Last month, the Trump administration announced completion of a U.S.-Canada-Mexico-Agreement, intended to supersede the 1993 North American Free Trade Agreement. Can the new agreement be approved before the new Congress takes office in January? Would a Democrat controlled House of Representatives endorse the new agreement? If the new agreement is not approved by Congress, what can the president do on his own to force changes in NAFTA? How will Washington trade disputes affect relations with Mexico and Canada?
Amb. Antonio Garza, Counsel, White & Case, and former U.S. ambassador to Mexico
Andy Keiser, Principal, Navigators Global, and former chief of staff to House Intelligence Committee
Prof. Timothy Meyer, Professor of Law, Vanderbilt Law School, and expert on foreign relations law and trade law
Moderator: Prof. Jeremy Rabkin, Professor of Law, Antonin Scalia Law School, George Mason University
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Operator: Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's International & National Security Law Practice Group, was recorded on Tuesday, November 27, 2018 during a live teleforum conference call held exclusively for Federalist Society members.
Wesley Hodges: Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is "New NAFTA or Else . . . What? My name is Wesley Hodges, and I'm the Associate Director of Practice Groups at The Federalist Society.
As always, please note that all expressions of opinion are those of the experts on today's call.
Today we are very fortunate to have with us an accomplished panel and moderating it is Professor Jeremy Rabkin, who is Professor of Law at the Antonin Scalia Law School at George Mason University, and also an affiliate of the National Security Institute at George Mason. After our speakers give their remarks today, we will move to an audience Q&A, so please keep in mind what questions you have for this subject or for any one of our speakers. Thank you very much for sharing with us. Professor Rabkin, the floor is yours.
Prof. Jeremy A. Rabkin: Thank you very much. So I'm just going to say a very few quick things about the background to this topic and then give very brief introductions to our panelists.
NAFTA is now 25 years old. A lot of people think it could use some updating, but there's no consensus that the Trump administration is the right one for that job. I should say that in the past there's been bipartisan support for this kind of undertaking but not really strong. The origin of this is a free trade agreement between the United States and Canada that was negotiated by the Reagan administration and took effect just afterwards in 1989. Then the first Bush administration tried to bring Mexico into this, and by the end of its term had negotiated an agreement, but it fell to the Clinton administration, the Democratic administration, to persuade Congress, which was then a Democratic Congress, to endorse this. I think the majority of Democrats did not vote for it, but Republicans were solidly for it, or at least substantially for it. And so there was at least a bipartisan majority in 1993 for this.
The Trump administration has now negotiated something which it calls the U.S.-Mexico-Canada Agreement, and we're waiting to see whether this can actually be adopted by Congress. So we've got three panelists to discuss different aspects of this. Andy Keiser is former Chief of Staff to House Intelligence Committee. He served on the transition team for foreign affairs and national security issues for the Trump administration. And he's now a Principal at the Navigators Global consulting group.
Timothy Meyer is FedEx Research Professor at Vanderbilt University, and also the Director of the International Legal Studies program there. [He] previously served in the Legal Advisers Office in the State Department.
And Antonio Garza was U.S. Ambassador to Mexico between 2002 and 2009. Now he's Counsel to the law firm of White & Case in Mexico City.
So I'm going to start by asking Andy Keiser a kind of obvious question. The Trump administration has changed the name of this. It's now something which doesn't have a handy acronym like NAFTA. Does he have any idea how we're supposed to pronounce this thing?
Andy Keiser: Nice to be on with you. That's a good question. Some are calling it simply NAFTA 2.0, which is a little easier turn of phrase than the U.S MCA. I did notice the opposition conservatives in Canada were referring to it as NAFTA .5. They were unimpressed with the concessions by the Canadians.
Prof. Jeremy A. Rabkin: Wait, I have one other, actually semi-serious agreement question, which is of course NAFTA is Free Trade Agreement in North America. It makes it seem like it's kind of like North American, the whole unit is giving itself a charter. Do you think they've actually thought this through in the Trump administration and they want to name the individual members and they want to avoid the expression "free trade"?
Andy Keiser: You know, I think first of all, something other than NAFTA was clearly a priority; something they were looking to rebrand in the tradition of the President's skillset in branding. So that was clearly an interest. I do think there is an interest in calling out the individual nation states in this, sort of, push for increased sovereignty and less focus on nebulous international institutions that average Americans out in the hinterlands have a hard time identifying with.
Prof. Jeremy A. Rabkin: Okay, so you probably saw this last week. The Wall Street Journal carried a column by Senator Toomey, a Republican of Pennsylvania, and he said, "Let's just get this endorsed by the lame duck Congress because that's the way we can be sure that this will get done." Is there any chance that that could happen?
Andy Keiser: You know, Professor, I don't think so. I checked around this week on that very question, and the House and Senate leadership seemed to think that ship has long sailed, everything from simple logistics of getting the paperwork in order to a number of things on the docket that have to be cleared and no time for a major free trade agreement to happen in the next, let's see, 12 days, or 16 if they extend to December 14, which it looks like will happen.
Prof. Jeremy A. Rabkin: Yeah, the new Congress comes in January 3rd. Is that right?
Andy Keiser: Yes.
Prof. Jeremy A. Rabkin: Very early in January.
Andy Keiser: January 3rd. Yep.
