Trump Wants Bilateral Nafta Talks But He Won't Quit Accord

(Bloomberg) -- President Donald Trump is seriously considering separate trade negotiations with Canada and Mexico but he doesn’t plan to withdraw from the North American Free Trade Agreement, White House economic adviser Larry Kudlow said.

“His preference now, he asked me to convey this, is to actually negotiate with Mexico and Canada separately,” Kudlow said Tuesday during an interview on Fox News. “I know this is just three countries but still, you know, oftentimes when you have to compromise with a whole bunch of countries you get the worst of the deals.”

Kudlow’s comments suggest Trump is serious about the position he staked out Friday, when he floated the idea of pursuing bilateral pacts with the Nafta partners in response to questions from reporters about the status of negotiations. Canada and Mexico on Tuesday both repeated their commitment to keeping the 1994 trade agreement a trilateral accord.

Trump doesn’t plan to quit Nafta, Kudlow said on Tuesday, addressing a repeated threat from the president to walk away from the deal since talks started in August.

‘Different Approach’

“The president’s not going to leave Nafta. He’s not going to withdraw from Nafta,” said Kudlow. “He’s just going to try a different approach. I can’t offer timing here, but judging from what he told us yesterday, I think he’d like to start that approach rather quickly.”

Negotiators have reached agreement on about nine of 30 chapters for an updated Nafta, and the U.S. had been pushing to get a deal passed in this Congress, which would require an agreement around now. A key Republican senator, John Cornyn, said on Monday that window is now closed and talks are expected to proceed more slowly going forward.

The peso sank to its weakest level in more than a year on Tuesday amid concern a trade pact with the U.S. won’t be approved by Congress before 2019.

Any of the three countries can quit Nafta on six months’ notice. No country has given such a warning, and only Trump threatens to. If he gave it and did actually exit, Canada has a pre-existing bilateral arrangement to fall back on, but it would probably require an update too.

Next Year

Pushing Nafta talks into next year -- as is likely -- may change the dynamic of negotiations. Democrats may take one or both chambers of Congress from Republicans in November midterms and push back against a new trade deal, while Mexicans will elect a new president in July. The current front-runner, Andres Manuel Lopez Obrador, has at times taken a strong anti-Trump tone and has been a vocal critic of Nafta.

Lopez Obrador favors updating the treaty with all three nations, his economic adviser Gerardo Esquivel said on Tuesday. “We want to have a Nafta 2.0 not a Nafta 0.5. That means we want a better and updated Nafta,” said Esquivel.

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Three-way talks to update the pact are continuing, a Canadian government official said Tuesday, speaking on condition of anonymity after Kudlow’s remarks.

Negotiations over rewriting Nafta are already largely bilateral given most meetings typically occur between two nations at a time, the official said, playing down any significant shift away from the current format of talks. The president has regularly raised the prospect of a bilateral deal so Tuesday’s comments aren’t new, the official added.

(Updates with comments from Mexican, Canadian officials from third paragraph.)