Successes and failures of state interest representation in the NAFTA negotiations

With the renegotiation of the North American Free Trade Agreement (NAFTA), at the urging of U.S. President Donald Trump, the agreement between Canada, Mexico and the U.S. has come under intense scrutiny more than 24 years after it went into effect. Among all the speculation on whether the president intends to withdraw from the deal or whether he is bluffing, the effects of any revised deal will be felt heavily at the state level. That’s why many governors and state politicians have been speaking out on the talks. But what can state governments achieve, when they’re not even officially involved in the talks?

In the relaunch of the NAFTA negotiations, governors quickly emerged as key actors, especially as potential pro-NAFTA allies for the Canadian and Mexican national governments.1Cassella, Megan. (2017, July 15). U.S. governors are wooed on NAFTA – by Canada and
Mexico. Politico. Retrieved September 8, 2017, from
http://www.politico.com/story/2017/07/15/governors-wooed-on-nafta-240582; Robichaud, Jesse. (2017, August 27). Atlantic premiers, eastern U.S. governors take centre
stage in NAFTA talks. The Hill Times. Retrieved September 8, 2017, from
https://www.hilltimes.com/2017/08/27/atlantic-premiers-eastern-u-s-governors-takecentre-stage-nafta-talks/117245
This was underlined by Canada’s Prime Minister Justin Trudeau becoming the first national leader to address a meeting of U.S. governors (Patton, 2017). Looking back at the original NAFTA talks, governors are continuing their engagement on the North American trade deal.

In fact, the NAFTA negotiations mark the first time the federal government was confronted with states’ views on trade policy2Sager, Michelle. (2002). One Voice or Many? Federalism and International Trade. New York: LFB Scholarly Publishing. Here: p. 148, even though there had been intergovernmental debates about the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) as well. That is despite the fact that formal opportunities for the states to represent their interests were scarce in the negotiations. Franz Greß, a German political scientist, termed the NAFTA “at least ‘half-blind’ in regard to the states”3Gress, Franz. (1996). Interstate Cooperation and Territorial Representation in Intermestic Politics. Publius: The Journal of Federalism, 26(1), 53-71. Here: p. 62. Even though a state official, Wisconsin Governor Tommy Thompson, had floated the idea of a Mexico-U.S. free trade agreement already in 19894Thompson, Tommy. (1990). Going global: A governor’s perspective. Intergovernmental Perspective, 16(2), 15-17. Here: p. 17., it was the federal level which took charge in the upcoming years and then led the negotiations for the U.S. because Congress allowed for the federal executive, namely the United States Trade Representative (USTR), to direct the talks.

Governors and state legislators: Noncentral voices in the NAFTA negotiations

Many governors spoke out on the proposed agreement during the negotiation period, mostly in favor of it: In a survey, 40 of the 50 governors supported the NAFTA5Seay, Douglas & Wesley Smith. (1993). Free Trade’s Forgotten Amigos: Forty U.S. governors support free trade with Mexico. Where are their congressmen? Policy Review, 65, 57-66., coming from all parts of the country and from all economic backgrounds. The governors proved to be a crucial ally for the Clinton administration in seeking ratification of the NAFTA. Gubernatorial support is especially noteworthy because of the opposition the NAFTA faced among labor and environmental organizations as well as in Congress. In the case of California, the curious constellation arose where the governor supported the NAFTA, saying it would create jobs, while the congressional delegation opposed the NAFTA, saying it would destroy jobs.6Seay, Douglas & Wesley Smith. (1993). Free Trade’s Forgotten Amigos: Forty U.S. governors support free trade with Mexico. Where are their congressmen? Policy Review, 65, 57-66.

The controversies and emotional debates surrounding the NAFTA renegotiations are nothing new: The trade deal was controversial even back when it was originally being drawn up. Controversy swirled around the NAFTA in all three member countries but especially in the U.S. The agreement was negotiated for the U.S. by the administration of President George H. W. Bush but ratified under President Bill Clinton, who faced tough opposition from some members of Congress and particularly labor and environmental activists. The latter groups staged a high-level lobbying effort against the NAFTA, which made ratification doubtful at some point. In the end, though, the proposed agreement passed both chambers of the U.S. Congress and it went into effect on January 1, 1994.

