While Trump believes withdrawing from NAFTA will pressure Congress to pass USMCA implementing legislation, that might not work, Veroneau said during a Practising Law Institute panel discussion.
Pelosi is resisting Trump’s requests during an ongoing government shutdown, and it’s foreseeable that if Trump withdraws from NAFTA, she could condemn the move and stall USMCA, said Veroneau, who was deputy USTR from 2007 to 2009 in the George W. Bush administration and is co-chair of Covington & Burling’s International Trade and Finance group.
President Donald Trump is requesting $5.7 billion for a wall along the U.S. southern border, which congressional Democrats are refusing to appropriate.
Further, while USMCA includes several pro-labor provisions and U.S. Trade Representative Robert Lighthizer worked closely with several Democrats on favorable language in the agreement, that appreciation might not be extending into the new Congress, Veroneau said.
Vanessa Sciarra, vice president for legal affairs and trade and investment policy at the National Foreign Trade Council, agreed that Lighthizer worked with Democrats on several provisions, including Mexican labor language, but noted the Democrat Caucus has a very strong progressive arm, including some who say the provisions still aren’t strong enough in areas such as enforcement.
Because presidential candidates and lawmakers running for re-election don’t generally like trade votes close to an election, the most realistic window for congressional approval of USMCA is between now and August, giving Congress a short amount of time for passage considering that a bill hasn’t been introduced, Sciarra said.
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, last week said Trump should withdraw from NAFTA if Democrats continue to insist that USMCA should be opened back up for renegotiation.
While there's a reasonable chance Trump provides notice of NAFTA withdrawal, there's a lesser chance that he finalizes such an action, Veroneau said.
NAFTA requires parties to provide six months’ notice before a government can take action to withdraw from the pact, Sciarra mentioned.
That means from a strategic perspective, Trump could theoretically provide withdrawal notice without affirmatively committing to remove the U.S. from the pact, and keep the withdrawal threat looming as USMCA gets teed up for consideration, Sciarra said. Yet there's a bipartisan sense that the U.S. can't live without some form of NAFTA, amid the prospect of tariff spikes, for instance, which would be as high as double digits in some cases, she said.
A withdrawal notice could have the opposite effect of pushing lawmakers to vote on USMCA, who could instead insist that Trump drop his threat, Veroneau said.
The ongoing shutdown could portend a dramatic political landscape between now and this summer, a situation in which it would be hard to imagine that Democrats simply cave if a Trump withdrawal notice initiates a confrontation with Congress, he said.