Letter From the Swamp: NAFTA is Dead; Long Live NAFTA

Paul Frazer

Donald Trump’s implausible presidency has altered every aspect of life in Washington, from how the White House is covered to how and whom lobbyists lobby. As veteran transplanted Canadian Paul Frazer writes, when the going gets frenetic in the NAFTA negotiations, the Canadians should just chill. 

The Trump administration’s first summer has been atypical for Washington, DC. Whenever we think the White House might be on track, another political meteor suddenly appears and knocks everything off balance. The object is not from outer space but from the very heart of the presidency. This is the pattern the president set on his first day in the White House and from week to week we witness more chaos overall and minor progress on the president’s key agenda issues.

In Washington, long-awaited NAFTA negotiations began against a backdrop of significant legislative failures, dogged political scandals and an ongoing set of investigations reaching into the president’s innermost circle.

The three NAFTA governments have marshalled their resources and have prepared their position papers in anticipation of an uncertain outcome.

They have canvassed their respective stakeholders, know their negotiating “asks” and have identified their “lines in the sand”. The political calculus has been made in each capital to determine negotiators’ parameters. Opening statements have been made; we know the general outline of priorities and have a sense of the rhetoric that will at times portray the nature of the discussions.

There will be tension and, at times, high drama; this will not be a surprise. As in previous negotiations, political leaders will not only focus on priorities and outcomes but must remain open to shifts in stakeholder demands and be sensitive to what compromises will be acceptable at home.

Digital commerce, intellectual property rights, dispute settlement and pharmaceuticals are—among many complex subjects—on the agenda, but it is social media that will bring a very different and possibly game-changing element to the negotiations environment. It will be a strategic weapon intended to influence negotiations and the perception of who has the edge.

Based on President Trump’s actions to date we should expect the president to tweet aggressively to impact public opinion, speak to his political base, and serve to bring leverage to bear on the talks. It is too early to tell to what degree this will be employed and what effect this will have on the negotiations themselves or on political sentiment in the U.S., Canada and Mexico.

The return of Congress ushers in a period of increasing domestic political discontent in Washington. Although Trump has the NAFTA negotiation he agreed to, this is very different from the NAFTA withdrawal that he had as a campaign priority. The U.S. entered negotiations at the direction of a president who needs a major “win” to prove he can deliver on a core campaign promise. He has failed dramatically in his quest to pass much-heralded legislation in the first eight months of his tenure and serious political face is riding on these negotiations.

The president, if true to form, will focus not so much on policy aspects but on his desired outcome and his potential signature on the document—presuming there will be a document to sign.

Rhetoric and marketing will be critical elements in Trump’s sale of any new agreement to the voters; something each NAFTA leader will also need to do. But as with everything else about this administration, for Trump the exercise will be “oversized”.

For the United States, the NAFTA negotiations will play out in a domestic setting of general chaos, legislative battles, majority party disunity, minority party existential struggles, Congressional investigations and the work of an independent counsel.  Battles in the Congress and disagreement with the White House over the federal budget, the debt ceiling, tax reform and more health care debate will absorb large amounts of political oxygen.

It will be very difficult to insulate the negotiations from the daily events of a turbulent and politically charged U.S. capital.

We can’t minimize the daily distraction these factors create for a president so intimately involved and who so openly and forcefully rebels against any challenge to his standing and that of his family. He is increasingly under siege and his actions speak to the threat he perceives at hand. His inclination will be to create dramatic distraction to serve his self-preservation.

The Congress by law has an important voice on the process and substance of NAFTA negotiations. Many legislators are highly skeptical and in some critical quarters there is outright opposition to key features of the existing agreement. The ongoing animosity across the political aisle and the disunity within the Republican party collide with a president who ineptly deals with a Congress he cannot control and with which there is an ever-widening political gap.

Canadian and Mexican leaders must take these factors into serious consideration and determine what they can do to affect the broader environment while simultaneously pursuing what will be tough negotiations on a wide range of sensitive national issues.

The administration would like to conclude the NAFTA agreement by early 2018. This is very optimistic given the congressional calendar, political reality and certainty of unanticipated events. In some of the areas to be negotiated, especially in areas new to NAFTA, there may be elements of the Trans-Pacific Partnership (TPP) package that can be reasonably transferred to NAFTA, enabling relatively swift agreement on selected important areas.

