Trump takes charge: How NAFTA renegotiations might unfold

The soundbitesfrom Donald Trump'sinauguration speech couldstrike fear into a free trader's heart.

"We must protect our borders from the ravages of other countriesmaking our products, stealing our companiesand destroying our jobs,"he vowedFriday.

"We will follow two simple rules: Buy American and Hire American."

• Trump formally pulls U.S. out of TPP with executive order

Minutes later, a rewritten White House website:

"President Trump is committed to renegotiating (the North American Free Trade Agreement.) If our partners refuse a renegotiation that gives American workers a fair deal, then the president will give notice of the United States' intent to withdraw from NAFTA."

President Donald Trump's inauguration speech

8 years ago

Duration 16:36

New U.S president speak after taking the oath of office

So it's on, then.But what, exactly, does renegotiating mean?

'Key is not to panic'

The new White House press secretary, Sean Spicer, said Thursday that Trump would not wait for his cabinet to be confirmed before he actedon two priorities:

• Withdrawal from the Trans-Pacific Partnership trade deal, a 12-country agreement Canada and Mexico also signed.
• Renegotiation of NAFTA unless Canada and Mexico won't cooperate. Then he'd use his powers to give six months' notice of termination.

"The key thing is not to panic," says Mark Warner, a Toronto-based trade lawyer who practices in both Canada and the U.S.

Trump doesn't mention termination first. That's plan B.

But threatening termination does focus minds.

• Canada not the focus of Trump's NAFTA talk, ambassador says

Canada and Mexico huddledandagreed to come to the table, something not everyone thought was wise. (Mexico's president agreedthere was room to improvethe trade agreement even before Trump's election.)

Trump's strategy, as described in his bookThe Art of the Deal, is to soften up the other side by making them sweat, Warner said.

Could he raise the stakes by giving notice of termination first?

"I suspect that Canada will go crazy if he does it," Warner said. "It's just a negotiating tactic."

Presidentcan't act alone

Negotiations require negotiators.

Yeta confirmation hearing date for Robert Lighthizer, Trump's nominee fortrade representative, hasn't been set.

Simon Lester, a trade policy analyst with the Washington-based Cato Institute, believes assembling the U.S. trade representative's team couldtake a few months.

All the departments and agencies state, commerce, labour, environmental protection and more must get on the same page before negotiating positions arefinalized.

Then there's America'sdivision of powers.

The president'sin charge of foreign policy. But Congress controls the money and from that, hasauthority overthings like tariffs.

BarackObamaneeded to go to Congress to get "fast-track" authority tonegotiate the TPP a process used in trade talks since the Nixon administration to make sure trade officials don't agree to things Congresslater triesto amend.

Once negotiated, Congress hasto take it or leave it.

Could the TPPauthorizationalso coverNAFTA? Lester thinks Trump's team might propose that, to expedite things.

Will Congress oblige?

Otherwise: "We could spend the next two or three years, I think, just talking about what we wantNAFTAto say," Lester said.

If the renegotiation objectives are modest, Congress may oblige. NAFTAprovisions allow for straightforward amendments.

But a fundamental overhaul?

"They'll definitely weigh in," Lester said."If they object, they could definitely put up a fight."

Behind-the-scenes talks are probablyunderway with Congressional leaders, Lester said.

"I'm not sure how much (the incoming administration)understand(s) what a trade negotiation looks like," Lester said. "In their mind, they do business deals and you can get those done in three months."

"If the Americans open NAFTA wholesale, depending on how ambitious they want to be, it will take years," saidMeredith Lilly, a former trade adviser to Stephen Harper.

"There are many members of Congress that are not unhappy about NAFTA, so it will not be an easy road," she said.

TPP is dead. Long liveTPP

A year ago it seemed NAFTAmightbe superseded by the TPP. Allthree NAFTA countries were onboard.

Now it's the other way around.

At his confirmation hearing Thursday, treasury secretary nominee Steven Mnuchin said the TPP could be a "starting point" for NAFTA talks.

Already-agreed-upon TPP chapters on labour, environmental standards, intellectual property, or e-commerce could migrate.

Ifseen as minor amendments, TPPtextcould become NAFTA annexes or side letters.

But it won't all translate.

TPP bargaining concessions made to achieve gains from non-NAFTAcountries might be off the table, such as themarket access to Canada'ssupply-manageddairy, egg and poultry sectorsgiven up in return for lowerAsiantariffs.

"I think that it would be extremely risky to open up agriculture chapters," Lilly said. "(All three countries) have protectionist sentiments. If you're going to get, you also have to give."

NAFTAneeds updating

It's not like NAFTA is just fine, as is.

Consider its labour mobility provisions, such as the list of professions that qualify for temporary entry to the U.S.

If a job didn't exist in the early '90s like digital technology worker, or nurse practitioner it's not listed.

Canada may push to open up government procurement so companies compete on cross-border infrastructure projects something its European Union trade deal achieved.

But fighting "Buy America" rules has been a tough slog for years.Trump's "America first" attitude doubles down.

Leaked memos early and recent suggested U.S. prioritiesfor renegotiation:

• Country-of-origin content rules: The automotive industry's use of Asian partsremains contentious. The livestock sector has along-running labelling dispute.
• Softwood lumber, a perennial trade irritantnot covered byNAFTA, isheading towardsa fresh round of duties and litigation.
• Dispute arbitrationpanels (NAFTA'sChapter 19)frequently rule againstAmericans. (Canada's anticipated NAFTA challenge onpresumed new lumber duties will get tricky if the U.S.simultaneously movesto eliminate these panels.)

Are these leaks credible? "We don't know," Lilly said.

Commerce secretary nominee Wilbur Ross toldhis confirmationthat everything's up for grabs.

"If they're looking for short-term gains, they'll want to keep the negotiations fairly tight, and really focus on things that are going to make a big difference for the U.S. economy," Lilly said.