Jan 13, 2019

Trump channels Theresa May's Brexit plan for NAFTA 2.0

Illustration: Sarah Grillo/Axios

The head of state wants to renegotiate a major free-trade agreement, and there is a deal on the table that has been agreed to by all parties. Now all that's needed is for domestic lawmakers to approve the deal. There are signs they might not be willing to do so. In order to concentrate the legislators' minds, the leader exits the old agreement, leaving a stark choice: Either accept the new one, or embrace the chaos of a no-deal exit.

The big picture: Theresa May pulled this move when she triggered Article 50 in March 2017, raising the specter of a catastrophic no-deal Brexit should Parliament not agree to a deal by March 29, 2019. Now, Donald Trump is thinking along similar lines for NAFTA, with the support of Republican Sen. Chuck Grassley.

  • The idea is that he should withdraw from NAFTA before its replacement, USMCA, is approved by Congress. That way, if Congress doesn't ratify the deal, the result would be a devastating no-deal exit from NAFTA, disrupting supply chains across North America.

As we're currently seeing in Britain, parliamentarians tend to react badly to such ultimatums. And as Britain is beginning to demonstrate, the implicit threat is not always credible.

  • The no-Brexit option is still on the table: May would almost certainly command a comfortable majority in Parliament should she opt to change her mind on Article 50 and stay in the EU after all.
  • Indeed, the most likely outcome at this point, according to ITV political editor Robert Peston, is that Parliament rejects May's deal on Tuesday and effectively prevents a no-deal Brexit some days later, thereby opening the door to the only other option, which is no Brexit at all.
  • In an op-ed today, May seems to say that the no-Brexit option "would be a catastrophic and unforgivable breach of trust in our democracy." Maybe this is her way of saying that if she loses Tuesday's vote, she won't stay as prime minster for very long, and that decision would have to be made by someone else.

Similarly, Trump would need Congress to ratify any NAFTA withdrawal under Article 2205, and a noisy withdrawal now should be largely shrugged off both by America's manufacturers and by Capitol Hill. It would be full of sound and fury, but would ultimately signify nothing.

The bottom line: The best way to get a legislature to pass any deal is the old-fashioned way, by persuading them to vote for it willingly. Extreme negotiating tactics have a tendency to backfire.

Go deeper: Theresa May warns of "catastrophic" outcome if Brexit deal fails

Go deeper

M&A activity crashes

Illustration: Sarah Grillo/Axios

Global merger and acquisition activity fell sharply in the first quarter of 2020, with dollar volume dropping 28% to $698 billion and the number of deals off 14% to 9,616, according to preliminary data from Refinitiv.

The big picture: The dollar drop was largely driven by the disappearance of megadeals valued at over $10 billion, which fell from $412 billion for the Jan. 1–March 28 period in 2019, to $179 billion that same period this year.

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 9:30 a.m. ET: 803,313 — Total deaths: 39,014 — Total recoveries: 172,657.
  2. U.S.: Leads the world in confirmed cases. Total confirmed cases as of 9:30 a.m. ET: 164,719 — Total deaths: 3,170— Total recoveries: 5,945.
  3. Public health updates: A state-by-state look at when the outbreak will peak.
  4. Trump latest: Senior administration officials discuss why the president backed off his planned Easter reopening date.
  5. State updates: New York Gov. Andrew Cuomo firmly ruled out a future presidential run. — Virginia, Maryland and D.C. issue stay-at-home orders to residents, joining 28 other states.
  6. Federal government latest: The Trump administration has deemed gun stores essential businesses during the outbreak.
  7. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

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No easy fixes to a Texas-sized oil problem

Illustration: Sarah Grillo/Axios

President Trump and two Texas oil producers are launching new efforts to temper the stunning supply-demand imbalance and price collapse that's inflicting deep financial wounds in the U.S. industry.

Driving the news: Shale producers Pioneer Natural Resources and Parsley Energy have formally asked Texas regulators to take the extraordinary step of imposing mandatory production curbs to help steady the ship.