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President-Elect Trump and NAFTA

Donald Trump’s “Contract with the American Voter” lists a number of actions that he plans to take in his first one hundred days in office.  Among those actions is to “announce my intention to renegotiate the NAFTA or withdraw from the deal under Article 2205.”  Naturally, this has raised the question of whether, as President, he would have the authority to follow through on this undertaking.

The short answer is “yes.”  As to renegotiating NAFTA, the trade negotiating authority delegated by the Trade Promotion Act runs through his Presidency, and, as noted in his “Contract,” Chapter 22 of NAFTA gives any member the right to withdraw after giving six months’ notice.  Presumably, the President could serve such a notice of withdrawal to Canada and Mexico.  However, that could be an action without much effect, as under US law, withdrawing from NAFTA by itself would not impact the preferential tariff rates currently in place under NAFTA.

However, as President, Mr. Trump could turn to Section 201 of the US statute that implemented NAFTA (the NAFTA Implementation Act) which confers authority on the President to proclaim “additional duties as the President determines to be necessary or appropriate to maintain the general level of reciprocal concessions with respect to Canada or Mexico. . .”  While before taking such action the statute directs the President to consult with Congress, such consultations confer no authority on Congress to block the proposed duty increases.   The statute requires only that the President report to the House Ways and Means and Senate Finance Committees the advice he is required to solicit from International Trade Commission and the appropriate advisory committees. The “general level of reciprocal concessions” is not defined and has not been interpreted, and it is likely that the President would be accorded significant deference in its interpretation should his actions be challenged.

The level to which the President could increase NAFTA tariffs would be limited by WTO commitments to the Most Favored Nation (MFN) levels bound by the US in its WTO schedules.  If the President withdrew the US from the WTO, there would appear to be no theoretical upper limit to which tariffs could be raised.

In addition to the authority to raise tariffs by proclamation in the NAFTA implementing legislation, Section 232(b) of the Trade Expansion Act of 1962, Sections 122 and 301 of the Trade Act of 1974, and the International Emergency Economic Powers Act (IEEPA) also confer the authority to raise tariffs in certain defined circumstances.

Section 232(b) of the Trade Expansion Act of 1962 authorizes the President to raise tariffs or otherwise regulate imports as necessary to strengthen national security. While it has often been used to limit imports of specific items, it was also used as one of the authorities cited to justify the 10 percent surcharge imposed on imports by President Nixon in the early 1970s.

Section 122 of the Trade Act of 1974 was adopted to give the President the authority to deal with “large and serious” balance of payments deficits.  It authorizes surcharges of no more than 15% to be imposed for no more than 150 days.

Section 301 of the Trade Act of 1974 provides a remedy for any unfair trade practice being used by a US trading partner.  If the United States Trade Representative (USTR) determines that “the rights of the United States under any trade agreement are being denied; or . . . an act, policy, or practice of a foreign country . . . violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under any trade agreement, or . . .is unjustifiable and burdens or restricts United States commerce. . .,” the President may direct USTR to impose higher tariffs on the products of that country in order to address that practice.

Lastly, the IEEPA was promulgated to deal with any “unusual and extraordinary threat, which has its source in whole or in substantial part outside the United States, to the national security, foreign policy or economy of the United States” by giving the President broad authority to address such a threat.  As with Section 201 of the NAFTA Implementation Act, the IEEPA requires the President to consult with the Congress with respect to any actions taken under IEEPA, but it does not require Congressional approval.

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