Washington Insider: Congressional Approval Needed to Change NAFTA

Much of the talk about NAFTA these days is quite bearish, including that from the right side of the political aisle. In fact, Bloomberg took care to cite Senator John Cornyn, R-Texas, this week, and his statement that the “administration needs to keep Congress in mind and know that lawmakers will need to approve any renegotiated NAFTA.” The comments came as the latest round of negotiations to update the trade agreement was ending in in Mexico.Cornyn's comments came following testimony minutes earlier from industry groups reiterating the importance of the agreement to their industries and the economy. Negotiators from Canada, Mexico, and the U.S. that had been meeting in Mexico City for the latest round, that closed this week.“It's even more important that we stay in close communication with the negotiators, so that we can negotiate something that actually has a chance to be passed by Congress, pursuant to the trade promotion authority,” Cornyn said.Cornyn’s views are important since he chairs the trade subcommittee of the Senate Finance Committee and is Senate Majority Whip. And, he is a long-time NAFTA supporter. Cornyn said he held the hearing to tell the story of NAFTA and how it has benefited the economy.Cornyn heard earlier from Stephen Vaughn, general counsel at the Office of the U.S. Trade Representative, as well as from trade associations at the Nov. 20 hearing. Vaughn outlined some of the changes the administration wants to see in NAFTA, including a five-year sunset clause, Cornyn sided with industry in its opposition to such a provision. He thinks it would discourage investment. “The idea that you would encourage somebody to invest millions of dollars into some plant or business model and then pull the plug on it in five years is undermining the whole process.”The San Antonio hearing was held on the anniversary of the signing of the draft agreement in 1992. Afterwards, Cornyn held a news conference by a plaque outside a San Antonio hotel commemorating the event.“I believe NAFTA is working, certainly it's working for Texas,” Cornyn said. “When people say there are winners and losers in NAFTA, I'm wondering where those losers are. Maybe we need to hear more about that because obviously we care about the welfare of all Americans, but certainly here in Texas it is working.”The rhetoric about withdrawing from the agreement may just be a negotiation tactic, Cornyn said, as a panel of industry representatives disagreed with the USTR position. While modernization is necessary to update the agreement on topics such as intellectual property and technology in cross-border operations, it is important to keep other provisions intact, including the rules of origin define the share of components that must come from NAFTA countries.The agriculture industry is very concerned about the administration's threat to walk away from the agreement, Russell Boening, head of the Texas Farm Bureau told Bloomberg after the hearing.Representatives from the American Farm Bureau met with Mexican agriculture organization representatives and Canadian agricultural representatives in Washington, Boening said. “We're having the same conversations because they're just as concerned as we are,” Boening said. “A trade deal is a trade deal. There are a lot of imports as well, because we can't grow tomatoes here in January.”The Texas Association of Business President Jeff Mosley told Bloomberg that “there is a strong commitment to timely resolution because businesses, of course, will sit on the sideline where there is uncertainty,” Mosley said. “Just the fact there are negotiations have caused Canadian, Mexican, and U.S. businesses to sit back and wait and see, and that has a chill on the existing trade we enjoy.”The Texas Association of Business also organized a trade coalition called the Texas-Mexico trade coalition.“The group has been very vigorous in opening a dialogue, not only with Texans working in Mexico but with our Mexican trading partners,” Mosley said. “We believe a new NAFTA agreement should benefit all parties so we have to make sure our trading partners interests are heard.”The negotiations will result in a modernization of the NAFTA agreement, Cornyn said, because consequences of a failure of the talks, “are really going to be very bad for all three countries involved. I really don't see failure as an option.”So, we will see. Certainly, ag groups are badly worried about the administrations negotiating signals so far. The industry seems to feel confident that it has strong support from USDA, but is increasingly concerned that may not be sufficient. This is yet another debate producers should watch closely as it proceeds, Washington Insider believes.