Saturday, October 6, 2018

Withdrawing from NAFTA 2.0

There’s a new NAFTA in town, called the United States-Mexico-Canada Agreement or USMCA. Much like the old NAFTA, the new NAFTA contains a provision allowing parties to withdraw upon six months’ notice.

So what does it take to get out of the new NAFTA? Is it any different from getting out of the old NAFTA?

The new NAFTA provision, Article 34.6 says, “A party may withdraw from this Agreement by providing written notice of withdrawal to the other Parties. A withdrawal shall take effect six months after a Party provides written notice to the other Parties. If a party withdraws, the Agreement shall remain in force for the remaining Parties.”

In comparison, the old Article 2205 said, “A Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.”

This seems to be a technical clarification, not a substantive one. Article 2205 in the old NAFTA could be read to require two steps: First a party gives written notice of withdrawal to the other parties, and then six month later that party “may withdraw” (how?).

Article 34.6 of the new NAFTA makes clear that this is all one step: A party gives notice of intent to withdraw and six months later it takes effect. That’s probably what the drafters of Article 2205 meant too, but Article 34.6 is more clear.

Who May Withdraw?

But this doesn’t really answer the big question: Who is entitled to effect U.S. withdrawal? In my last post, I highlighted why the fast track statutes that form the basis for congressional-executive trade agreements don’t support the case for unilateral presidential withdrawal: The Trade Act of 1974 gives specific powers to the President in the event of U.S. withdrawal, but not the withdrawal authority itself. That authority exists, but it’s written in passive voice, not as a power of the President. The 2015 fast track statute doesn’t talk about withdrawal at all.

This is consistent with the structure for getting into trade agreements under fast track, which requires a cooperative process by Congress and the President.

The fast track framework that governed the first NAFTA also governs the new one (with updates and extensions). So we're still in the dark about withdrawal and termination procedures. Congress could clarify withdrawal and termination authority if it wanted to in the implementing act for the new NAFTA.

Clues in the Statement of Administrative Action

The implementing act for the old NAFTA did contain one clue about who could effect withdrawal. In Section 101(a)(2) of the NAFTA Implementation Act, Congress approved “the statement of administrative action proposed to implement” NAFTA. Statements of administrative action are required by Section 1103 of the 1988 fast track statute and describe significant administrative actions proposed to implement the agreement.

The Statement of Administrative Action (“SAA”) that was incorporated into the NAFTA Implementation Act discussed the dilemma the U.S. might face if Mexico or Canada were to withdraw from the side agreements on labor and the environment that the U.S. considered essential to the deal.

The Clinton Administration proposed a resolution to this potential dilemma in the SAA: “The 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 the President would deliver notice of withdrawal if Mexico or Canada withdrew from a side agreement, but only “after thorough consultation with the congress.” The SAA doesn’t specify the details of that consultation or whether the Administration could proceed if Congress expressed objection. But it does suggest that the President was not expected to act unilaterally, even in this instance that was anticipated and discussed by both branches before implementing the agreement.

Implementing NAFTA 2.0

If it decides to approve and implement the new NAFTA, Congress could fill the gaps in the fast track scheme and the old NAFTA implementing act by specifying how withdrawal by the United States should be accomplished.

Given the constitutional powers that Congress has always retained over U.S. entry into trade agreements, it would make sense for Congress to spell out a role for itself in withdrawal or termination as well. More about the constitutional interplay between the political branches in a later post.

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