President Donald Trump may exercise the power to unilaterally withdraw from the North American Free Trade Agreement but will likely require congressional approval to completely renegotiate NAFTA.
Prime Minister Justin Trudeau of Canada expressed willingness to renegotiate NAFTA, as has the Mexico secretary of foreign relations, Luis Videgaray, who also stated that Mexico would like to renegotiate NAFTA “as soon as possible” to “dispel this uncertainty.”
If Trump withdraws from NAFTA, it is unclear how quickly a similar agreement could be put in place considering the bureaucracy of three different governments, assuming that an agreement is even reached. NAFTA as it currently stands took from the beginning of negotiations in 1990 until Jan. 1, 1994, to go into effect.
Texans should be concerned, because the complete withdrawal from NAFTA and a return of trade barriers with our leading trade partners, Canada and Mexico, will disproportionately and adversely impact the economy of Texas. Close to half, $118 billion, of all Texas exports are to Mexico and Canada, and Texas exports support over 1 million Texas jobs. The top Texas goods exports include $45.3 billion in computer and electronic products, $42.7 billion in petroleum and coal products, $39.8 billion in chemicals, $24.8 billion in machinery, and $22.2 billion in transportation equipment.
According to recent data collected by the office of the governor of Texas, the oil and gas industry accounts for 11.3 percent of Texas gross domestic product. The Texas Railroad Commission estimates that natural gas exports from Texas to Mexico are expected to increase from an average of 2.1 billion cubic feet per day to 3.4 billion cubic feet per day by 2020. Former Texas Gov. Rick Perry, Trump’s pick for secretary of energy, sits on the board of Energy Transfer Partners, which has approval from the Obama administration to build two pipelines to transport natural gas from Texas to Mexico.
Although the current Gov. Greg Abbott has declined to comment on NAFTA, Perry called NAFTA “the largest job stimulus packet to come along this decade” in 1993. Then, in 2002, Perry stated that he would be urging “our friends in Washington” not to enact regulations that would hinder free trade. Former Texas Gov. and U.S. President George W. Bush expressed his support for NAFTA in November, stating that any president should “recognize that trade encourages growth and fair trade is important for the workers of our respective countries.”
NAFTA created the work authorized TN visa category to facilitate the travel of Canadian, U.S. and Mexican professional workers between the member parties to the agreement. These professions include accountants, engineers, consultants, university professors, scientific technicians and another 50 specifically negotiated degreed professions. For Mexican nationals seeking to enter the United States as treaty traders or treaty investors, the E visa category is also based on the NAFTA agreement. This category is available to nationals of many countries with relevant treaties with the United States and requires substantial trade or investment in the United States. Without these visa categories allowing Canadian and Mexican citizens to obtain U.S. immigration status, incentives will be reduced and important mechanisms underlying Foreign Direct Investment will cease to exist.
While the majority of Texans voted for Trump, that does not mean that Texans have supported — or should support — each and every statement made during a heated campaign. During this critical period when administrative priorities are being set, Texans should make the Trump administration aware that campaign rhetoric can now be set aside and make clear that withdrawal from NAFTA is not in the best interest of Texans, Texas jobs and our future economic development.
Loughran is a partner of Foster LLP.