International Trade Law Prof Blog

Reason #1 Why Trump Can’t ‘Terminate’ NAFTA: Getting off the Fast Track

The Canadian negotiating team is in Washington this week trying to strike a new NAFTA deal, and Trump has threatened to “simply terminate NAFTA entirely” if they don’t.

There are three reasons he can’t do that legally.

First, the statutes under which NAFTA was created don’t give him the right to unilaterally terminate the agreement.

Second, the President’s constitutional authority over foreign relations is limited by Congress’s enumerated authority to regulate foreign commerce.

Third, and relatedly, the statute that implemented NAFTA obligations into U.S. law would only terminate if the U.S. effected a lawful withdrawal from the agreement – which, for reasons #1 and #2, is something a unilateral Presidential withdrawal would not be.

In the next few posts I’ll outline the legal authorities behind each of these statements, starting with the first one – the scope of the President’s withdrawal authority under the statutory regime that provides for the creation of congressional-executive trade agreements – the so-called “fast track” framework.

First Things First: It’s Not a Treaty

The first thing to bear in mind is that NAFTA is not a treaty, despite what some news sources say. It’s a congressional-executive agreement, negotiated by the President under consultation with Congress.

Does that matter? For legal purposes, yeah, a lot.

A treaty is governed by Article II, Section 2, clause 2 of the Constitution. That clause, of course, provides that the President can enter into any treaty he wishes, but it has to be ratified by a 2/3 majority of the Senate.

That Senate ratification can be a tough sell and a turn-off to potential negotiating partners, so Congress in the Trade Act of 1974 recognized an alternative: the congressional-executive agreement.

Unlike treaties, congressional-executive agreements must be notified to Congress before the President begins negotiations, and Congress must be consulted in specific ways throughout the negotiation process.

The up-side for the President (and negotiating partners) is that agreements made with this kind of cooperation between the two political branches don’t have to be ratified by the Senate. Instead, they are authorized by a thumbs-up/thumbs-down vote by a simple majority of both houses of Congress after limited debate.

So for a President, congressional-executive agreements are easier to get into, because Congress is part of the process.

But they’re also harder to get out of – because Congress is part of the process.

Termination Authority under Fast Track

The fast track statutory regime began with the Trade Act of 1974 and has been amended and extended several times, most recently by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. Since the 2015 statute says nothing about termination, the 1974 Act remains the governing standard.

The fast track statutes are very specific about the roles of the President and Congress in entering into trade deals, devoting dozens of pages to describing that process in detail.

They are considerably less clear about the process for termination, but the structure and context do not support a unilateral Presidential right to withdrawal.

Termination, in the Passive Voice

Section 125(a) of the Trade Act of 1974 provides the authority for termination of or withdrawal from congressional-executive agreements. That section, however, is written in the passive voice. Section 125(a) provides:

Every trade agreement entered into under this Act shall be subject to termination, in whole or in part, or withdrawal, upon due notice, at the end of a period specified in the agreement. Such period shall not be more than 3 years from the date on which the agreement becomes effective. If the agreement is not terminated or withdrawn from at the end of the period so specified, it shall be subject to termination or withdrawal thereafter upon not more than 6 months’ notice.

That’s it – “shall be subject” to termination. No subject, no actor.

 Withdrawal By “the United States” and Action by “the President”

So did Congress intend the President to effect withdrawal? While Section 125(a) does not say, Section 125(c) suggests not. Section 125(c), which deals with the impacts of a withdrawal, sets out a distinction between actions of “the United States” and actions of “the President:”

Whenever the United States, acting in pursuance of any of its rights or obligations under any trade agreement … withdraws, suspends, or modifies any obligation with respect to the trade of any foreign country or instrumentality thereof, the President is authorized to proclaim increased duties or other import restrictions, to the extent, at such times, and for such periods as he deems necessary or appropriate, in order to exercise the rights or fulfill the obligations of the United States.

 In “Withdrawing from NAFTA,” an article forthcoming in Georgetown Law Journal, I summarize the fast track termination scheme this way:

[T]he statute is ambiguous as to how “the United States” is expected to exercise its withdrawal authority. The distinction between action by the United States and action by the President, however, suggests that Congress contemplated action of “the United States” to mean something other than unilateral Presidential power. … Indeed, the Trade Act as a whole prescribes numerous express Presidential powers, but never expressly authorizes the President to withdraw from trade agreements. This omission of any such express authority when the Act discusses withdrawal and termination from trade agreements is conspicuous.

 Terminating Agreements v. Terminating Proclamations

There’s another section, Section 125(b) that allows the President to “at any time terminate, in whole or in part, any proclamation made under this Act.” Although this authority is broad, it does not include the power to withdraw from trade agreements as a whole.

