Posted on January 31, 2018
Has Trump walled himself in?
Renegotiations of the North American Free Trade Agreement are reportedly moving very slowly, and it’s no wonder. As eager as Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto sounded about reworking the deal, neither of them is proposing any major alterations, and most of the proposals coming from the Trump administration – such as a five-year sunset clause, and the elimination of any binding dispute settlement system – are non-starters.
The only reason these talks are taking place is because Trump, who had promised to “tear up” NAFTA early in his presidential campaign, said he would withdraw from it if Canada and Mexico did not agree to negotiate. Contrary to the opinions of overpaid media legal analysts, he does not have the power to follow through on that threat. Yes, Article 2025 of NAFTA does allow any party to withdraw six months after notifying the other parties, but Donald Trump is not a party to NAFTA. The United States is, and it is Congress, and not the president, that the Constitution empowers to regulate commerce with foreign nations.
<![if !vml]><![endif]>For us to pull out of NAFTA, a resolution to do so would need to pass through both houses of Congress. That’s not likely to happen. If, on the other hand, Trump were to submit a renegotiated NAFTA to Congress, it would almost certainly pass. Perhaps realizing this, Trump changed his pledge from discarding the deal to revising it instead. Because he’s never specified the changes he wants, any new agreement will give him a pretext to declare victory.
The reason that’s significant is that Trump claims this is how he’s going to make Mexico pay for a border wall. “They can pay for it indirectly through NAFTA,” he told the Wall Street Journal. “We make a good deal on NAFTA, and I’m going to take a small percentage of that money, and it’s going toward the wall. Guess what? Mexico’s paying.”
No, it isn’t, because there won’t be any “that money” to take. NAFTA is essentially a multilateral agreement to lower tariffs among the three nations. It is not a series of financial transactions between governments. Whatever the outcome of the negotiations, it will not result in Mexico paying the United States any money. Trump’s assertion that it will rests on one of two faulty premises: (a) that a trade deficit represents a wealth transfer from one nation to another, rather than the equitable trading of money for material goods, such that the purchase of fewer Mexican goods by Americans would somehow mean more money left in the United States Treasury; or (b) that if we were to raise tariffs on Mexican imports, those tariffs would be paid by the Mexican government, and not by American consumers. Neither of these is true. Mexico would not pay a single centavo to the United States in either case.
Since Trump is a master negotiator who’s constantly outwitting his foes in a game of thirteen-dimensional chess, we’ll have to assume he has some brilliant tactical reason for showing his entire hand to President Nieto, but what might that reason be? Trump has no leverage that might compel Nieto to make any new agreement that would be advantageous to our country at Mexico’s expense. The best we can possibly hope for is that, with the benefit of hindsight, some unwisely adopted provisions will be dropped from the agreement to the benefit of all three parties. Unfortunately, Trump’s introduction of the wall into the discussion will likely prompt Nieto to reject any such proposal, however benign.
Perhaps Trump is using double-reverse psychology, by which Nieto is duped into thinking Trump wants the NAFTA talks to fail, and therefore, spitefully, proposes a clause requiring his own country to pay for our border wall. But let’s just suppose that, by some incredible fluke, this doesn’t work.
If the talks break down, NAFTA will simply remain as-is. That means there will be no imaginary Mexican money to build the wall that will not really be a wall, and for which Trump is properly trying to obtain congressional funding anyway. Moreover, he’ll have failed to fulfill his promise to do some unspecified thing or other to NAFTA, which he accuses of ravaging our nation’s factories, even though it has done nothing to inhibit the great American manufacturing renaissance he boasted about in his State of the Union Address.
On the whole, that’s not a bad thing, but why must we sort through so many Trumpian unrealities just to figure that out?
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