Threat to NAFTA galvanizes lawmakers

WASHINGTON -- The North American Free Trade Agreement is making a political comeback.

We tend to value things more when there is a risk of losing them, and NAFTA, like the debate over repealing the health care law, is a perfect example of that.

Over two decades, members of Congress on both sides of the aisle took to heart anti-globalist sentiments and complaints that the trade deal symbolized the decline of the American worker. They heard only from people who said NAFTA was terrible and caused companies to ship manufacturing jobs overseas.

But with President Donald Trump threatening to take it away, NAFTA is probably more popular on Capitol Hill than any time in the last 20 years.

That's the sense one gets listening to members of Congress, congressional insiders and industry folks in Washington.

Two things seem to be changing the political dynamic on trade: The business community finally got off the sidelines and launched a concerted lobbying campaign to educate lawmakers about the importance of having an integrated North American economy to compete with other regions of the world. And lawmakers realized their districts and states would lose service, logistics, agriculture and manufacturing jobs if trade with Canada and Mexico diminished because of new tariffs.

"The reality is this [NAFTA withdrawal option] has forced the complacent people in the U.S. business community and elsewhere to make the case for it," Eric Miller, the head of Rideau Potomac Strategy Group, told me.

Companies of all shapes and sizes are helping frame the message that NAFTA is important by providing concrete examples of how closely their U.S. operations depend on partnerships north and south of the border. Those partnerships are made possible, in large measure, by rules that reduce the cost of cross-border trade.

Lawmakers, in turn, are taking that message to the White House and the U.S. trade representative.

Sen. John Cornyn, R-Texas, and 35 Senate colleagues recently sent a letter to Trump highlighting NAFTA's benefits and how the pact can be improved.

Texas would be one of the hardest-hit states if the U.S. withdraws from NAFTA, with 970,000 jobs at risk and nearly half of its exports ($112 billion) destined to the NAFTA market, according to the U.S. Chamber of Commerce.

The administration is also being warned that a pullout from NAFTA could undercut economic gains from the corporate tax cuts and regulatory rollbacks, as well as the rise in the stock market over the past year, a source of pride for Trump.

Last week U.S. Trade Representative Robert Lighthizer met with leaders of the House Ways and Means and Senate Finance committees, where he was told that Congress supports preserving the investor-state dispute settlement provisions the Trump administration has proposed to weaken. Members also say it is important to create investment certainty, which would be weakened by the proposal to automatically terminate NAFTA every five years unless the parties decide to renew it.

The shift in attitude doesn't mean lawmakers don't want NAFTA to be updated to include enforceable provisions on protecting intellectual property rights, dairy exports, streamlining customs procedures, labor, e-commerce and energy trade.

The debate also seems to have created a deeper groundswell of support for free trade writ large. Members of Congress believe the U.S.-Korea free trade agreement, which Trump is seeking to modify, has been successful -- despite concerns Korea has not fully complied with provisions for better market access for American goods such as autos. Even progressives in the Democratic caucus, who were skeptical of then-President Barack Obama's efforts to join large regional trade agreements, are talking wistfully about the Trans-Pacific Partnership that is moving ahead without the U.S. They see a more robust NAFTA agreement as perhaps a pathway back to the Trans-Pacific Partnership.

The threat of withdrawal has galvanized lawmakers to maintain NAFTA. Forced to concentrate their attention, they've dug into the data to understand NAFTA's true value. Canada and Mexico are confused about how to approach negotiations because they know there is no support in Congress for the administration's most extreme proposals, such as on rules of origin for autos.

Meanwhile, Congress is preparing options to exert constitutional prerogatives in the event of a unilateral Trump withdrawal, although there is growing optimism on the Hill that the administration is coming around to the traditional way of putting America first: by engaging in trade agreements.