Historically, the President’s power to make proclamations under tariff acts referred to his power to raise or lower duties within certain limits and under certain conditions, against the backdrop of a detailed tariff law passed by Congress. In debates on the Trade Act of 1974, members of Congress described Section 125(b) as an uncontroversial continuation of that authority dating back to the 1930s – a time when Congress, not the President, clearly set the limits on trade agreements.

This distinction between “trade agreements” and “proclamations” is reflected in the structure of the Act. Section 101(a), which sets out the basic authority for entering into trade agreements, divides the President’s authority between two tools: (1) entering into trade agreements, and (2) proclaiming tariff modifications. Section 101(a) provides:

Whenever the President determines that any existing duties or other import restrictions of any foreign country or the United States are unduly burdening and restricting the foreign trade of the United States and that the purposes of this Act will be promoted thereby, the President –

(1)  … may enter into trade agreements with foreign countries or instrumentalities thereof; and

(2) may proclaim such modification or continuance of any existing duty … as he determines to be required or appropriate to carry out any such trade agreement.

So terminating a proclamation – as provided in Section 125(b) – is not the same as terminating or withdrawing from a trade agreement. The Trade Act of 1974 gives the President the right to do the former but not the latter.

Getting Off the Fast Track

To summarize: NAFTA was entered into not under the President’s constitutional treaty power, but under the procedures of the Trade Act of 1974 for creating congressional-executive agreements.

When Congress laid out the role of the President in that scheme, it gave him certain specific powers and duties, including the power to notify Congress of the need for a trade agreement; the power to negotiate that agreement while consulting with Congress; the power to conclude a trade agreement; and the power to terminate or modify proclamations of duties.

What Congress did not do is give the President an express power to ‘terminate’ agreements like NAFTA. Under the statute, termination is by “the United States,” not by “the President.”

What About the Constitution?

This begs the second question presented in the introduction to this post: Doesn’t the President have the authority under his foreign affairs power to speak for “the United States” and withdraw from NAFTA? For that matter, couldn’t he rely on this inherent constitutional authority instead of congressional authorization under the fast trade statutes?

In my next post, "Reason #2 Why Trump Can't Terminate NAFTA" (not to be a spoiler), I'll explore this question.

Can Trump Dump Canada from NAFTA?

Trump is talking about terminating NAFTA again – this time by striking a new deal with Mexico and leaving Canada out if they won’t agree. Can he?

On September 1, Trump tweeted, “There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off…”   

This presents a couple of legal questions. First, if Trump dumps Canada, is the remaining agreement still NAFTA? If not, does he have the statutory authority to enter into a new agreement with Mexico?

The answer to both questions is that the President could probably have done either – but he can’t do the latter now, and he could never do either alone. 

This post draws on research that I advance in greater detail in “Withdrawing from NAFTA,” forthcoming in Georgetown Law Journal.

The North American Free Trade Agreement, Minus One-Third of North America

Members of Congress have been pretty much in unison in saying they expect any new deal to include Canada, as reported by the conservative paper The Weekly Standard.  

Far from “interfer[ence]” with the President’s trade negotiations, Congress has primary constitutional authority over trade deals and a statutory right to guide any trade negotiations that the President engages in.  

“To Regulate Commerce with foreign Nations …”

Although the President has the power under the Constitution to speak for the United States in foreign relations, in the trade context that “sole organ” doctrine has to be read in conjunction with the Commerce Clause of Article I, Section 8, which says that Congress has the power “[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”

Where Congress has an enumerated power such as the power to regulate foreign commerce, the implied powers of the President are limited. As articulated in Justice Jackson’s famous concurrence in Youngstown Sheet & Tube Co. v. Sawyer, the President may not take action “incompatible with the expressed or implied will of Congress.”

That’s a problem for President Trump here, because Congress has expressly created a detailed system of procedures that the President must follow before, during, and after negotiating trade deals in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (“TPA”). TPA gives the President the authority to negotiate and enter into trade agreements through July 1, 2121.

It’s important to note what’s happening here: The President doesn’t go out and negotiate trade deals under his own constitutional authority. Instead, because Congress has the authority to regulate foreign commerce, Congress delegates to the President the power to speak for the nation on trade.  

That authority is heavily conditioned. First, Section 103(a)(2) says, “[t]he President shall notify Congress of the President’s intention to enter into an agreement under this subsection.”

It’s clear that this notification must occur before negotiations, because Section 104, entitled “Congressional Oversight, Consultations, and Access to Information,” requires the United States Trade Representative to consult with specific congressional committees during negotiations.