Prof. Jeremy A. Rabkin: So they have to do this in December if they're doing it at all, and you're saying there's just not time for that?
Andy Keiser: That's right. So then much more likely this will go into 2019. And then, of course, the whole dynamics change, right? You have a new majority. You'll have a new speaker, almost certainly Pelosi, with different trade priorities than you would've had with Speaker Ryan for sure. So those dynamics will certainly be an interesting one to watch. We'll see how that plays out, how they're getting along into the new year. And then, of course, the President does have this nuclear option in his back pocket to withdraw from NAFTA to force the Democrats, essentially, to the table, on the House side anyway.
Prof. Jeremy A. Rabkin: Does that force them? Maybe they say, "Good"?
Andy Keiser: [Laughter].
Prof. Jeremy A. Rabkin: Well, I noted -- I thought this was a little sobering. We don't know for sure yet, but the person who vests seniority is likely to become the chair of Ways and Means voted against NAFTA, and the person who's likely to become chair of the House—what do they call it—the Foreign Affairs Committee also voted against NAFTA. And Nancy Pelosi, was she for it? I think she was against it, so maybe the House leadership is not going to be threatened if you say we're going to throw you into the briar patch of not having a NAFTA.
Andy Keiser: Well, I think they'll get the pressure of the importance to the economy of the largest free trade zone there is. But that said, you make exactly a correct point, that the Democrats certainly in charge of the House are generally skeptical of trade. So, actually, in a weird way, they line up with more with President Trump's skeptical view of trade and the benefits to the U.S. They come at it, of course, more from labor, environmental, and other concerns. But is there a way -- I've been talking to folks on the Hill and in the administration this week. It sounds like the most likely scenario is the Democrats go ahead and move but with some revisions to the compact. And then the question for the smart lawyers that will follow this conversation you and I are having is whether that's enough or whether the Canadians and the Mexicans will go along with those concessions or does it complicate the negotiation going forward.
Prof. Jeremy A. Rabkin: Well, probably no one will come back and check what you said in November of 2018, but this is your chance for immortality. Give us an actual number. Like 1-10, where 1 is impossible and 10 is certain. What do you think the odds [are] that a year from now we have this new agreement in place?
Andy Keiser: Sitting here in this chair I would say a 9 out of 10; that there's so much at stake that you'll have hot and cold episodes along the way; you'll have a whole host of interesting and colorful tweets; you'll have threats from Democratic leaders for sure. I would suspect the Canadian and Mexican parties, perhaps, trading barbs. And then not dissimilar way from what you saw with the NAFTA negotiations, where it was really, sort of, darkest before the dawn before they reached an agreement in October. And, of course, we'll see this week how the signing ceremony in Argentina plays out, which may inform us of it.
Prof. Jeremy A. Rabkin: Do the other panelists share that optimism?
Amb. Antonio Garza: This is Tony. I think nine is encouraging from where I sit, but Andy, I guess I have a question, and I have a hard time getting a feel for this, that historically you've had a very significant core of Republican support; yet, the Republican member in this day and age seems a bit different, you know, culturally a little bit different, a little more skeptical of trade, as does the Democrat. And I guess in the past to get these sort of things done, you needed 25 to 40 Democratic votes. How do you see the counts breaking down, or where are the coalitions around the center going to come from? And what kind of advocacy do you anticipate from the President?
Andy Keiser: Well, I think you will need to cobble together a coalition like you're describing, but I think it'll look a little different, right? So first start with the notion that President Trump -- this is his deal, right? So you have all of the House Republicans -- there is a large freshman class coming in despite the 40-seat pickup by the Democrats. You still have a large number of freshman Republicans who are certainly going to, as you are correctly pointing out, be largely in his mold and not necessarily an American-Enterprise-Institute, Paul-Ryan Republican, Mitt-Romney type, but a little more populist, a little more nativist. So they're going to be inclined to support this President's agreement and will, I think, go along with the line that this is better for the country. We have the sole -- create jobs in the U.S. It helps crack down on unfairness and shipping jobs to Mexico on down the long.
So then the question is can we come up with some agreement with, sort of, free-trade Democrats along with the more pragmatic leadership types, which, actually, I might even put Pelosi in that category as someone who is not interested in the U.S. economy imploding. And particularly, I think she will look more and more pragmatic as we see her caucus shift to the left as well.
So is there a deal to be made there? I think there is. I do question whether it goes too far for either the Canadians or the Mexicans, and that could be an even greater complicating factor.
Amb. Antonio Garza: I was at a breakfast this morning with the fellow who negotiated for Mexico in the transition, Jesus Seade. And his comment, which I thought was actually pretty insightful, he says, "You know, at some point, the United States does want to get one of these things ratified and done, and perhaps against the backdrop of more concerns about the global economy and what's going to on with China. It'll be nice simply to get one of these things done." But the second observation he made was, "But you don't want to open it up for the very reasons that it still has to pass through the Mexican Senate and Canada, that if there was something done in the nature of side agreements," which is I guess what was done in '94 with the labor and environment, "that perhaps that would manage. But really to open this one up as negotiated to even a change in comma could create a very unwieldy situation vis-à-vis the three legislative bodies." Is there that kind of backdrop or thinking that you're seeing in our Congress?