The U.S. Senate provided a rather weak, indirect way for states to represent their interests, so state governments engaged in fragmented interest representation using the Intergovernmental Policy Advisory Committee on Trade (IGPAC) and state associations to pronounce their policy positions. The IGPAC at the USTR, established in 1974, is a formalized and institutionalized way for states to engage in consultations with the federal level (learn more about this body in the post on the IGPAC). At the time, it had a membership of 16 governors, six state commissioners, six state legislators and nine mayors and county officials.7Chopra, Karen James. (1993). “Don’t tread on me”: NAFTA respects states’ rights. Business America, 114(21); Kaiser, Robert. (1998). Regionale Integration in Europa und Nordamerika: Vergleich von Europäischer Gemeinschaft (EG) und Nordamerikanischer Freihandelszone (NAFTA) unter besonderer Berücksichtigung bundesstaatlicher Organisationsreformen in Deutschland und den USA. Baden-Baden: Nomos. Here: p. 202. It issued a report in 1992 favoring the NAFTA but also addressing some critical issues. Despite this activity, the IGPAC was criticized for its lack of regular meetings and qualified staff, which limited states’ influence in the NAFTA negotiations.
Apart from the IGPAC, governors and state legislatures sought different opportunities to make their voices heard. Informal contacts between governors and the USTR or the president took on an important role in addition to the official IGPAC communication.8Orbuch, Paul M. & Thomas O. Singer. (1995). International Trade, the Environment and the States: An Evolving State-Federal Relationship. The Journal of Environment & Development, 4(2), 121-144. Here: p. 130

Several governors’ associations, including the National Governors Associations (NGA), spoke out on the NAFTA, 20 state legislatures passed resolutions on the NAFTA, Minnesota released a study on the proposed agreement’s effects, North Carolina and Washington installed commissions to scrutinize the NAFTA and the National Conference of State Legislatures (NCSL) also published a statement on the trade deal.9Kaiser, Robert. (1998). Regionale Integration in Europa und Nordamerika: Vergleich von Europäischer Gemeinschaft (EG) und Nordamerikanischer Freihandelszone (NAFTA) unter besonderer Berücksichtigung bundesstaatlicher Organisationsreformen in Deutschland und den USA. Baden-Baden: Nomos. Here: p. 207-208. The majority of states were for the NAFTA, but no matter the opinion on the agreement, it is evident that state executives, legislatures and other state bodies were involved in interest representation on the NAFTA.

Questions on state sovereignty add a different dimension to the NAFTA debates

Just like during the renegotiations, many of the 1990s resolutions and statements (as well as most of the general political and media debate) dealt with the NAFTA’s expected economic effects, such as job losses and gains. But with international trade agreements, questions of state sovereignty are another crucial aspect for state governments to address. After an international agreement is signed, its rules are not automatically superior to state laws.10Aceves, William J. (1995). Lost Sovereignty? The Implications of the Uruguay Round Agreements. Fordham International Law Journal, 19(2). Here: p. 461. Trade agreements such as the NAFTA or the TTIP first have to become U.S. federal law to take effect. Since federal law supersedes state laws, the international trade rules are only superior to state regulations once enacted at the federal level.

Knowing the general idea that trade agreements indirectly overrule inconsistent state law, several state legislatures addressed questions regarding U.S. federalism, which the IGPAC emphasized, too. In addition, it became clear during the negotiations that the NAFTA would severely affect state sovereignty “because the trade agreement mandates uniform regulations, thereby requiring states to regulate according to the NAFTA guidelines in areas that were previously left to independent state regulation.”11Tangeman, A.J. (1996). NAFTA and the Changing Role of State Government in a Global Economy: Will the NAFTA Federal-State Consultation Process Preserve State Sovereignty? Seattle University Law Review, 20(243), 243-270. Here: p. 251. The federal government had not done this in previous trade agreements, alarming states that they might lose their “independent lawmaking capacity”12Weiler, Conrad. (1994). Foreign-Trade Agreements: A New Federal Partner? Publius: The Journal of Federalism, 24(3), 113-133. Here: p. 132. due to NAFTA restrictions and new institutions curtailing them. As the NAFTA was a comprehensive, wide-ranging trade agreement and state economies had become more globalized, state governments were keen on protecting their rights to design and implement their own state policies and regulations.

Got questions or feedback?

If you have comments or questions, please feel free to get in touch via e-mail at research@transatlanticties.com (PGP-Key).

Two side agreements, which President Clinton negotiated after the actual NAFTA text had already been finalized, offered a chance for the states to secure promises from the federal level that their own laws could not be preempted under the NAFTA.13Paarlberg, Robert L. (1995). Leadership abroad begins at home: U.S. foreign economic policy after the Cold War. Washington, D.C.: Brookings Institution. Here: p. 77. However, some members of the IGPAC at the time offered individual comments, which were added to the official report, that stated the need for considering even stronger labor and environmental laws. Overall, the 1992 IGPAC report on the NAFTA was favorable towards the proposed agreement, but it also criticized the lack of access to the text and the limited time frame for states to comment on the proposed agreement. The IGPAC demanded a stronger say in the implementation of the agreement: “IGPAC calls upon the federal government to establish a formal mechanism for consultation and coordination with state and local governments regarding the implementation of pertinent aspects of trade agreements, including NAFTA.”14Thompson, Tommy. (1992). Report of the Intergovernmental Policy Advisory Committee for Trade on the North American Free Trade Agreement. Here: p. iv.

