Disclaimer: The views and opinions expressed in this article are those of the author's and do not necessarily reflect the position of JLIA, Penn State Law, School of International Affairs, or Pennsylvania State University.
On June 23, 2016, the United Kingdom (“UK”) voted to leave the European Union (“EU”), the body that has been the definition of prestige in the realm of international treaties.[i] This triggered hysteria, rightfully so, because while the rest of the world were not a part of this treaty, it was so intertwined with any country’s relation Europe that it left countries like America and Canada wondering what it meant for them. But while “Brexit” has caused such uncertainties for countries that are not party to the EU, what would happen if a country like America were to withdraw from one of their biggest treaties? Well, this speculation might have to become reality if President Trump ends up getting his way and leaving the North American Free Trade Agreement.
Before Donald Trump took office, he consistently spewed during Presidential Debates that “NAFTA is the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.”[ii] While Trump argues that NAFTA has only ever hindered the US, would it in fact be as devastating to America for them to leave NAFTA as it is for the UK to leave “EU”? International Trade expert, and Penn State Law faculty member, Takis Tridimas argues otherwise.[iii] Tridimas argues that, while he believes it is unlikely that the US will withdraw from NAFTA, in the event of NAFTA Article 2205[iv] being triggered by the US, he vehemently argues that it will not have such an impact of that of Brexit.[v] This leads Tridimas to mentioning that where Brexit solely uses the EU as the basis of negotiations, and how to readdress issues that are up in the air with the UK leaving certain mechnisms of the EU, the United States comes into NAFTA and withdrawal of NAFTA needing their position to encompass the United States Constitution.[vi]
This draws the attention to another issue with President Trump’s solo campaign to withdraw from NAFTA, does he know the Commerce Clause exists?[vii] Under the Constitutions Commerce Clause, Trump cannot terminate NAFTA, nor could he have even renegotiated it without a “yes” from Congress.[viii] While we can debate whether or not the President’s knowledge of the Constitution is substantial or not, or if America leaving NAFTA will be as detrimental of Brexit has been in the EU, the question remains: What would happen if America did leave NAFTA?
Well there’s a whole slew of things. Firstly, in my opinion, the dispute resolution mechanism of NAFTA would disappear first and fast.[ix] This system of dispute resolution has been rarely used, with the United States, Canada and Mexico all being members of the World Trade Organization (“WTO”), NAFTA’s Chapter 20 and WTO’s Dispute Settlement Understanding (“DSU”) are often venue shopped between these three countries, with preference being given to the WTO’s dispute resolution system.[x]
Secondly, Trump would not hesitate to reinstate various tariffs on Mexico, likely using the WTO’s maximum tariff percentage, as it would be the only binding material on free trade that America would need to adhere to foregoing NAFTA.
Thirdly, the most interesting events to succeed the termination of NAFTA would to examine if the United States, Canada and Mexico either multilaterally institute a new agreement or if the countries would forego one another and decide to bilaterally create agreements. With the uncertainty of Congress today, it would not be surprising if Canada and Mexico decided that they would institute a new trade agreement between the two of them. This would likely be followed with new bilateral agreements between Canada and the US and the US and Mexico. Wouldn’t this just unnecessarily complicate matters of free trade between the three countries? To have terminated one simple, all-encompassing, agreement because of a President’s pride (or the Republican Congress’s pride) be replaced with two separate binding agreements, that must also adhere to the global trade organizations guidelines; where’s the common sense in that?
Whether the United States decides to leave NAFTA or not is something that only time will be able to tell and we may never see the hypothetical consequences; yet, it could be worse … just look at the failing negotiations of Brexit.
About the Author: Pooja Toor is a 2L at Penn State Law.
[i] Alex Hunt & Brian Wheeler, Brexit: All you need to know about the UK leaving the EU BBC News (2017), http://www.bbc.com/news/uk-politics-32810887 (last visited Nov 9, 2017).
[ii] Cooper Allen, 2016 general election debate schedule USA Today (2016), https://www.usatoday.com/story/news/politics/onpolitics/2015/09/23/2016-general-election-debate-schedule/81238502/ (last visited Nov 15, 2017).
[iii] Pooja Toor & Takis Tridimas, Personal Interview of Takis Tridimas (2017).
[iv] North American Free Trade Agreement, Can.-Mex.-U.S., Art. 2205, Dec. 17, 1992, 32 I.L.M. 289 (1993).
[v] Pooja Toor & Takis Tridimas, Personal Interview of Takis Tridimas (2017).
[vii] U. S. Const. art. I, § 8, cl. 3
[ix] North American Free Trade Agreement, Can.-Mex.-U.S., Ch. 20, Dec. 17, 1992, 32 I.L.M. 289 (1993).
[x] R. Leal-Arcas, Comparative Analysis of NAFTA’s Chapter 20 and the WTO’s Dispute Settlement Understanding, 8 in Transnational Dispute Management, www.transnational-dispute-management.com (2011)