Andy Keiser: I think they're going to go to the straight vote counting, bare-knuckles politics of "how do we get to 18 on the floor" is how I think they will have to look at it. Congress is not always great about looking much further than what's directly in front of their nose, as someone who spent a decade and a half up there. But I think that's right, and I do think that is the risk that some of these changes come up the works. But that's a great point. Actually, I sat through a lunch, also, with the Mexican and the Canadian ambassadors last fall, and they made that clear as well that the Americans were very interested in this serving as a template for what we'd like to do with Korea, with Japan, with other countries and bodies around the world.
Prof. Jeremy A. Rabkin: I want to get into the legal issues and bring Tim into this, but let me just say for myself as the moderator who's not supposed to have opinions, wow! Nine sounds awfully optimistic to me because it seems to me there's just a lot of people in the incoming majority who want to say no to anything that Trump puts on the table. And if they could be brought around on a trade agreement, then, gosh, maybe we could have a functioning legislative executive relation, and they could come to some agreement on immigration and many other --
Amb. Antonio Garza: Oh, Professor, don't get carried away.
Prof. Jeremy A. Rabkin: Well, right. I think that can't happen. That's why I'm a little surprised that you think --
Andy Keiser: I think some of those things are a little different in that I think you'll feel the weight of corporate America on getting this done. I mean, I saw that last summer and fall in these negotiations. So I think every business in the country, essentially, has a stake in this getting done, which is not necessarily the case with immigration or other issues.
Prof. Jeremy A. Rabkin: Okay, good. So let me ask Tim now, could you describe for us what the legal framework of this is? Am I right that this was negotiated under Trade Promotion Authority, and Congress has already pledged to vote up or down on this? And if that's right, can they really be held to that pledge?
Prof. Timothy Meyer: That's a great question. So you're right that this was done under Trade Promotion Authority. Yeah, the date's from 2015. But we have seen this movie before in the November of 2006 election that brought Nancy Pelosi to the speakership in the House. And there were a series of Bush-era trade agreements that were negotiated under the 2002 Trade Act and the Trade Promotion Authority granted thereunder. And the Democrats just, more or less, declined to move those agreements forward until President Obama came in and negotiated some modifications to them.
So I don’t think at this point Trade Promotion Authority is really -- and in the timelines that are -- the sort of fast-track timelines that are laid out in the 1974 Act as incorporated and modified by the 2015 Trade Promotion Authority are really all that meaningful. They are just rules of parliamentary procedure, that it's clear in the statute that these are not rules that require an act of Congress to change, that the House could changes its rules on its own. And I don't think there's any reason to think that Speaker Pelosi wouldn't do that if she saw an advantage in doing that, just as she did when those Bush-era trade agreements, which include the Korea-U.S. Trade Agreement.
Prof. Jeremy A. Rabkin: So I just want to pin this down. It isn't just a matter of the deadlines for taking action, for voting. They promised that they would treat this as a package and not in it what had been agreed. They can't even be held to that, right? If Nancy Pelosi thinks that she needs to tweak the actual text and make some amendments, there's nothing stopping her from doing that.
Prof. Timothy Meyer: That's right. The word you used, "pledged", is exactly right. That Congress pledged to not amend the bill that the administration submitted, but they cannot be held to that pledge. You can't go to court and say, "She's violating the . . ." --
Prof. Jeremy A. Rabkin: Right. If they do it, they do it. They're the Congress. Okay? But it does then -- or does it have to be signed by the President? Maybe he's already submitted it, and they are just endorsing it?
Prof. Timothy Meyer: So the change in their procedures -- that is if the House of Representatives were to decline to apply the fast-track rules, there's no other authority that that can be appealed to. The President wouldn't have any say on that. The implementing legislation that the administration will submit is just ordinary legislation. So that does have to go back to the President. So if the House amends it, then it would go through the ordinary legislative process.
Prof. Jeremy A. Rabkin: So to start with, the President has the threat to say, "No, this is unacceptable," right? And that may be a little dangerous for him because then the whole thing might just collapse. Or as Andy was saying maybe the President can make this threat, "I'm leaving NAFTA on this date." Is that a credible threat? Does he have the legal authority to do that?
Prof. Timothy Meyer: This is unclear and is an interesting question. So, first of all, I think it's worth noting that, I think Andy described this as the nuclear option, but this is a slow-motion nuclear option because the first thing the President would do is he would send a notice to Canada and Mexico that he intends to withdraw, but he then would have to wait six months. So even under the terms of NAFTA itself all this would do, the sending that notice, is set in motion a six-month period to negotiate before the withdrawal actually became effective.
But to answer your question, there's a constitutional question about whether the President can do that. I think most—and this is my view—I think most foreign relations lawyers think the President probably does have that authority. The President has substantial authority, constitutional authority, over foreign relations. There is a long practice of the President exercising -- making unilateral determinations about when to withdraw from international agreements.
Prof. Jeremy A. Rabkin: Just to clarify what's at stake here. I take it that you're last remarks were about the treaty power in general, whether the President can withdraw from a treaty with Taiwan, as was done. But maybe NAFTA is different because it's actual legislation. It isn't just a pledge to other countries. Do you think exactly the same analysis applies to NAFTA as applies to a treaty of alliance that was ratified by the Senate?
