By Peter Nicholas in Washington, Paul Vieira in Ottawa and José de Córdoba in Mexico City
President Donald Trump was prepared to end the North American
Free Trade Agreement deal, which had governed trade relations for
the past 23 years, with a dramatic announcement Saturday at a
Pennsylvania political rally marking his 100th day in office.
As rumors spread of the possible action, Mexican President
Enrique Peña Nieto called the president urging him not to pull out
of the accord. "Let me think about it," Mr. Trump said. Within a
half hour a call came in from Canadian Prime Minister Justin
Trudeau with a similar request.
After the talks, Mr. Trump was convinced "they're serious about
it and I will negotiate rather than terminate," the president said
in an interview with The Wall Street Journal on Thursday.
Those conversations, along with a flood of calls to the White
House from business executives, helped steer Mr. Trump away from an
idea that some of his own advisers feared was a rash and
unnecessary threat to two trading partners who fully expected to
renegotiate the agreement anyway.
But Mr. Trump wanted to show dramatic action on key campaign
promises before he hits his 100 days in office on Saturday, and the
threat would have showed his supporters that he was wiling to take
steps opposed by the establishment to upend American trade
policy.
Mr. Trump insists the talks will take place amicably among
allies he likes and respects -- though he also reminded them that
he was willing to entertain an extreme option in service of
rewriting American trade policy, and insisted that he could put the
option back on the table if the coming talks don't proceed the way
he would like.
At the same time, the gyrations risked weakening the U.S.
position -- by unifying Canada and Mexico in their strategies to
counter the U.S., irking key lawmakers he needs to back him, and
exposing his inability to overcome the strong domestic support for
Nafta that he has helped rally.
"I expect the administration to closely consult with Congress
before such major trade-policy decisions are made," said Utah
Republican Sen. Orrin Hatch, chairman of the Senate Finance
Committee, which oversees trade, archly reminding him of the need
to take the time to work with Capitol Hill. "Withdrawing from Nafta
would have significant effects on the America economy."
"It was a trial balloon, but it didn't work," said Mexican
economist Luis de la Calle, a trade expert who had been a senior
negotiator on the pact. "Next time, nobody will believe it. People
start to figure things out."
But Mr. Trump said in the interview that he still holds his
strongest card. "We'll terminate Nafta if we're unable to make a
deal, but hopefully we won't have to do that."
The Trump administration jolted markets and stoked panic among
business leaders as multiple aides sent signals that officials were
considering issuing an order that would begin the six-month process
of having the U.S. withdraw from the three-nation trade agreement.
It was floated as a possible stick Mr. Trump would wield to force a
quick renegotiation on terms he wants. He has blamed the agreement
for encouraging manufacturers to relocate to Mexico, and for
expanding U.S. trade deficits with its border neighbors.
But by 10:30 p.m. Wednesday, the White House issued a statement
saying Mr. Trump had decided "not to terminate Nafta at this
time."
Meanwhile, a lobbyist for one big business group said he urged
member companies to "have your CEOs call the highest-ranking
administration officials they can reach." Tom Donohue, the veteran
president of the U.S. Chamber of Commerce, made at least three
calls to the White House during the afternoon, a person familiar
with the matter said.
Mexican and Canadian officials, who for months have been
comparing notes on how to deal with the volatile new leader
situated between them, reached out to each other throughout
Wednesday to coordinate how to approach Washington, Mexican Foreign
Minister Luis Videgaray told a Mexican television news program
early Thursday. "Mexico's and Canada's positions are very similar,
if not the same," he said.
Mexican officials also spent the day working their Washington
contacts to try to verify the rumors and press reports.
"We spoke with a lot of members of the U.S. government and they
confirmed that the possibility existed but wasn't a firm decision,"
Mr. Videgaray said.
Meanwhile, Sonny Perdue -- the agriculture secretary who took
office two days earlier -- met with Mr. Trump and talked him
through the states where jobs would be lost if the pact collapsed.
It included farm and border states that voted heavily for Mr.
Trump, three people who had been briefed on the meeting said.
Late in the afternoon, "after a day that generated a lot of
doubts," the Mr. Videgaray said, Mr. Peña Nieto called Mr. Trump
directly. The Mexican leader made the case that, rather than acting
as a constructive prod for negotiations, an official threat by the
U.S. to pull out of Nafta "would frankly have a very negative
impact on Mexico and would practically cancel the possibility of a
constructive negotiation."
Mr. Trudeau separately reached out to Mr. Trump to make a
similar argument. In a press conference on Thursday, Mr. Trudeau
said that when Mr. Trump told him he was considering terminating
Nafta, he warned the president that would put at immediate risk
hundreds of firms and thousands of jobs that rely on an integrated
continental economy for their livelihood.
"A disruption like canceling Nafta -- even if it theoretically
might lead to better outcomes -- would cause a lot of short- and
medium-term pain for an awful lot of families," said Mr. Trudeau,
speaking in the western Canadian province of Saskatchewan, when
asked about his conversation with the president.
While Mr. Trump has in the past few months spoken harshly about
the trade practices of both Mexico and Canada, his aides told the
Mexicans that the big-stick threat was really aimed at Congress,
which has slowed the process of launching the Nafta
renegotiation.
