Canada and Mexico bristled at an idea by the US to include a five-year sunset provision in the North American Free Trade Agreement (NAFTA) that would force partners to reconsider the deal or terminate it.
While a NAFTA nation can exit the pact after giving its partners six-months’ notice, US Secretary of Commerce Wilbur Ross on Thursday said it was unlikely to occur.
US President President Donald Trump has repeatedly threatened to quit NAFTA if he can not get better terms from renegotiations that began last month.
By adding a so-called sunset clause, countries would be regularly compelled to take a fresh look at the deal to fix what is not working, Ross said.
“The forecasts that had been made at the initiation of NAFTA and of the other trade agreements mostly had been wildly optimistic as to the results, and the results have been quite different,” he said at a conference hosted by Politico in Washington. “If there was systematic re-examination after a little experience period, you’d have a forum for trying to fix things that didn’t work out.”
The Canadian and Mexican ambassadors to the US, speaking later at the same event, said the provision would create uncertainty for businesses that make long-term investments.
“If every marriage had a five-year sunset clause on it, I think our divorce rate would be a heck of a lot higher,” Canadian Ambassador David MacNaughton said. “We can have that discussion, but I really do think it won’t be Mexico and Canada that are pushing back against the secretary, it will be a lot of Americans.”
Mexican Ambassador Geronimo Gutierrez said he agreed with McNaughton, and added that it “would probably have very detrimental consequences to the business sector of the United States, Mexico and Canada.”
Ross said he and US Trade Representative Robert Lighthizer have favored the concept for a long time.
“That’s why we put it forward,” Ross said. “Whether it will be agreed is a whole different question and obviously tied to many, many other issues in NAFTA.”
Politico, a news organization, earlier on Thursday reported that Lighthizer was considering plans to propose the idea of a sunset provision.
Ross’s comments came ahead of the third round of NAFTA talks, which are to take place in Ottawa from Sunday next week to Sept. 27.
Ross reiterated that he wants to wrap up negotiations in the next three to four months, as elections next year in the US and Mexico will make it increasingly difficult to come to an agreement.
The Canadian and Mexican envoys also agreed on the need for a dispute resolution mechanism in NAFTA.
The US has said it would to scrap the so-called Chapter 19 tool, which allows reviews of subsidies and anti-dumping cases by binational panels.
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