Trump administration introduces five-year ‘sunset clause’ into NAFTA talks
The U.S. introduced the proposal amid a growing consensus that Donald Trump’s protectionism could lead to the collapse of NAFTA negotiations.
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WASHINGTON—Adding to the gloom surrounding NAFTA negotiations, U.S. President Donald Trump’s administration began the latest round of talks by making a proposal loathed by Canada and Mexico: a “sunset clause” that would automatically terminate the agreement in five years if all three countries did not approve it again.
Trade experts say the U.S. may simply be issuing aggressive demands as a negotiating tactic. If the sunset clause proposal is not eventually withdrawn, however, it could well lead to the collapse of talks.
Canadian and Mexican officials have both slammed the idea in the last month. And it is fiercely opposed by business groups in all three countries, who say it would deny companies the certainty they need to make investments.
“What manufacturers want more than anything is certainly and predictability. And it’s rather hard to make long-term capital decisions or sourcing decisions if there’s an automatic sunset of five years,” said Dennis Darby, chief executive of the Canadian Manufacturers and Exporters. “With a five-year potential sword hanging over your head, I think what it’s going to do is cause manufacturers to not invest and be really, really risk-averse.”
“I think this will be one of the most difficult for the business community to accept,” said Dan Ujczo, a trade lawyer and president of the Ohio-Canada Business Association.
Jerry Dias, president of the Unifor union that represents Canadian autoworkers, said he would support a sunset clause on a bad final deal, oppose it on a good final deal. Regardless, though, he said the proposal is a “schoolyard bully” tactic that conveys “they don’t want a deal in the first place.”
The proposal comes amid a growing consensus around the continent that the talks might fail because of Trump’s protectionism. Prime Minister Justin Trudeau said Wednesday he was “ready for anything,” and Dias said Thursday that “this thing is going into the toilet.”
“They want to hold this weapon over people’s heads to get them to surrender more, surrender more, more concessions, more concessions. But they’re not fooling anybody,” Dias said.
The sunset clause was endorsed by Canada’s United Steelworkers. National director Ken Neumann said the threat of termination would “add some accountability” for politicians making the kinds of promises the original NAFTA has not fulfilled.
“We got sold a bill of goods with NAFTA,” Neumann said. “If you would have had a sunset clause, it wouldn’t have survived going forward.”
U.S. Commerce Secretary Wilbur Ross floated the sunset idea in September. It was formally put on the negotiating table late Wednesday, said a source with knowledge of the negotiations.
“Yes, that’s our proposal,” Ross said at a Wednesday event.
In a speech the day prior, the president of the U.S. Chamber of Commerce, Thomas Donohue, described the proposal as a “poison pill” that “could doom the entire deal.”
The fourth round of talks, scheduled to run until Tuesday in a suburb of Washington, are expected to be the most challenging to date. The U.S. is likely to introduce a contentious proposal to require that a hefty percentage of an automobile be manufactured in the U.S. itself, rather than just in the NAFTA zone, to be exempted from tariffs.
The specifics of the sunset proposal were not immediately clear. One key question: whether it would give the president unilateral authority to renew NAFTA or if Congress would have to vote again as well.
Canadian ministers did not address the proposal Thursday. Speaking on condition of anonymity, one official said, “We expected a tough round.”