Prof. Timothy Meyer: Yeah, I think they're different in the following respect, which is that NAFTA itself is an international agreement that imposes international obligations on the United States. There is then a statute – the NAFTA Implementation Act – that describes the domestic force of NAFTA. And so a number of people have made the argument that you just made, which is that because there is implementing legislation this is different from a treaty that goes to the Senate for advising consent.
And there's also an important background, constitutional difference here which is that we're talking about tariffs and we're talking about the regulation of foreign commerce. And those are exclusive constitutional authorities of Congress under Article I Section 8 of the Constitution. So I don't think that there's much question that Congress could restrict the President's ability to withdraw from NAFTA. I think, though, that they haven't done that. And I think in the absence of -- this would be my prediction, that in the absence of an expressed congressional statement to the effect that the President cannot withdraw from NAFTA, that a court would be reluctant to step in and hold that the President lacks the power to withdraw from the international agreement. But that's not going to effect the domestic legislation. The President --
Prof. Jeremy A. Rabkin: Right. The legislation will still be there, right?
Prof. Timothy Meyer: Exactly. The legislation will still be there. There is a provision in the legislation at Section 109 that could be read to suggest that the legislation would sunset when the agreement is no longer in force. That would probably be unconstitutional. The President cannot repeal a statute through an executive action. The Supreme Court held that in a case called Clinton v. New York that involved a line-item veto. But I think the same thing would apply here. The President cannot, by withdrawing from an international agreement, repeal a statute.
So the legislation would remain in effect, but the legislation does not just incorporate NAFTA wholesale. The President would still have some discretion.
Prof. Jeremy A. Rabkin: No. But we would still have substantially the same kind of border treatment that we have now, right?
Prof. Timothy Meyer: I think this depends on how far the administration wanted to go. So the NAFTA Implementation Act grants the President the authority to set tariffs, for instance, in accordance with the NAFTA itself. And so the President would have no authority to raise those tariffs under NAFTA. But there's an old provision of the 1974 Trade Act that actually does grant the President the authority to raise tariffs when an agreement is no longer in force. So if the administration really wanted to push—and this is what USTR has sort of hinted at—it could rely on this Section 125 of the 1974 Trade Act to try to raise tariffs.
Now I think it's possibly that that statute itself is unconstitutional, that it's simply too broad a delegation of authority over foreign commerce and tariffs. But you're absolutely right that the NAFTA Implementation Act itself doesn't provide any authority to change or raise the barriers across the board in response to a withdrawal.
Amb. Antonio Garza: Tim? This is Tony again. Actually, I think I'm enjoying this podcast or this session more than anyone else because -- I have a question because it sounds like it's -- you said it's a very kind of slow-rolling nuclear option, but then it sounds like you went one step further and essentially said, "And it's got a wet fuse," because if you still have that underlay of NAFTA and you have to jump into the tariffs, what is the President's strongest tariff authority? Is it similar to what he's done with steel and aluminum? And you could kind of gum up the trade framework through the selective use of tariffs under the national security umbrella? Because I think when the President makes this threat, this is pretty well understood that it's kind of a moot threat or a very slow-rolling threat, so what's the other stick that he holds in the negotiation? The other tariffs?
Prof. Timothy Meyer: Well, I think that's right, and I think the tariffs under Section 232 that have been imposed on steel and aluminum that the administration talked about for autos and auto parts are faster. Now, those are subject to a constitutional challenge that's pending in the Court of International Trade at the moment in which I'm involved. And it's the same claim. It's a claim that Section 232 delegates unconstitutionally broad authority to the President over, essentially, commerce. But I do think that the President has sought to use those more selective tariffs to apply pressure. And I guess as a question I have for you, Tony, and for Andy, which is one of the interesting things about NAFTA 2.0, or NAFTA .5, is that I guess we haven't yet seen a resolution on the steel and aluminum tariffs for Canada and Mexico. And I was a little surprised that that wasn't included as part of the initial package, and I wonder whether we'll see something this week on that.
Amb. Antonio Garza: I don't think there's any sense down here, and I was actually at this breakfast this morning, one of the larger steel impresarios was there, and there's no sense it'll happen this quickly. And there's also, I think, some concern that because it hasn't been wound up pretty quickly or as part of a true TMEC is what they're calling it down there, USMCA Side Agreement that it may be hanging out there for a while. So, no, I don't think there's any real sense it'll get done this weekend.
Prof. Jeremy A. Rabkin: I want to just raise one other kind of international law question, which maybe Tim can handle very quickly and then we'll turn to what other things Tony might want to say about the political context. If the Congress enacts what it considers to be an acceptable version of this but it's different from what Canada and Mexico agreed to, I assume this is not at all binding on Canada and Mexico because it's not what they agreed to. And so how do you envision the procedure for this that they would then, supposing they don’t exactly accept what Congress did, would we have to renegotiate and then go back to Congress? What would be the process to sort through this?
Prof. Timothy Meyer: One of the things that Nancy Pelosi has said that she is really interested in is boosting the enforcement on the labor and environment fronts. And I think the Democratic caucus more generally. If there's going to be an agreement to bring some of them on board, it's going to at least involve that.