However, no one can predict when this frenetic president will aggressively insert his views on any general and/or specific aspects of the negotiations. Tweets are not policy but they will impact the atmosphere of the negotiations, impinge on the U.S. negotiating team’s daily efforts and play with the psyches of the Canadian and Mexican negotiators.

Presidential tweets can put every aspect of the NAFTA negotiation to the test of public scrutiny. We can expect Trump, increasingly isolated politically, to wade forcefully into the negotiations in his own way.

The challenge for negotiators and political leaders will be to see these tweets for what they are—electronic outbursts signaling the president’s perception of events and/or his immediate sense of the precariousness of his situation. These impulses will reflect his every instinct to defeat the other two partners in the negotiations. In his view, success will be on his terms; any product will have to have his stamp all over it. Can Canada and Mexico avoid rising to the bait or in some cases play these factors to their advantage?

For Canada, as Foreign Affairs Minister Chrystia Freeland put it on August 14, “the softwood lumber negotiations will continue in parallel with the NAFTA negotiation”. The political and strategic challenge will be increased. We know how softwood has had a corrosive impact on the bilateral relationship. If Canadians see the U.S. foot dragging, carping from the Congress, and less than good faith on softwood, this issue could regrettably infect the NAFTA negotiations.

Canada must maintain its energetic strategic advocacy in the United States. Ottawa, the provinces and other Canadian stakeholders must continue to travel the country targeting Washington and elsewhere those leaders critical to Canadian interests.

By the end of July, President Trump’s persuasive powers with the Republican congressional majority had severely diminished. His threats to Senators identified as weak supporters or opponents on health care reform and repeal had lost their impact. The Congress has demonstrated that on foreign affairs it will pass legislation that both directs and constrains the president, notably on the economic sanctions primarily aimed at Russia.

It is a truism that every statement and every vote in the House and the Senate is determined in the end not by party loyalty but on the basis of political survival. Individual decisions are made according to the political calculus of each representative or senator considering constituent interests and sentiments and how a vote will affect his or her re-election prospects.

For the 435 Members of the House, the November 2018 mid-term elections loom large and evoke a degree of skittishness about re-election. Those Senators not up for re-election until 2020 are more immune from the immediate threats; for the moment their time-frame is like a bulletproof vest when it comes to attacks from the president and his acolytes.

The mood in Washington is gloomy; everyone feels pummeled on a daily basis.  President Trump is under siege and the Congress is increasingly defiant of the White House. Republican committee chairs, especially in the Senate, are flexing their political muscles. They have many ways to out wait a president, to deny him timely confirmations of those nominated to senior positions or to thwart his budget and policy wishes. They, with their House counterparts, set the congressional agenda; in some cases the agenda for the rest of 2017 is set very much in stone. This leaves little room for the president to influence or bully Members of Congress to follow his commands.

The Congress has a strong voice on NAFTA and we should expect that voice to be loud and clear regardless of Trump’s negotiating priorities. The Congress is showing greater determination to more fully play a separate and equal role vis-à-vis the White House. Senators and House Members are more knowledgeable (in part thanks to Canada’s actions) about the fundamental importance of NAFTA trade and investment. Their broad priority is that the negotiations do no harm to the economic and trade relationship critical to the economic well-being of their districts or states. They will not easily be rolled by the president on these issues.

Given what we have witnessed these last eight months, NAFTA negotiators will struggle to keep the talks at the table and less in the realm of public political mud wrestling that the White House seems to favor. At the end of the day, as some may speculate, perhaps the NAFTA we know becomes the “non-NAFTA” and is called the “North American Agreement on Economic Prosperity and Job Creation” eagerly marketed across the United States as a huge win for the President. As in other successions: NAFTA is dead; long live NAFTA.

Paul Frazer is President of PD Frazer Associates in Washington, DC where he advises Canadian corporate and public sector clients on how best to promote and protect their interests in the United States. He is a former Canadian diplomat and has served as Minister, Public Affairs at the Canadian Embassy in Washington,  and on postings in New York, Warsaw, and Prague (as Ambassador).