‘Sunset clause’ could darken NAFTA hopes
U.S. negotiators this week presented a proposal for a so-called “sunset clause” that would see the North American Free Trade Agreement expire after five years unless the parties can agree to extend it, according to two people familiar with the talks.
The proposal was presented to a small group of negotiators, according to the people, who asked not to be identified discussing private negotiations. The White House declined to comment on the NAFTA talks, and the U.S. Trade Representative’s press office didn’t respond to a request for comment.
Canada and Mexico rejected the idea of a sunset clause after Commerce Secretary Wilbur Ross floated it last month, saying it would create so much uncertainty for businesses that it could hurt long-term investment. The idea of a sunset clause has been among the most contentious proposals for a pact that already has a relatively straight-forward exit provision — a country can leave after giving sixmonths’ notice of withdrawal.
The U.S. has “miscalculated badly” in proposing the provision, said Nate Olson, director of the Trade21 program at the Stimson Center. The U.S. “doesn’t understand how much damage the uncertainty would do to private sector investment,” Olson said.
President Donald Trump has threatened to exit the pact if he can’t get more favorable terms. Negotiators began the fourth round of discussions to rework NAFTA on Wednesday outside Washington. Asked about the sunset clause Wednesday, Ross said “Yes, that’s our proposal.”
The proposal will be unpopular in Congress and it’s likely to be abandoned as negotiations continue, said Welles Orr, a former assistant U.S. Trade Representative under George H. W. Bush who is now a senior international trade adviser.