Now, anything that gets passed as implementing legislation by the Congress is not, as you said, is not binding on Canada and Mexico. And the Congress cannot itself directly amend the agreement. So to the extent that the U.S. needed to secure changes from Mexico and Canada in order to comply with its own legislation, that is whatever the House and Senate pass, then, yes, they would have to reopen it. And it's hard for me to imagine what a tougher enforcement regime looks like that Canada and Mexico wouldn't have to consent to. I mean, almost anything that involves enforcing labor and environment rules against Canada and Mexico, Canada and Mexico are going to have consent to that.
Prof. Jeremy A. Rabkin: Okay. This is maybe a good bridge to ask Tony about this. Up until now, would you say this has been a fairly amicable negotiation, or has it ruffled a lot of feathers in Mexico City?
Amb. Antonio Garza: You know, I will tell you I think when we got post-July 1st, which was the presidential election down here and the President-elect is very clearly a man of the left but integrated his team into the negotiation and was accepted by the, as of Saturday, what will now be the outgoing administration. I think it's been relatively straightforward because post-July 1st there was a sense of wanting to get this done prior to December 1st. So there was an urgency in Mexico to address some of those issues that were -- you know, the rules of origin as related to automobiles, the sunset clause, I think there was some investor state stuff that was important to Mexico. There were different sets of issues that were important to Canada. But I would say since the election of July 1st and leading up to the taking of office of President-elect Lopez Obrador, which will be on Saturday, I think it's been relatively straightforward.
Now, the thirteen months and nine rounds before that were very contentious and frustrating and there was a lot of backdrop and threats. And, certainly, President Trump's campaign rhetoric going back a bit further created some ill-will between the leadership of the two countries. I think for the longest time Mexicans distinguished between President Trump rhetoric and, quote/unquote, the "American people." And so you had that sort of dissonance
But one of the things, Professor, that I think the Mexican negotiating team has done well throughout, even with the ups and downs and the responses in the popular press down here to our Presidential tweets, is they've stayed very focused and very disciplined on getting to an agreement. And I think in that sense -- yeah there was some ruffled feathers, generally, as relates to the agreement -- there's a bit more focus.
I would say the backdrop now—and I won't spend a lot of time—is just what kind of president will the President-elect Lopez Obrador be? And in the last four or five weeks, he has taken a rhetorical shift, certainly, to a more populous-style president. He has set aside an 18 billion public works project, the new airport that was about a third down the way. Markets reacted very adversely to that. He has had what he calls "consultations", which is essentially sort of not legally sanctioned referendum on everything from what public works projects should proceed to, in fact, what they would call the new agreement. And they settled on TMEC.
So there's a real concern, I think, in the marketplace about how far left will he go? What kind of president will he be? What does that mean for things like energy and other contracts? So I think that's the bigger question out there right now.
Prof. Jeremy A. Rabkin: You used the word left, but I often have seen him described as a populist, which, come to think of it, is a word that is often used about Trump. And maybe they have somewhat parallel ideas about these things. Like the Trump team wanted Mexico to agree to some minimum wage requirements for the auto industry, and maybe the new president of Mexico thinks, "Yeah, that's a good thing."?
Amb. Antonio Garza: Yeah, well, curiously the President, or Trump, has become increasingly comfortable with the self-characterization as nationalist.
Prof. Jeremy A. Rabkin: Yes.
Amb. Antonio Garza: And in Mexico there has always been a certain nationalism, quite distinct from the way we're using the word in the United States. But in that sense, there is this sort of, in the President-elect in Mexico, this focus on the people, sovereignty, traditional notions of Mexican nationalism. And he's run on that. And so, yeah, I guess there is a bit of overlap in terms of mindset. Stylistically, it's a bit different. And, you know, let's not fool ourselves. There's a very different role and place in the world for the United States than Mexico. So while there's a little bit of overlap, Mexico, I think, now, or certainly the investor in the business class, is trying to digest what this sort of populism will mean and at the same time be supportive of a new president without divorcing themselves, or having him run off too far from a model of trade that has worked reasonably well for this country and integration with the United States. So when you have these big issues like the caravan and closing the border in Tijuana, that may not seem like trade issues, but they can flare up in a way that ignites some of that populism in this country to the detriment of a bilateral and a commercial relationship.
Prof. Jeremy A. Rabkin: So I just want to pin this down. It's the same in Mexico, isn’t it, as in the United States that this has to be approved by the Congress; it's not enough for the President to sign?
Amb. Antonio Garza: No. It'll go through the Senate down here. And one of the senses, and tactfully it will be a wise thing to do, is get it done here in Mexico as quickly as possible with no changes at all, so that there's a -- at least out there, there is an approval of an agreement. And that, perhaps, when the U.S. Congress takes it up, they would be less likely to want to open that agreement itself and whatever, let's say, the new speaker may need in terms of additional tweaks on labor and environmental, much the way they were done during the Clinton administration, that they would be done through side agreements. So, no, it'll only go through the Senate down here.
Prof. Jeremy A. Rabkin: And does it have a two-thirds majority or a simple majority?
Amb. Antonio Garza: Well, the new President, his win was so overwhelming that he enjoys significant majorities in the House, the Senate, and in 19 of the 31 state legislatures. So there are no real guardrails on him. If this is something that he would like to see done, it'll get done.
Prof. Jeremy A. Rabkin: Well, if the Congress does say, "No, we insist on making some changes," is it possible that there would be a kind of populist resentment of this in Mexico, and it would be hard even for the new President to direct everyone to make the necessary changes?
