Trump and the Art of the NAFTA Deal

Nafta Terminator (300 dpi)

 

In the late 1980s, Donald J. Trump appeared as though he had a future in politics.  Take a trip back with me.

As a fresh-faced real-estate mogul in New York City in his early forties, Trump chummed it up with Clintons on the party circuit and even had Oprah tempting him into flirting with an eventual run for President.

In the 90s, Trump’s carefully crafted persona expanded into a successful foray into authorship through The Art of the Deal, which spent 51 weeks on the New York Times’ bestseller list.

The part autobiography, part listicle recommended 11 unavoidable keys to success in business and to making great deals.

Trump’s tome on deal-making is timely considering that now-President Trump is being tested on one major deal and one of his key campaign promises: renegotiating NAFTA.  He criticized the deal as “the worst trade deal” ever signed by the U.S. and said that he would get his country a much better deal.

So, will we find some clues to Trump’s NAFTA strategy in The Art of the Deal as we enter Round 3?  Let’s find out by examining his tactics for deal-making:

Think big

NAFTA has big stakes.  Tens of millions of jobs depend on it.  NAFTA countries’ economies have grown together to become the world’s largest free trade area and have a combined output of approximately $17 trillion (U.S.) worth of goods and services.  Renegotiating and modernizing it could be big for business.

Protect the downside and the upside will take care of itself

The U.S. has put Mexico and Canada on their back feet in these negotiations by coming to the table aggressively.  U.S. trade negotiators charge that hundreds of thousands of jobs “left” or slipped northwards or southwards, and would soon be coming back to them.  Canada and Mexico have entered this discussion aiming for a tweak at best to the existing deal.  They may be too busy defending their key levers while the U.S. is on the offensive – essentially protecting itself from losing ground.

Maximize the options

This chapter essentially suggests a good negotiator must ensure there are distractions in waiting, including leaving room to negotiate something else – in case this deal falls through.  So, if NAFTA falls through – bilateral trade deals with each country remain on the table, although that is not considered ideal for anyone.

Know your market

While Trump may think that his administration speaks for business, industry’s motto is “do no harm” to the existing agreement and arrangements of supply chains.  Industry is not onside with the administration’s tactics.  It is sheer tone deafness and contrarianism of the U.S.’s Trade Negotiator Lighthizer in saying “tweaks” are not enough.

Use your leverage

Arguably all three countries picked strong negotiating teams with a lot of experience.  Well done all around.

Enhance your location

The U.S. got home-team advantage in Washington off the bat, ornate rooms in any nation’s capital will not phase weathered trade negotiators though.  No points to anyone.  Thankfully it’s still summer weather in Canada going into this weekend’s round.  However, if this drags on… winter trade talks could be considered a trade irritant of sorts.

Get the word out

Trade negotiations necessitate a high level of privacy.  Trump’s use of his rallies throughout August to loudly threaten again that the U.S. will walk away from NAFTA was a clear play for media and the other countries to induce panic.  As neither Canada nor Mexico have taken the bait – both suggesting it was simply empty rhetoric – it seems the safe bet is that cooler heads prevail behind closed doors.

Fight back

President Trump often thinks people are being “unfair” to him.  His impetus for calling for NAFTA renegotiation was because it was unfair to manufacturers, and the U.S. wasn’t going to take it anymore.  We can expect him to take more swings at NAFTA at his persistent campaign rallies and obviously on Twitter.  Does that impact the negotiations?  Doubtful.  Experts point to the fact that Congress passed a trade implementation bill around NAFTA that would need to be dealt with before Trump could truly pull the U.S. out.

Deliver the goods

Commentators suggest Mexico and Canada will likely concede small things to give Trump a political win back home, but they won’t give away the store.  Trump will get tweaks and must declare victory, which is not what he set out to do.  Otherwise, he will walk away with no agreement delivered.

Contain the costs

When all is said and done, these negotiations will have cost a lot.  If these talks last for longer than Trump hoped, he will be accused of running up the bill for not a lot of return on investment.

Have fun

Trade deals are not ‘fun’.  This is an exercise in pouring over countless pieces of paper to amend the wording of an existing agreement that has trillions of dollars on the line.  Trump’s rallies may give him an adrenaline boost that thrills him, however, NAFTA should not be a political football.  This is a deal that creates many jobs and puts the food on many families’ tables.

Some commentated that Lighthizer’s opening remarks in round one in Washington, “We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement,” sounded as if Trump wrote it himself on the back of a napkin for his Trade Negotiator to toss in.

The President’s fingerprints are present in the negotiations and his unpredictability looms all around it.  His Apprentice persona was built as a deal-maker, and now his worldview is being put to the test.

The Art of the Deal – an undeniable major influence on negotiations in the private sector over the last few decades – now sits on the shelf as perhaps Trump’s best legacy.

Then again, he didn’t even write the thing.

Shane Mackenzie is an Associate Consultant with Ensight, a government relations and public affairs firm.  He previously worked with a Liberal Member of Parliament and before that at the Liberal Party of Canada’s headquarters, while also being an active local and digital campaigner municipally, provincially, and federally for over 5 years.

Follow Shane on Twitter: @ShaneMackenzie_

 

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