MEXICO CITY — Canada and Mexico are prepared to engage the United States on one of its most contentious demands for NAFTA, in an early indication of how proposals currently deemed non-starters could, in theory, be redesigned into something all three countries can live with.
It involves a U.S. idea deemed so hideous by the other parties that they refused to even look at it in the previous round of negotiations. But with a significant facelift, the other countries say, the U.S. proposal could be turned into something a little more palatable, or at least worthy of discussion.
That idea is the five-year sunset clause the U.S. dropped on its partners last month.
Also referred to as a termination clause, the proposal would end NAFTA after five years unless all three countries agree to extend it. The idea has been blasted by business, American lawmakers and the other countries as a recipe for permanent uncertainty, antithetical to the spirit of a trade agreement which is supposed to provide investor confidence.
But as the latest round of talks kicks off in Mexico City, the two other partners are revealing a willingness to discuss modifying the idea. They say the termination clause could be turned into a review clause, meaning the agreement would still undergo regular assessments without creating a climate of constant uncertainty, in which the deal could be cancelled by default.
The Mexican government has publicly and explicitly acknowledged its willingness to discuss this revised version; Canadian officials are saying similar things privately.
“We are going with a counter-proposal: Let’s put more force into evaluations, but let’s not establish an automatic phase-out mechanism,” Mexico’s economy minister, Ildefonso Guajardo, said this week. “Let’s establish a commitment that every five years we will evaluate what is happening, an analysis, what effects the agreement is having. And based on those results, each country can decide what to do in the future.”
That’s compatible with the Canadian position.
Prime Minister Justin Trudeau and Foreign Affairs Minister Chrystia Freeland have frequently spoken about the value of reviewing trade agreements, but have not publicly discussed the idea of embedding such a practice in a formal clause of NAFTA.
Yet one Canadian official speaking on background Thursday opened the door to discussing the idea.
He said the notion of periodic NAFTA performance reviews is not new in trade agreements, nor is it something Canada would be unhappy to discuss should other countries wish to.
But he said the original proposal of a so-called sunset clause remains out of bounds. He said it would make for permanent uncertainty, and would be unnecessary, as NAFTA already has a six-month termination clause that can be invoked at any time by any signatory unhappy with the agreement.
The apparent willingness to engage comes after an acrimonious round in Washington last month, where countries swatted aside each other’s major demands. At the end of the round, all three lead NAFTA ministers publicly scolded each other’s attitudes from the news conference stage.
Those politicians, Freeland, Robert Lighthizer, and Guajardo, have announced they will not attend the current round. There are also reports they might miss the next round too, as the politicians retreat from the foreground to give negotiators space to work without all the discord in public view.
This hint of willingness to compromise on a review-type clause raises the possibility that there might be some softer stances as the talks approach their hoped-for finish date of next March.
That being said, Canada, Mexico and the U.S. business community remain unnerved by some American proposals and wonder what the Trump administration actually wants. Speculation is rife in all three capitals about whether the White House wants a deal, or whether it is attempting to sabotage the talks and set the stage for the announcement of a U.S. withdrawal from NAFTA.
More than six-dozen U.S. lawmakers wrote to Trump’s trade czar this week expressing concern about the handling of the NAFTA file.
A trade consultant attending this week’s talks says this idea of a regular assessment could be a worthwhile discussion point.
Peter Clark said it’s not so revolutionary either — he pointed out that the current agreement’s Chapter 20 establishes a NAFTA Commission and gives it the power to consider new matters that might affect the operation of the agreement. Mandating a regular review is understandable, Clark said, but what’s not understandable is designing it in a way that creates a constant threat.
“It is in fact rather normal to have periodic reviews to determine if the deal is working and can work better. It is not normally tied to killing the deal,” said Clark, an Ottawa consultant.
He said a review clause would mean NAFTA could be sold as a living agreement.
“This will not stop the troglodytes from trying to kill it.”
Alexander Panetta, The Canadian Press