Amb. Antonio Garza: Professor, I think that's possible but unlikely. And I think they started to inoculate themselves a bit from that by having integrated themselves, or being invited into the negotiation over the last stretch. The President-elect team was very much a part of that final stages of negotiation. So they can credibly represent that this is their agreement as well. And I think that should be enough to assure a safe majority in their Senate.
Prof. Jeremy A. Rabkin: I really envy Mexico for having such a calm, reasonable bipartisan spirit.
Amb. Antonio Garza: No, I'm not saying they've got that either. But I think on this there is a general kind of consensus around the need to get it done.
Prof. Jeremy A. Rabkin: On the same 1-10 scale, where 1 is never and 10 is for sure, you want to give us a number of the likelihood that Mexico will be able to sign off on whatever it is we need done?
Amb. Antonio Garza: I don't want to try to one-up Andy, but I'd go with 9.5.
Prof. Jeremy A. Rabkin: I want to just ask, Tim, what do you think are the odds that the International Court of Justice, or some other international authority, will muck this up, as between 1 and 10?
Prof. Timothy Meyer: Will muck this up? I don't think --
Prof. Jeremy A. Rabkin: I just wanted you to have a chance to say "1".
Prof. Timothy Meyer: Oh, thank you. Yes, 1. 1 would be -- I don't think this is going to end up in front of the ICJ.
Prof. Jeremy A. Rabkin: Well, this all sounds really optimistic. There's only one more thing. Suppose that the border situation gets worse. I mean, it's terrible to think about, but it's a very tense, difficult situation, and it's quite possible that people will be killed on both sides. That there'll be a few casualties among our border patrol and that there'll be some people killed who are now trying to rush the border. If that happens, would this have a big impact on the treatment of the trade agreement in Mexico?
Amb. Antonio Garza: I don't think so. And, first, obviously that would be tragic, and I do think on both sides, both the Mexican outgoing and incoming, are working pretty closely with the United States. And they're probably having a lot more conversations that we appreciate. I also understand that as part of the vice presidential delegation to the inaugural here in Mexico City on Saturday that Homeland Secretary Nielsen will be a part of it. So clearly there's a focus on that. I think Mexico, certainly for the new administration, they've done a lot more, Professor, in terms of willingness to work with the U.S. on the enforcement of their southern border with Central America, on the apprehension of migrants going through Mexico in violation of Mexican immigration laws up to these last conversations. And while there's no final agreement about essentially housing or detaining Central Americans in Mexico while their asylum applications are being processed in the U.S -- now, I realize that's still all very tentative, but that suggests a lot more flexibility than certainly I even saw with a very U.S.-friendly government in the early 2000s.
So it has the potential to be a flash point, but I think they have managed to keep them somewhat compartmentalized in terms of -- or to date, there's a commitment to NAFTA to get it done, get it through the Senate quickly, and work very closely to try to address the migrant caravan issue.
Prof. Jeremy A. Rabkin: I really hope that Canada will prove as calm and reasonable and focused as Mexico has.
Amb. Antonio Garza: Well, they have been. I think they have been. They've been tough negotiators, and that whole at the end of the process where the administration announced the U.S.-Mexico agreement, I got to imagine they were not happy in Ottawa. But somehow we got to the end of this. A lot of background noise, but somehow we got to the end of it.
Prof. Jeremy A. Rabkin: All right. Well, let's see, we have a bunch of people who want to pose questions by telephone. Wes, what have you got for us?
Wesley Hodges: Absolutely, Professor. Let's go ahead and move to our first caller.
Juscelino Colares: Hi, this is Juscelino Colares from Cleveland. I'd like to speak with my friend, Jeremy Rabkin. Thank you for a phenomenal job, the other panelists. My question: President Trump campaigned on eliminating the Chapter 19 dispute, the settlement system, the binational review panel system. He managed with, of course, Ambassador Leif Keiser, the USTR, to eliminate it from our bilateral with Mexico, and then the final negotiations with Canada under deadlines. And expecting a midterm, he acquiesced to Prime Minister Trudeau's redline, and basically left it in the agreement. Could the Democrats, who've always historically opposed to binational review dispute settlement system because it tends to reverse U.S. trade agency decisions, double the rate that U.S. courts do, could the Democrats attempt to exploit an opportunity now in basically asking for the Chapter 19 to be out of the agreement, actually developing an interesting alliance with the President because then as so-called protectionists, they would actually end up doing the President a big on, and it would secure the votes to approve without the President having to threaten to withdraw on anything because they would be approving the agreement but for that change. How likely is that?
Prof. Jeremy A. Rabkin: Well, I'm waiting for Andy Keiser to say, "Yes."
Andy Keiser: Sure. Happy to take the first cut at that. So I haven't heard too much about that. It's certainly a good question and one that's interesting to ponder. The more concerns I hear about the Democrats with this particular agreement as revised on this; we've discussed the labor and environmental side. Keep in mind there's, of course, two bodies in the Congress and the House can pass anything they want, of course, assuming they can get to 218 votes. But the Senate could make changes. They would have to go to a conference committee, hammer those out. So that process for them feels like it would be difficult. It's an interesting question you raise whether they could partner with the administration on that. I haven't heard much on that, but it's certainly one to keep an eye on.
