Trump’s NAFTA Reversal Likely Tied To Oil Industry Pressure

Trump pauses while speaking in the East Room of the White House in Washington. (AP/Andrew Harnik)

WASHINGTON, D.C.– Having called the North American Free Trade Agreement (NAFTA) “the worst trade deal in history” during his presidential campaign and repeatedly promising to “entirely renegotiate” the controversial pact, Donald Trump’s stance on NAFTA has seemed clear for months, especially after he affirmed the need to radically alter the agreement in order to “protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs” during his inaugural address in January. However, Trump remained mute on his ties to certain industries with a very strong interest in keeping NAFTA largely intact.

Just a few months after officially assuming the office of the president, Trump’s position on NAFTA seems to be undergoing a dramatic renegotiation of its own. According to the Wall Street Journal, the Trump administration is now seeking only minor changes to the agreement – citing an administrative draft proposal circulated in Congress by the Office of the U.S. Trade Representative.

Though all of the details of Trump’s proposed changes to NAFTA have yet to be made public, the Journal noted that many of the deal’s most controversial provisions will remain in place, such as arbitration panels laid out in NAFTA Chapter 11 that allow businessmen and investors to circumvent local courts. These panels, which served as the foundation for the offshore courts once proposed by the Trans-Pacific Partnership, have long been flagged as one of the key ways in which NAFTA erodes national sovereignty in favor of corporate interests.

The plan, which is by no means finalized, also calls for minor changes regarding the protection of digital trade and tougher intellectual property enforcement. The most significant change proposed thus far would allow NAFTA member nations to create tariffs if a flood of imports causes “serious injury or threat of serious injury” to those countries’ domestic industries. This measure seems to be in line with Trump’s criticisms of U.S. trade policy. However, he has frequently described the import of goods from China as having been detrimental to the U.S. economy. Any changes to NAFTA will have no effect over U.S. imports of Chinese goods.

According to The Street, the proposal doesn’t necessarily reflect Trump’s preferences, representing a compromise “between trade hawks that want to use NAFTA renegotiations to set a new trade agenda and moderates that support the U.S. commitment to free trade.” However, Trump transition officials hinted that Trump would adopt a softer stance on NAFTA months ago, with one official telling The Hill in January: “I don’t think we’re looking to rip up NAFTA as much as we are looking to right-size it and make it fairer.”

However, other evidence seems to suggest that Trump’s shifting position on NAFTA renegotiation has to do more with making NAFTA fairer for business interests closely aligned with his administration than U.S. workers.

The Influence of Fossil Fuel Interests on Trump’s Trade Policy

The Centenario deep-water drilling platform stands off the coast of Veracruz, Mexico in the Gulf of Mexico. (AP/Dario Lopez-Mills)

In early December of last year, several U.S. fossil fuel companies – including ExxonMobil and Chevron – were granted a series of lucrative petroleum contracts by the Mexican Hydrocarbon Commission. Most of the contracts concern deep-water offshore drilling projects in the Gulf of Mexico. Upon their entrance into the Mexican oil market – one that had been closed to foreign investors for 75 years due to a state monopoly on national oil reserves – these U.S. companies suddenly became very interested in NAFTA and the likelihood of renegotiation under the Trump administration.

As Forbes noted in January, certain controversial aspects of NAFTA, such as the arbitration panels provided by NAFTA Chapter 11, would prove “essential to ventures involving operations that might last for over two decades,” such as the multi-year contracts recently obtained by top U.S. oil firms. Not surprisingly, the Trump administration, whose deep connections to the oil industry are well-known, has decided to keep this aspect of NAFTA intact, as its removal could make those billion-dollar investments vulnerable to termination. As a result, it seems highly likely that these U.S. oil interests are pushing to keep the bulk of NAFTA in place – a fact that Secretary of State Rex Tillerson, former CEO of ExxonMobil, likely knows all too well.

Also of top concern to U.S. oil interests now invested in Mexico is the fact that NAFTA has no “survival clause” – a provision that typically provides continuing protection of treaties for multi-year investments. Without such a clause, if a NAFTA member such as Mexico chose to terminate an agreement made with corporations based in another NAFTA nation, those foreign investors could be deprived of protection under international law, as well as the right to international arbitration.

Considering that the Mexican government warned the Trump administration last week that they were poised to “step away from NAFTA,” Tillerson and Trump have most likely chosen to forgo any major overhauls involving the trade deal to protect billions of dollars in U.S. oil corporation investments, explaining the administration’s decision to seek only “modest” changes to the free trade agreement.

Although Trump’s tough stance on NAFTA renegotiation helped push him to victory last November, the president’s latest about-face on a key campaign promise once again demonstrates that Trump’s repeated promises to serve the American people and make the nation “great again” are consistently overshadowed by his personal wealth and industry ties. The president is, as many have described him, a billionaire first and a president second.