Withdrawal From NAFTA Remains An Option If Renegotiation Talks Fail
On April 27, 2017, US President Donald Trump announced that he would not withdraw from the North American Free Trade Agreement (NAFTA) "at this time," after securing agreement from Canada and Mexico to renegotiate elements of the agreement. The administration is expected to submit the formal notification of its intent to enter into negotiations in the very near future. It remains to be seen how patient the administration will be if Mexico and Canada drag out the negotiations without making a serious effort to renegotiate. The option to withdraw from NAFTA, while on the back burner for now, could re-emerge at some point in the future. It is worth understanding what the administration's options really are with regard to withdrawing from NAFTA.
NAFTA was enacted domestically by statute when Congress passed the implementing legislation making the required changes to US law. However, Chapter 22 of the NAFTA agreement provides a mechanism for parties to the agreement to withdrawspecifically, Article 2205 Withdrawal, which states: "A Party may withdraw from this Agreement six months after it provides written notice of the withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties." It is generally assumed, although untested in trade agreements that are in force, that the president, exercising his constitutional power over foreign policy, is authorized to give notice on behalf of the United States to terminate a treaty, including NAFTA. In fact, President Trump used this authority earlier this year to withdraw from the Trans-Pacific Partnership agreement (although this was not in force).
Once the United States has announced its intention to withdraw from NAFTA, there still must be, in most cases, additional steps taken to return the United States' trade regime to a pre-NAFTA state. The preferential tariff rates for goods from Mexico and Canada established by NAFTA were authorized through the grant of proclamation authority to the president by Congress under Sec. 201(a)(1) of the NAFTA implementing legislation. Specifically, the statute states: "[T]he President may proclaim (A) such modifications or continuation of any duty, (B) such continuation of duty-free or excise treatment, or (C) such additional duties." The NAFTA preferential tariff rates were proclaimed by former President Bill Clinton on December 15, 1993. Some have questioned whether President Trump could unilaterally eliminate...
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