Trump aides told the Mexican officials "that they were
considering this as an alternative, or a form of accelerating the
process before Congress, " Mr. Videgaray said in the television
interview. "You have to remember that the trade renegotiation with
the U.S. has not begun because of a delay in certain processes in
the U.S. Congress."
The Canadian and Mexican governments have actually been saying
openly for months that they are eager to start the renegotiations
Mr. Trump has long demanded, concerned that the uncertainty about
Nafta's future has damped economic activity in both countries.
Canadian Foreign Minister Chrystia Freeland and the country's
chief envoy in Washington, David MacNaughton, have been in frequent
touch with Commerce Secretary Wilbur Ross, Mr. Trump's point man on
Nafta, and had signaled privately -- as well as publicly in media
interviews -- that Canada was ready to start talks on changes to
the continental trade pact, Canadian officials said.
Canadian officials are aware that uncertainty over U.S. trade
policy has become an overhang on its economy, as businesses in
Canada -- in particular the nonenergy sector -- remain reluctant to
increase their capital-spending plans until things settled down.
The Bank of Canada has continued to highlight that U.S. trade
policy remains "significant" headwind to growth, and warns economy
won't be firing on all cylinders until business investment picks up
momentum.
Mexican officials have also been eager to complete the talks
before campaigning intensifies for their presidential election next
year, where the Nafta talks and Mr. Trump's harsh words on Mexico
have fueled the popularity of an anti-American candidate.
The holdup in starting Nafta negotiations has actually been the
U.S. Congress, which jealously guards its authority to shape U.S.
trade agreements. The 2015 fast-track trade law requires the
president to send Congress a 90-day notice before he can begin
trade talks -- and it also requires his U.S. trade representative
to brief Congress before submitting that letter. Congress has yet
to confirm Mr. Trump's trade representative nominee, Robert
Lighthizer, and so he has been unable to start talks. Lawmakers say
Mr. Lighthizer may finally win confirmation in early May. That
would push the start of the Nafta renegotiation to August at the
earliest, or well past Mr. Trump's first 100 days in office.
Mr. Trump has repeatedly blasted Congress over the delays. "We
filed a 90-day notice 60 days ago, but it hasn't started because
they're holding it up," Mr. Trump told The Wall Street Journal in a
mid-April interview. "We have to get this ridiculous 90-day
rule."
But lawmakers -- even leaders of Mr. Trump's own Republican
Party -- are pushing back against Mr. Trump's rush.
"I know there's a bit of frustration now from the Trump trade
team, and they're eager to get moving," Texas Rep. Kevin Brady,
chairman of the House Ways and Means Committee, which runs that
chamber's trade policy, told The Wall Street Journal in an
interview on Wednesday. "But at the end of the day, the time spent
now listening to members of Congress...is time well spent."
The confusion this week over Nafta highlights one of the
questions surrounding Mr. Trump: whether the deal-making skills he
employed in the business world translate to the presidency.
In his first 100 days, it isn't so clear that his methods have
paid off. He and White House aides have at times sent conflicting
messages about what they intend to do.
While negotiating with Congress over a spending bill aimed at
keeping the government up-and-running, some of Mr. Trump's advisers
insisted that any deal include money that would go toward a wall
along the Southern border.
"I don't think it's an exaggeration to say that the wall is one
of his top if not his top priority," Mr. Trump's budget director,
Mick Mulvaney, said in an interview on April 21. Three days later,
Mr. Trump backed off, saying he was open to waiting until later in
the year for border-wall money.
This month, Mr. Trump said he wouldn't reveal any details about
his tax plan until Congress passes a health-care overhaul. Mr.
Trump backtracked, putting out a tax blueprint on Wednesday.
Watching events play out, veterans of past White Houses say Mr.
Trump needs a more consistent, unified message. Part of the trouble
may be that his White House is split into factions: a nationalist
wing symbolized by chief strategist Steve Bannon that is wary of
multinational treaties and trade deals, and a more mainstream group
that is comfortable with the trend toward globalization.
That mainstream group has been actively sending reassuring
signals to business leaders in other countries, even as they have
been locked in internal battles in Washington.
One senior Toronto bank executive said Gary Cohn and Steven
Mnuchin -- former Goldman Sachs Group Inc. executives now serving
as chairman of the White House National Economic Council and as
Treasury Secretary, respectively -- have on a few occasions reached
out to senior Canadian business officials in recent weeks to
counsel them that despite the internal Trump administration divides
over trade policies, they expect no significant Nafta changes.
"This is a disputatious White House and we have to understand
this is going to spill out into the public," the Canadian banker
said.
Atop the pyramid is Mr. Trump, who in his 1987 book, "The Art of
the Deal," wrote that he values flexibility above all: "I never get
too attached to one deal or one approach," he said.
Craig Fuller, who served eight years in former President Ronald
Reagan's White House, said in an interview: "The trouble here is I
don't see how you get a course correction when there isn't a
course. It's just erratic.
"He needs to go look at the two factions inside the White House
and get rid of one of them. You can't operate that way in the White
House."
Mr. Trump dismissed talk about a split inside his White House
between aides with a nationalist or globalist orientation. "Hey,
I'm a nationalist and a globalist," he said. "I'm both. And I'm the
only one who makes the decision, believe me."
--Jacob Bunge in Chicago and William Mauldin in Washington
contributed to this article.
Write to Peter Nicholas at peter.nicholas@wsj.com and Paul
Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
April 27, 2017 19:40 ET (23:40 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.