Section 105(a) is more specific still, requiring the President to “provide, at least 90 calendar days before initiating negotiations with a country, written notice to Congress of the President’s intention to enter into the negotiations with that country and set forth in the notice the date on which the President intends to initiate those negotiations ….”

The Trump Administration didn’t do this. Instead, in a letterto Congress on May 18, 2017, U.S. Trade Representative Robert Lighthizer said, “I am pleased to notify the Congress that the President intends to initiate negotiations with Canada and Mexico regarding modernization of the North American Free Trade Agreement (NAFTA).”

All subsequent oversight, consultations, and exchange of information between the two branches – including the development of specific negotiating objectives – related to renegotiation of NAFTA with both Canada and Mexico, not to the creation of a new agreement with Mexico.

Members of Congress seem reluctant to accept one as tantamount to the other. That is effectively a veto, because without implementing legislation by Congress, no trade deal can go into effect, whether new or renegotiated. Procedures for implementing legislation are streamlined but mandatory, as detailed in Section 151 of the amended Trade Act of 1974.

50 Ways to Leave Your Trade Agreement

Technically, though, there may be a way around this to get to an agreement with Mexico that excludes Canada.

Rather than calling the Mexico deal a new bilateral agreement, the Trump Administration might be able to cease to apply NAFTA to Canada – leaving in place a renegotiated NAFTA with only two parties, Mexico and the U.S.

This approach would probably still require some type of congressional approval, so it’s not a get-out-of-jail-free card. But the type of congressional consultation required is not expressly stated, and it avoids the problem of failure to give notice.

Ceasing to Apply NAFTA to Canada

NAFTA became effective in U.S. law when Congress passed the NAFTA Implementation Act in 1995. Section 109(b) of that Act says,

(b)Termination of NAFTA Status.– During any period in which a country ceases to be a NAFTA country, [the implementing provisions of the Act] shall cease to have effect with respect to such country

 Okay, but when does a country “cease[] to be a NAFTA country”? Section 2 of the Act defines “NAFTA country” to mean:

• Canada for such time as the Agreement is in force with respect to, and the United States applies the Agreement to, Canada; and
• Mexico for such time as the Agreement is in force with respect to, and the United States applies the Agreement to, Mexico.

So if the United States no longer applies the agreement to Canada, then Canada “ceases to be a NAFTA country.”

How convenient! This begs the question, however, of how“the United States” can cease applying the agreement to Canada. Can the President do it with the stroke of a pen? Or does Congress have some say in the matter?

“[A]fter Thorough Consultation with the Congress ….”

Section 2 and Section 109(b) don’t say. But there’s another provision of the Act, Section 101(a)(2), that sheds some light on the question.

In Section 101(a)(2) of the NAFTA Implementation Act, Congress adopted a Statement of Administrative Action (“SAA”) sent by the President along with the text of NAFTA. Among other things, the SAA discussed what would happen if Mexico or Canada withdrew from the side agreements on labor and environment that had been negotiated to accompany NAFTA.

The SAA said, if that happened, “[t]he Administration, after thorough consultation with the congress, would provide notice of withdrawal under the NAFTA, and cease to apply that Agreement, to Mexico or Canada if either country withdraws from a supplemental agreement.”

So at least in the case of withdrawal from a side agreement, United States withdrawal would be accomplished by the President “after thorough consultation with the congress.”  It is possible that the President might similarly be able to provide notice to Canada that the United States no longer intends to apply NAFTA to Canada.

It is unclear whether a “thorough consultation with Congress” includes a congressional power to deny the President’s proposed action. But since the Constitution gives Congress the enumerated power to regulate foreign commerce, it seems that the President would not be constitutionally permitted to cease to apply the agreement to Canada if Congress passed a resolution indicating its disapproval of the action.

In my forthcoming article, I summarize the withdrawal authority of the two branches this way:

It is not clear whether the commitment to a “thorough consultation with the congress” applies in all circumstances of United States withdrawal. The SAA does suggest, however, that withdrawal was not viewed as a unilateral prerogative of the President. At least in those circumstances where withdrawal was specifically contemplated, the President and Congress both believed that Congress was to play a role.

Would Congress consent? Some members might find this two-legged NAFTA approach too cute, too clever an effort to cut Congress out of its constitutional powers and oppose it on those grounds. Others may be satisfied on legal grounds but oppose the move to dump Canada for political or economic reasons.

Far from “interfer[ing],” they would be entirely within their rights in doing so, as the branch with the enumerated constitutional power to “regulate Commerce with foreign Nations.”