NAFTA Termination: Legal Process in Canada and Mexico

Tetyana Payosova Payosova (), Gary Hufbauer and Euijin Jung ()
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Tetyana Payosova Payosova: Harvard Law School
Euijin Jung: Peterson Institute for International Economics

No PB18-11, Policy Briefs from Peterson Institute for International Economics

Abstract: The mechanics of US withdrawal from the North American Free Trade Agreement (NAFTA) have been widely explored, with an emerging consensus among legal experts that President Donald Trump does have the authority to pull out of the accord. This Policy Brief examines the legal procedures in Canada and Mexico in the event that either country decides to withdraw or terminate NAFTA. Relative to the United States, Canada and Mexico have clearer legal procedures. To terminate NAFTA in Canada, the Department of International Trade would send the notice to withdrawal upon approval by the Cabinet and the Order in Council. In Mexico, the president can notify withdrawal from NAFTA under Article 2205, following Senate approval. To raise tariffs to the MFN level, Canada requires amendment of federal statutes that requires passage in both chambers of the Parliament through regular procedures. To raise its tariffs, Mexico requires a bill to amend federal legislation that has the approval of the Senate and the Chamber of Deputies. While the legal powers to withdraw from NAFTA commitments are very broad in all three partner countries, political and economic constraints greatly narrow the scope of action. Canada conducts about 64 percent of its two-way merchandise trade with the United States; the figure for Mexico is 63 percent; and the United States depends on Canada and Mexico for 29 percent of its global commerce.

Date: 2018-04
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