White House Drafting Executive Order to Withdraw From NAFTA

This is via Politico, so make of it what you will:

The Trump administration is considering an executive order on withdrawing the U.S. from NAFTA, according to two White House officials.

A draft order has been submitted for the final stages of review and could be unveiled late this week or early next week, the officials said. The effort, which still could change in the coming days as more officials weigh in, would indicate the administration’s intent to withdraw from the sweeping pact by triggering the timeline set forth in the deal.

Peter Navarro, the head of Trump’s National Trade Council, drafted the executive order in close cooperation with White House chief strategist Steve Bannon. The executive order was submitted this week to the staff secretary for the final stages of review, according to one of the White House officials.

The draft executive order could be a hardball negotiating tactic designed to bring Mexico and Canada to the table to renegotiate NAFTA. But once Trump sets the withdrawal process in motion, the prospects for the U.S. pulling out of one of the largest trade deals on the globe become very real.

Generally, I think this is not a great idea. But, objectively, NAFTA is being used by our partners to screw American companies and aid their own. Recently attention has been focused on Canada.

Americans have long been complaining about Canadian dairy production. The country uses a supply management system to regulate dairy production and pricing, and it provides regular quotas that monitor supply and demand and helps prevent surpluses and deficits.

Last year, Canada implemented a policy that created a new class of milk prices for ultra-filtered milk, a liquid, high-protein concentrate sometimes used to make products such as cheese and yogurt. Canada lowered the prices for this milk class, so as to incentivize domestic ultra-filtered milk and better compete with the US-produced imports.

Canada claims that because US exporters have access to Canadian markets for “ultra-filtered milk” without quota or tariff that NAFTA isn’t offended. But the fact is that the Canadian government is subsidizing domestic producers to enable them to undercut US imports.

The same applies to the tariff on Canadian softwood lumber just announced by the Commerce Department. In this case, some Canadian provinces allow their lumber companies to harvest from province-owned lands and charge the companies well below market rates. This wood that is subsidized by Canadian provincial governments is effectively dumped on the US market and undercuts prices of US producers.

This is not a “stroke of the pen” arrangement. While Trump can withdraw from the treaty there is a lot of implementing legislation that Congress would have to repeal.

https://twitter.com/scottlincicome/status/857264980877606913

And this is probably just Trump staking out an initial negotiating position, rather than an actual move to leave the agreement. But free trade has to be fair trade. It is lunacy to expect a country to have a trading partner in what is billed as a “free trade” agreement intervening in the marketplace the disadvantage of companies in that country. I’m well aware of the economic arguments but in the real world winning an argument of economics means damn little if you are put out of work.