Prof. Timothy Meyer: This is Tim. Yeah, if I could just -- my impression is something similar to what Andy said earlier is that there's a lot of pressure from business on members of the Democratic caucus. It may not necessarily be as visible, but part of the reason that, I think, the Democrats focus on labor and the environment is probably out of sincere belief in those issues, but also because raising labor and environmental standards don’t necessarily call into question some of the business interests on the U.S. side. And, of course, there's a lot of businesses in the United States that don't like the trade remedies system because it makes acquiring products more expensive for them. So I would be a little bit surprised to see the Democrats reopen that particular issue.
Prof. Jeremy A. Rabkin: I've read this, too. The Canadians were very insistent on this. So if that was really a redline in the negotiation, I'm not sure that it turns to a kind of Obama redline, just because Nancy Pelosi has said that she doesn’t think it's a good thing, right? I mean, the Canadians might insist on this. Anyway, that's an interesting question. So there's that. Do we have another question?
Wesley Hodges: I believe that caller has backed out of the queue.
Prof. Jeremy A. Rabkin: Yeah, it's really intimidating when you see how the first caller is treated.
Amb. Antonio Garza: May I ask, Professor, a question of my fellow panelists because I know the last question was about 19, but when you think about some of the dispute settlement provisions – 11, 19, and 20 – certainly, as I sit in Mexico today and I look out and I realize there's a great deal of apprehension about the incoming administration, and Mexico historically having, to generously put it, an uneven judicial system, I can't help but think that for investors here and U.S. interests here, which are very much a part of this country—you look out and you can't look too far without seeing a big U.S. multinational interest—that those sort of provisions you would've thought that our negotiators in the U.S. would want to protect them because they do provide protections to our interests here abroad.
Prof. Jeremy A. Rabkin: I thought that was very curious that the Trump administration decided that it didn't want protections for U.S. investors in Canada and Mexico. And I think that was always -- when that was negotiated, people were thinking particularly of Mexico. My only speculation is that they think, "Oh, well that encourages investment in Mexico, and we don't want that." But really? It's there already. It's not going to go away, and so why would you want it to be confiscated or looted?
Prof. Timothy Meyer: You know, I've always thought of that as the answer, which is that the evidence that multinational corporations in general, the extractive sector may be a little bit different. But multinational corporations in general make investment decisions based on -- the existence of ISDS alone is -- yeah, I think the evidence for that is not great. And so if it's not affecting investment decisions anyway, and this is something that Ambassador Leithauser can take to the Democrats in Congress and can take to the labor unions and say, "Look, I've gotten rid of this thing that you all have been crying for us to get rid of for years." That is a potential bridge, I think, to the political United States. It's a relatively moderate cost in terms of --
Prof. Jeremy A. Rabkin: Although, if you want to say evidence, there's no evidence that this has undermined American labor or environmental standards, right? That seems to be a completely fantastical fear that they have.
Prof. Timothy Meyer: No, no. I don't meant to suggest that the left's position on this is evidence based. I just mean to suggest that it is their position, and this does appear to be a relatively cheap way, I think, for Ambassador Leithauser to reach out to them.
Amb. Antonio Garza: Although, I think you make a good point about the extractives because it was very important to the energy sector to hang onto those with that whole space opening up to private investment. I think they felt that was pretty key to them.
Prof. Jeremy A. Rabkin: If we don’t have another caller, I want to take up a related issue, which is how this effects U.S. strategy in negotiating with other countries outside of North America. Do we have to have this as a done deal before we can start to talk with the EU or Japan? Somebody mentioned this earlier that, yes, this would be important. I don't quite understand the logic of that. Is it just politically that other potential partners don’t have confidence in us if we can't get this done?
Prof. Timothy Meyer: This is Tim. I would just say, if I'm not mistake, USTR just notified of its intention to initiate negotiations with the U.K. The U.K is an interesting case because the U.K. needs negotiations whether or not we're a credible negotiating partner. So I think for them NAFTA is -- they have their own issues about whether or not it's permitted under --
Prof. Jeremy A. Rabkin: They have huge issues, don't they?
Prof. Timothy Meyer: Yeah, they have their own huge issues. But their issues are not about whether we're a credible negotiating partner. But I would think for the others, and I guess I would look to Tony and Andy on this, I would think for the others you wouldn't want to start making significant concessions to the United States if you don't know that the Congress is going to be willing to implement what President Trump does.
Andy Keiser: Yeah, I think that's right. This is Andy. I think the Japanese in particular and the Koreans would see a new negotiation as not in their interests versus what they have currently. So I would think they're going to try to slow walk that process, and if were unable to negotiate favorable trade agreements with our direct neighbors and most important trading partners, I think that makes it all the more difficult.
Amb. Antonio Garza: Andy, do you sense, or does anybody out there sense, that it could or does the administration see it as the first piece in a larger strategy vis-à-vis China? I mean, you would think this should be relatively straightforward. It's been a tough get, but it looks like we may get there. The steel and aluminum tariffs, there's some sense that those are sort of in the offing, but are doable. The EU may be a series of bilaterals, and then we'd be much better positioned to go into what may be kind of an extended back and forth with China. Or is this administration entirely ad hoc? Or is this part of -- do you hear anything about their strategic movement? Is this the first piece?
