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Why Congressional Deadlines Don't Foreclose NAFTA Changes

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Why Congressional Deadlines Don't Foreclose NAFTA Changes

As prospects fade for a complete overhaul of the North American Free Trade Agreement this year, the White House could still alter important provisions by negotiating changes outside of rules that set deadlines for congressional action, trade experts said.

That approach could be used to adjust the rules of origin for automobiles under the current agreement, said Simon Lester, a trade policy analyst at the Cato Institute, a libertarian think tank in Washington, D.C.

Other experts agree that the May 17 deadline set by House Speaker Paul Ryan for congressional consideration of a NAFTA revamp does not necessarily prevent President Donald Trump from reworking the trading relationship among the U.S., Canada and Mexico.

"The most likely scenario is a modest set of changes that can be implemented through executive action alone," said Todd Tucker, a fellow at the Roosevelt Institute, a left-leaning think tank, in an email. "There is no reason that [Trump] couldn't chop off bits of NAFTA 2.0 and introduce them to Congress outside of Fast Track procedures."

A slower track?

Fast track trade promotion authority allows U.S. presidents to negotiate trade agreements without congressional oversight. The president is required to notify congress that he intends to sign an agreement at least 90 days before doing so, while providing lawmakers with a list of what needs to change under U.S. law for the country to comply with the agreement within 60 days of signing it. The U.S. International Trade Commission, or ITC, is required to produce an economic assessment report 105 days before the signing of any treaty before Congress can hold a vote. Ryan said at an event earlier this month that lawmakers will not have enough time this year to consider a completely new treaty unless Congress receives a notice of intent to sign a deal by May 17.

That deadline may require the Trump administration to change its approach and take more incremental steps to changing the free trade pact. While the administration has not publicly discussed that strategy, it is plausible that the White House might consider it, Cato's Lester said.

"Maybe there's a way to do smaller tweaks," Lester said in a phone interview, suggesting that the automotive rules might be one such amendment. "What if that was the only change? Well, maybe that's a little easier then. Maybe then it doesn't even require a congressional vote, or maybe the analysis by the ITC is so much easier."

The Korean example

Such a strategy would mirror the approach the Trump administration took with recent changes to the Korea-US Free Trade Agreement, said Gary Hufbauer, a senior resident at the Peterson Institute for International Economics. In that case, the two countries agreed to a series of changes to tariffs and safety standards that did not require Congressional approval.

"They just did some amendments, and then the administration said, 'Well, these amendments don't require a congressional vote,'" Hufbauer told S&P Global Market Intelligence in a phone interview. "The legal point is that if there's any change in U.S. law, Congress has to vote it, but there's a lot that can be done by executive action."

While the president may be able to use executive authority to modify existing trade agreements, a piecemeal approach is uncharted territory in Congress, Lester said.

"Normally, you just do it a certain way. You make big changes or you propose a new agreement — we've never had these kinds of amendments before, or renegotiations. Usually, the expectation is you go to congress," he said. "We now have the possibility ... where we're just going to make small changes that don't require changes to U.S. law and therefore don't require a vote. Could they come up with something on NAFTA like that? What's the threshold for that? We don't know the answer to that. That would be breaking new ground."