Three Things to Keep in Mind as the Nafta End-Game Plays Out

(Bloomberg) -- President Donald Trump is pushing to wrap up negotiations over an updated and re-branded Nafta this week as he puts pressure on Canada to sign on to the bilateral deal he announced with Mexico on Monday.

Nafta ministers are now meeting in Washington to try and reach a deal for Canada to join the arrangement by the end of this week.

Here are three things to keep in mind as what looks like a frantic end-game plays out after more than a year of negotiations.

Fuzzy Deadlines

U.S. Trade Representative Robert Lighthizer has said he will send a required notification to Congress on Friday that the Trump administration plans to sign a bilateral deal with Mexico later this year that is meant to form the basis of an updated North American Free Trade Agreement.

The main reason for the rush is that Mexican President Enrique Pena Nieto leaves office Dec. 1 and U.S. rules require the president give Congress 90-days notice before he signs the deal. Incoming Mexican President Andres Manuel Lopez Obrador, who has endorsed the deal but still wants to maintain an arms-length relationship to it politically, wants Pena Nieto to sign it.

So too does the Trump administration, which has treated the looming transition as a way to force a deal and frets about the possibility of negotiations dragging on otherwise.

Still, the reality is that even if the Trump administration sends a notification to Congress on Friday, there is still some wiggle room. Under congressional rules, the administration has another 30 days to release the text of the agreement they will be signing. And trade negotiators always find a way to battle to the end over every last comma in an agreement. It’s what they get paid to do.

For a clue to what looms ahead, just look to how the deal with Mexico was badged when it was announced Monday. U.S. officials dubbed it a “preliminary agreement in principle.”

Political Hoops Aplenty

Whether it’s a bilateral deal with Mexico or a tripartite agreement including Canada as well, Trump will need Congress to ratify the new pact. But any vote can’t take place before well into 2019.

The rules governing trade votes on Capitol Hill require presidential administrations, which negotiate deals under the authority of Congress, to jump through a number of hoops. Within 105 days after a trade agreement is signed, government economists must present their assessment of the economic impact of the deal, for example. Congress also has 90 days in session to vote on a deal. For those reasons, even if things go smoothly, the ratification in the U.S. is unlikely to happen before the second quarter of next year.

That assumes things go smoothly. One big unknown is who will control Congress in 2019. If Democrats win a majority in the House of Representatives in November’s midterm elections, will they be willing to back Trump’s new Nafta? Or will they play politics and claim he has betrayed his promises to bring factories and jobs home from Mexico?

The Messy Scenario

Canadian Prime Minister Justin Trudeau and his government have been striking an optimistic tone going into the latest talks in Washington. That may signal that the most likely scenario is for them to forge their own “agreement in principle” with the U.S. and Mexico this week.

But don’t discount the possibility of a messier scenario under which the Canadians dig in their heels, the U.S. makes impossible demands, or Trump has another public bust-up with Trudeau similar to June’s clash at the Group of Seven summit in Quebec.

Under the most dramatic case, the Trump administration could send a notification to Congress on Friday that he is plowing ahead with a bilateral deal with Mexico and leave the negotiations with Canada in limbo.

That’s a possibility the business community and both Republicans and Democrats have expressed serious concerns about this week. There are also questions about whether the president could even do that under the negotiating authority he has from Congress. Technically, it was for a trilateral agreement. Administration officials are already arguing that Canada’s willingness to sign up to a deal may be beyond Trump’s control. In that case a bilateral deal with Mexico is worth having, they contend.

Even then, though, Canada could conceivably find a way back to the table in the weeks to come and a way to join a signing later this year.

We’re in what looks a lot like the frantic final stages of a major trade negotiation. Everyone should be ready for some surprises.

To contact the reporter on this story: Shawn Donnan in Washington at sdonnan@bloomberg.net

To contact the editors responsible for this story: Simon Kennedy at skennedy4@bloomberg.net, Sarah McGregor, Randall Woods

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