Andy Keiser: So I'm happy to take the first cut at -- it's Andy. I think sometimes saying strategic and the White House is sort like an oxymoron, at times seemingly. But I think one thing has been very consistent with the President. If you go back and look at when he was thinking about running for president in 1992, and he shows up in New Hampshire and gives a speech, it's ripped out of the pages of a rally he just gave in West Virginia. He's saying the same thing. He's saying there's slightly different culprits. It's more about the Japanese at the time, replace them with China and you have a very similar argument. So I do think he brings this inherent notion that the U.S. is being ripped off and that we need to push for fairness. So I do think that's a strategic goal of the administration.
Another one that he, I think, has, but I think the administration has more broadly, is a conscientious, almost -- it's hard to say whole of government with the U.S. because we're so bifurcated, but pretty close to -- the closest I've seen anyway to a whole-of-government approach in dealing with the China threat, perhaps, since the Soviet Union days, from top to bottom. And trade would certainly be an important component of that in my view.
Prof. Jeremy A. Rabkin: Since we're talking about trade strategy in larger terms, what does this signal to potential trade partners? There was, as you say Trump has had this rhetorical emphasis on standing up for America, stopping other countries from taking advantage of us. But, actually, this really seems like it's made some relatively minor changes to NAFTA. So maybe that signals to other countries, "Oh, that was just bombast. Don't worry about it." Or is that wrong? Do people think, "If he could do that with NAFTA . . ."—which is well-known and important in America and really carries a lot of trade—"we better accommodate him" in whatever other country it is; I suppose Japan is a big trading partner. But does the President come away from this with a bigger stick or a smaller one?
Prof. Timothy Meyer: This is Tim. I don't see -- the President's rhetorical strategy is to try to be seen as -- rather than negotiating an agreement that benefits all parties, he talks about it in zero-sum terms. And so he needs the United States rhetorically to win. And so for me, at least, it's hard to see -- again, the U.K. is a little bit different, but it's hard for me to see why other parties who have their own political calculations to make at home, why they would be interested in entering into negotiations, unless there really is a big club in the background. The 301 with China, the tariffs, is maybe also different for that reason because it's a significant -- it's so large. But for Japan, I don't see what it would be.
Prof. Jeremy A. Rabkin: I ask this with an eye on China because a number of people have said it was a mistake to pull out of the Transpacific Partnership Agreement, there, because that was a way of isolating China. And other people have said, "Oh, well the Trump administration will go one by one with all of the countries that were involved in the Pacific Trade Deal." So we will end up having pressure on China by having agreements with all these other Pacific players. But maybe that is harder to do now.
Prof. Timothy Meyer: That seems right, although if you think about who was in TPP, assuming we don't withdraw, we already have an agreement with Mexico and Canada. And assuming Andy and Tony are right in their optimistic projections. And we have an agreement with Australia. Korea is not in the TPP yet, but we have an agreement with them. So other than Japan -- I mean, Japan is really the major economy in Asia that we don't have locked up, and I think you're right. It clearly hurts us, I would think, with them.
Prof. Jeremy A. Rabkin: And just spell it out. Do you think it hurts us because it shows a kind of bullying that's not -- doesn't seem to have a serious focus?
Prof. Timothy Meyer: Right. I mean, I think if you were a democratically elected government in another country, or maybe even if you're not democratically elected, but certainly if you are, to engage in -- to sort of willingly submit yourself to the bullying that the negotiation with the President seems to involve, it's just not something that I think politically seems well advised. In the case of Japan, I suppose, auto tariffs would be potentially meaningful, but he'd have to find some lever to pull to make it worth their while to engage in those negotiations. If I were sitting in Tokyo, I think what Andy said makes sense to me, which is it sort of costs less to start talks and try to tease them out, but there's not going to be any—I wouldn't think—significant movement because you just don’t view yourself as having a credible negotiating partner. And you expose yourself at home to some political risk.
Prof. Jeremy A. Rabkin: Well, it'll be interesting to see, even if we do end up approving this new agreement, how exhausting and costly it is – politically costly – to get through, and whether that leaves either the administration or the Congress with an appetite to do it again. That's something we're going to find out. And do you all agree this is going to be, one way or another, something that we'll know by the end of 2019? That is whether this thing is going to be approved?
Amb. Antonio Garza: I think so. I don't know exactly what the timeline is, but the one I hear most often is March/April. But I'd really defer to Tim and Andy on that.
Andy Keiser: I think that there's a sequence of events, right? There's the final presentation to the Congress of the final agreement, which triggers certain clocks. I think folks suspect a final, final signoff in summer to early fall of next year,
Prof. Jeremy A. Rabkin: Fall. So, yes. This gives us a while to wring our hands over it. But we can all wish them well, both in Congress, and in Washington, and in Ottawa, and in Mexico City.
Amb. Antonio Garza: That's why there's tequila.
Prof. Jeremy A. Rabkin: Okay, thank you.
Wesley Hodges: Well, it looks like we're at the top of our hour. Professor, are there any closing remarks you'd like to make, or anything you want to offer to our --
Prof. Jeremy A. Rabkin: I can't top the Ambassador's remark about tequila.
Wesley Hodges: Excellent. Then we all very much appreciate you being here for the call. On behalf of The Federalist Society, I'd like to thank our experts for the benefit of their valuable time and expertise today. We welcome all listener feedback by email at email@example.com. Thank you all for joining. The call is now adjourned.
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