional approval would end up in court.

 

This is the case with NAFTA, the 1994 North American Free Trade Agreement signed by Canada, Mexico, and the United States, which President Trump has threatened to cancel if it cannot be renegotiated to his liking. NAFTA’s Article 2205 enables a country to withdraw from the agreement six months after giving notice. However, like all approved trade deals, NAFTA’s actual implementing legislation is based on the Constitution’s Commerce Clause, which states that only Congress may alter U.S. tariff, tax, and customs laws. As such, many observers believe that President Trump would not be able to officially terminate (“reverse”) U.S. participation in NAFTA—or in any Congressionally enacted statute such as participation in the World Trade Organization (WTO)—without a corresponding new statute to “repeal” the original statute agreement, which must first be enacted by Congress and only then signed by the president. Still, even this requirement remains open for debate.

 

It should be noted that President Trump is not the first U.S. president to call for NAFTA to be updated and renegotiated. As a presidential candidate, President Obama also was critical of the deal. His administration’s approach to updating it was in part accomplished via TPP (to which Mexico and Canada are signatories), which modernizes and addresses many of the shortcomings of NAFTA, including providing more effective enforcement mechanisms for global labor and environmental protections as well as robust intellectual property and e-commerce sections.

 

Renegotiating trade deals

 

Notwithstanding the need for Congressional approval in order to fully terminate an existing trade pact, reopening a trade agreement for negotiation is itself not an easy task. For starters, President Trump’s own nominations to lead such negotiations—U.S. Trade Representative Robert Lighthizer and Secretary of Commerce Wilbur Ross—have yet to be confirmed by the Senate. Moreover, each of the relevant Executive branch departments and agencies—the Departments of State, Commerce, Treasury, and Labor and the Environmental Protection Agency, among others—would all need get on the same page before negotiating positions could be finalized.

 

Still, under “Trade Promotion Authority” (known as “fast track”, the current iteration of this legislation was passed by Congress in 2015 and applies to all agreements reached before July 1, 2018 and with possible extension to July 1, 2021), President Trump is authorized to pursue negotiations on new as well as existing trade deals with other countries and regional blocks.

 

In the end though, once any new agreement is finalized by the administration, it will need Congressional approval to implement its provisions.