By Stuart Thomson

As negotiators prepare for this week’s talks about reopening the North American Free Trade Agreement, they’re facing a U.S. president caught between two campaigns.

Donald Trump sealed the presidency with populist rhetoric about trade, promising to rescue jobs that were being shipped out of the country and trashing trade deals such as NAFTA as the source of the economy’s ills.

Now, another campaign looms, as antsy Congressional Republicans look ahead to the 2018 mid-term elections and scramble for some accomplishment to show voters. If they want to run on a revamped trade deal, an agreement would have to be reached by early that year.

That doesn’t leave a lot of room for error and — whatever Trump’s past rhetoric — it doesn’t leave a lot of room for ambitious reform.

A potential shortcut could be for the three countries to pick already agreed-upon items out of the Trans-Pacific Partnership agreement that was signed in 2016. Trump pulled the United States out of the deal, but it could provide a template for some important changes to NAFTA, without going through the complicated and time-consuming work involved in negotiating a trade deal from scratch.

That strategy could create a whole host of new political problems for the president, though.

“It was candidate Trump who called the Trans-Pacific Partnership the worst trade deal ever negotiated,” Rick Helfenbein, president and CEO of the American Apparel & Footwear Association, said in a light-hearted summary of Trump’s dilemma at a panel discussion on trade in New York in June. “And he called NAFTA, the worst trade deal ever signed. And now, our geniuses in Washington are taking elements from the worst trade deal ever negotiated and putting it in the worst trade deal ever signed.

“And they’re about to claim a big victory on the improvement of NAFTA. That gives you an idea of what we’re dealing with in Washington,” Helfenbein said.

Trump has to decide if he can convince his political base that a rudimentary NAFTA modernization will fix the “worst trade deal ever signed.”

Christina Fattore, a political scientist at West Virginia University who specializes in trade disputes, thinks it will be a tough sell.

“His tendency seems to be to appeal to his base and considering his rhetoric during the campaign of bringing jobs back to America, making sure trade deals are fair for Americans, if he just pushes for an easy win it will turn voters off,” Fattore said.

Anything less than a major overhaul could be seen as a failure.

If Trump agrees that negotiations aren’t moving quickly enough, he could simply terminate the agreement, as he has threatened in the past.

At the panel discussion in New York, trade lobbyist Ron Sorini said it was likely Trump would make a good-faith attempt at negotiations until time ran out before the midterm elections. At that point, all bets are off.

“It’s either going to be renegotiated or it’s going to be terminated,” said Sorini, who targeted the first quarter of 2018 as the deadline before the administration looks to terminate.

There are also forces within the Trump administration that genuinely want the trade deal ripped up or drastically overhauled.

“You have folks like (Trump advisor Steve) Bannon… who would just as soon wall off the United States, not have any trade agreements and institute the border adjustment tax,” Sorini, who was involved in the original NAFTA negotiations in 1993, said.

In March, the Financial Times reported a “battle within the White House,” pitting free trade enthusiasts like former banker Gary Cohn against the economic nationalists like Bannon. In one fiery meeting inside the Oval Office, Trump appeared to side with the anti-free trade faction.

In April, Bannon helped draft an executive order to withdraw from NAFTA, which sent shivers down the collective spines of Republicans in congress, according to Politico. That order was never signed, thanks at least in part to an intervention by Prime Minister Justin Trudeau and Mexican president Enrique Peña Nieto.

On top of the U.S mid-terms, there’s another clock ticking on the NAFTA renegotiations. Mexicans go to the polls on July 1 and the incumbent president Nieto is constitutionally prohibited to run for another term. That leaves opposition parties on the left and right vying for a chance to take power.

Andrés Manuel López Obrador, a populist firebrand on the left, has been giving speeches about the perils of free trade and has been critical of NAFTA. López Obrador’s party leads in recent polls, although things can certainly change before next summer.

But whoever wins, and whatever their position on NAFTA, it would be some time before negotiations could resume after the election and it would most likely push the deal past the November midterms and maybe into late 2019.

One more hurdle for Trump in his quest for a quick win is that he can’t simply dictate terms to Canada and Mexico. Completing a trade agreement is like launching missiles from a submarine: everyone has to turn their key.

“It’s very hard for one country to simply dictate terms to another country. If there are things that the United States hopes Canada and Mexico will do, we have to see it as being in our interest, otherwise we don’t do it,” Robert Wolfe, a professor at the School of Policy Studies at Queen’s University, said.

Even the threat to terminate the deal has practical limits.

“It’s true that the president can simply rip up the deal — it’s just a treaty, he can rip it up — but the deal is actually given effect by legislation. That legislation stays on the book whether he rips up the treaty,” Wolfe said.

Given all the industries spread out across the United States that benefit from NAFTA — the auto industry, for example, — it would be incredibly tough to push any drastic changes through Congress.

“The more you think about what Trump’s up against in doing anything that requires the approval of congress, and trade requires that approval, he’s just not going to be in the position to play the great big bully and say, ‘here’s what the terms are, now do it,'” said Wolfe.

“We have a very long history of doing trade deals with the United States and that has never happened, that we get pushed around to that extent.”

Financial Post

sxthomson@nationalpost.com

Twitter.com/stuartxthomson