How a call from President Trump’s son-in-law started a scramble on NAFTA

The US insists Trump's threat to pull out of NAFTA wasn't a negotiating ploy, but instead a "non-story" that got out of control.

WASHINGTON — A phone call from US President Donald Trump’s son-in-law set off a frantic scramble ending in sighs of relief across three national capitals that the North American Free Trade Agreement would survive.

Jared Kushner called around supper time.

It happened on an intrigue-filled day last month after different news reports said Trump was seriously thinking of invoking Article 2205 of NAFTA, which would be the first step in canceling the quarter-century-old deal.

Many observers presume it was a mere bluff. Yet Trump insists he came close to doing it. He has since said he was dissuaded by a pair of evening phone calls from Prime Minister Justin Trudeau and President Enrique Pena Nieto.

”Two people that I like very much, the president of Mexico, prime minister of Canada, they called up, they said, can we negotiate? I said, yes, we can renegotiate,” Trump told a rally in Pennsylvania several days later.

”So we’ll start a renegotiation.”

He didn’t delve into the details. But here’s what happened.

Washington was abuzz over those reports hinting at the possible demise of NAFTA. Some Trump administration members warned of the economic bedlam such a move would cause. At the Canadian embassy in Washington, some were heartened by the intensity of the reaction.

The business community and lawmakers had, for the most part, quietly abided Trump’s trade-skeptical campaign talk for over a year but were suddenly springing to action, flooding Washington contacts with phone calls and warnings not to touch NAFTA.

Then came the call from Kushner.

A pair of sources described the chain of events. At about 6 p.m., the senior White House aide contacted a counterpart in Ottawa. The president’s son-in-law and adviser called PMO chief of staff Katie Telford, and said: Trump has a free moment, right now, to speak about NAFTA.

He suggested Trudeau might want to call the White House.

Telford veered to a stop. She happened to be in a carpool, commuting with her colleague Gerald Butts. The senior officials pulled over to the side of the road in Tunney’s Pasture, an industrial-park-like federal area in west-end Ottawa.

They got in touch with Trudeau, and the prime minister contacted Trump. Trump also spoke to Pena Nieto and, a few hours later, the White House issued a statement: NAFTA was saved, for now, and would be renegotiated – not terminated.

It’s still a little murky, what Trump really intended.

”I’m not sure. I think they were genuinely close to pulling out,” one Canadian said.

”(But) I think the story is a little messier than that.”

The different parties involved, in both countries, might be spinning the details to their benefit, he said. That’s the opinion of some NAFTA experts – who believe the whole thing was theatre, orchestrated by the White House.

”A negotiating ploy,” said Gary Hufbauer of the Peterson Institute in Washington. ”True to Trump’s style.”

One Mexican official said an American colleague even admitted as much.

Foreign minister Luis Videgaray told media that an American colleague told him who the intended target was – the US Congress. Congress has been dragging its heels in starting the NAFTA negotiation process and, according to the Mexican minister, some described the sudden activity as a pressure-tactic intended to light a fire under Capitol Hill.

The US’s NAFTA point man offers a more blase explanation.

The whole thing was neither a negotiating ploy, nor a near-death experience for NAFTA, but something else entirely, says Commerce Secretary Wilbur Ross. It was a non-story that got way out of control, he says.

He appears to be blaming whoever leaked news to the press about Trump considering an executive order. Ross suggests somebody prematurely pushed out a half-baked, never-decided draft policy, and that stirred up unnecessary excitement.

”What people don’t understand is the president encourages lively discussion. In the course of those discussions all kinds of alternatives come up,” Ross told CNBC.

”I think what’s unfortunate is that someone leaked one of the many potential papers that was floating around, and created a whole skirmish over something that had not been decided upon by the president.”

The White House does have internal divisions over trade.

Some advisers are more trade-skeptical, such as Peter Navarro and Steve Bannon, who were reportedly two forces behind the now-scrapped executive order. Other senior staff are believed to be pro-NAFTA – including Gary Cohn and, yes, the president’s son-in-law.

News from © Canadian Press Enterprises Inc. 2016
1 Comment » for How a call from President Trump’s son-in-law started a scramble on NAFTA
  1. Mr. Deniz Yazici, M.A.Sc., P.Eng. says:

    The problem with NAFTA is that for manufacturers, it’s one sided – favouring US manufacturers and companies. Canada has become a resource based economy along with a dependence on the more precarious service sector which is under severe cost and competitive pressures from low cost jurisdictions such as India. In order for NAFTA to work, manufacturing across the US and Canada has to be more balanced – deindustrialization of Canada’s industrial heartland – Ontario – has tipped the scales in the favour of the US. Ontario lost hundreds of thousands of factory jobs mainly due to NAFTA – those plants closed and left the country with no replacement jobs. A border adjustment tax based on wages to make a product to level the playing field is a good start. For example, Rexnord is closing their plant in Indiana and moving to Mexico because wages there are $3/hr compared to $25/hr in the US. A border adjustment tax will tax the difference of any product entering the US or Canada from Mexico – in Rexnords case ($25-$3=$22/hr tax). The company will have to provide timesheet information at time of payroll tax source deduction submission so that this tax can be collected. If the company refuses, then the product cannot enter the Canada-US trade zone or will be subjected to a valuation penalty per unit. NAFTA was supposed to “level” the playing field for wages and costs throughout the trading block – it resulted in US companies getting “greedily” rich, while working Mexicans have not seen an improvement in the standard of living as was promised and Canadians have seen a huge erosion in job security as well as the standard of living. As far as Canada is concerned – now is the time for a National Industrial Strategy to rebuild the industrial base of Canada once again. Border adjustment taxes can be used to subsidize Canadian businesses so that they can build local/national brands and be able to compete against the much larger US corporations – this would lead to massive job creation and give local companies a chance that they may never get if the status quo is maintained. This job creation and enlargement of local Canadian companies would also lead to more payroll, income and corporate taxes the Canadian Government would receive – a win-win for Canada.

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