‘Sun­set clause’ could darken NAFTA hopes

Houston Chronicle - - BUSINESS -

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.

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