That the NAFTA binds states is by itself not a menacing circumstance for the states, were it not also for the fact that states had so few formal ways to help develop the NAFTA rules. As described above, negotiations were dominated by the federal level and state interest representation was relegated to studies, proclamations and gubernatorial contacts in Congress. Even these rather weak, disjointed and informal ways of interest representation did lead to some successes for the states, however:

NAFTA is the first treaty through which states have been guaranteed the right to be informed and to participate in trade matters affecting the states.15Tangeman, A.J. (1996). NAFTA and the Changing Role of State Government in a Global Economy: Will the NAFTA Federal-State Consultation Process Preserve State Sovereignty? Seattle University Law Review, 20(243), 243-270. Here: p. 265.

What concessions did the states achieve in the NAFTA talks?

As the NAFTA was an executive agreement, the federal government had to pass implementing legislation (H.R. 3450 in 1993), in order for the agreement to enter into effect. Additionally, the federal government prepared a Statement of Administrative Action, serving as the “definitive interpretation of NAFTA and the actions proposed to implement the agreement.”16Tangeman, A.J. (1996). NAFTA and the Changing Role of State Government in a Global Economy: Will the NAFTA Federal-State Consultation Process Preserve State Sovereignty? Seattle University Law Review, 20(243), 243-270. Here: p. 264. These two documents established several avenues for states to become involved in NAFTA trade policy and to safeguard some of their sovereignty in policy making, but drawbacks did remain:
  • Grandfathering of laws: U.S. states were allowed to keep already existing state laws that conflict with the NAFTA regulations, a process known as grandfathering. This meant that some discriminations to be eliminated by the NAFTA were kept in place. For example, U.S. states were explicitly excluded from the public procurement rules in the NAFTA, so they could continue favoring state-based businesses in their procurement processes.
  • Guaranteed cooperation between the USTR and the states on law conformities: The federal government pledged to help states in conforming their laws to NAFTA standards and to involve the states in developing positions on NAFTA issues.
  • Establishment of the NAFTA Coordinator for State Matters: Acting as a liaison between states and the federal government, this position is a guaranteed way for states to be involved in trade matters, but it is nevertheless a weaker option than involving states directly in the NAFTA dispute resolution mechanism. The mechanism for resolving trade conflicts between the three member countries is not open to the states immediately but only to the federal level. States can defend their laws in dispute settlements only with federal permission, so ultimately, the central government remains the dominating power in dispute settlement.
  • Establishment of the State Single Point of Contact (SPOC) system: A further mechanism for states to exchange information with the federal level is the State Single Point of Contact. Every state must designate an official responsible for relaying information regarding trade policy matters to the USTR and for disseminating information from the USTR to state agencies.
  • Participation in NAFTA committees and institutions: The federal government’s general reluctance to include the states in the negotiations carried over to the establishment of NAFTA institutions. States are not completely shut out, but their participation in the commissions created by the NAFTA is limited. For example, while the Border Environment Cooperation Commission has members from the public and private sectors representing the states, there is only one state member allowed on the Joint Public Advisory Council, which advises the North American Commission on Environmental Cooperation.

In constitutional and formal terms, the federal level asserted its primacy in U.S. commercial and trade policy with the NAFTA negotiations. In political terms, however, it became clear that federal actors could not ignore states’ interests.17Smith, Michael & Stephen Woolcock. (1993). The United States and the European Community in a transformed world. London: Pinter. Here: pp. 50, 103. States achieved a certain level of influence through various structures established in the aftermath of the NAFTA ratification. By the time the negotiations for the free trade agreement were underway, states had realized how intricately and irreversibly they are connected to the international economy and how important it is to make their voices heard on trade matters that affect them.

Based on their experience with the NAFTA talks, states have continued their engagement on trade policy issues over the years. This approach can be observed in today’s NAFTA reform talks: States cannot be overlooked in international trade negotiations. They are willing and capable to develop international trade policy preferences, which then shape the negotiation process, albeit to a small degree. Furthermore, states’, especially governors’, public support or opposition affects the negotiation and ratification processes. The federal government in most cases cannot ignore states’ interests but seeks to accommodate their concerns to ensure the passing of trade legislation. So if and when the time comes for the NAFTA to be debated in Congress and the public, federal lawmakers and the federal executive will likely be keen on listening to states’ concerns.