House Speaker Paul Ryan was once described as a Republican “young gun.” These days, he fires blanks.
Ryan told the the men and women negotiating the North American Free Trade Agreement that if they wanted legislative approval this year, then he would need something by May 17. Everyone in Washington, Ottawa, and Mexico City essentially ignored him. The Trump administration spent the day negotiating with China, not Canada and Mexico, while officials from those two countries continued to insist they felt no pressure to rush.
The failure of Ryan to speed up the NAFTA talks suggests President Donald Trump has decided he wants to fundamentally overhaul of the agreement, and won’t settle for cosmetic changes. That could mean the Trump administration becomes more open-minded, as a top-to-bottom reworking of the agreement will require lots of give and take. But it also would drag out the uncertainty around trade rules that is hurting investment in both Canada and Mexico.
A simpler deal appears to be on the table if the president wants to take it.
David MacNaughton, Canada’s ambassador to the U.S., told reporters in Washington that they were close on a new set of rules that would address Trump’s concerns about his country’s trade deficit in automobiles and parts. And Prime Minister Justin Trudeau said in New York that he was optimistic a deal will be done, despite the missed deadline.
“We’re down to a point where there is a good deal on the table,” Trudeau said. “We know that those last conversations in any deal are extremely important, so I’m feeling positive about this, but it won’t be done until it’s done.”
Some observers said Ryan’s timeline was getting too much attention.
He is a spent force politically; he announced earlier this year that he wouldn’t be seeking re-election, blunting his influence.
Still, he understands what is required for bills to become laws. Congress is blocked from making changes to the final text, but the review process is legislated to last for about six months. Some say that means the deadline for congressional approval really is early June. The problem with that assertion is that it assumes everything would go smoothly.
Ryan’s timeline allowed for some flexibility, arguably a wise thing given Washington’s penchant for gridlock since about 2010. As his deadline passed, he conceded there might in fact be time to approve an agreement this year if negotiations concluded over the next couple of weeks. It would depend on how quickly the U.S. International Trade Commission completed its mandated review of the revised text, he said.
It may no longer matter.
The focus on resolving the Trump administration’s issues with NAFTA relatively quickly is desirable from the perspectives of Canada and Mexico because the uncertainty around trade is causing them to lose out on investment.
Yet the Canadians and Mexicans insisted they had no deadlines. It was U.S. Trade Representative Robert Lighthizer who was pushing to conclude negotiations before the 2018 election calendar introduced political risk.
Mexicans will elect a new president in July and polls suggest the House will flip to a Democratic majority after the November midterms. An agreement completed soon theoretically could be decided by legislatures over which the current leaders of Mexico and the U.S. have some influence.
But what if Lighthizer no longer cares about the timing?
Eric Miller, a Canadian trade consultant based in Washington, said he thinks the Trump administration is beginning to understand that its initial approach to trade negotiations has failed.
Trump, Lighthizer and others said repeatedly that they believed they could squeeze concessions out of the U.S.’s trading partners simply by threatening to restrict their access to the world’s biggest economy.
Lighthizer’s strategy in the NAFTA talks has been to force the consideration of a long list of difficult demands under strict time constraints, betting that Canada and Mexico would cave. It hasn’t worked. Several artificial deadlines have been missed because Canadian and Mexican negotiators refused to make serious concessions until Lighthizer made some, too.
“The Trump negotiating style of maximum pressure has failed,” said Miller. “It was never about bargaining. It was about submission.”
There does appear to have been a shift in the U.S. approach. Last month, I was told by someone with knowledge of the Trump administration’s NAFTA strategy that it was ready to give up most of its demands and retreat. The focus was shifting to China and the feeling in Washington was that Lighthizer wanted to focus on the bigger opponent.
But over the last week or so, there have been more reports of the Americans complaining about Canadian and Mexican intransigence around issues such as drug patents and the U.S.’s desire to insert a sunset clause.
This suggests that Lighthizer is repositioning for a more normal negotiation. The good news would be that the U.S. would probably be willing to grant Canada and Mexico some wins in order to achieve its priorities. The bad news is that talks quite likely will drag into 2019.
“He wants to renegotiate the agreement from top to bottom,” said Miller. “You can’t have a comprehensive deal done quickly.”
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