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Trudeau rejects Trump proposal for ‘sunset clause’ review of NAFTA in 2023

The Globe and Mail reports, “The Trump administration is pushing for a ‘sunset clause’ in the North American free-trade agreement that would automatically kill the deal after five years unless all three sides agreed to keep it in place.”

The article highlights, “Canada and Mexico immediately rejected the idea, arguing that it would create unnecessary uncertainty for businesses, which would not want to make investments without reassurance that market access between the three countries is here to stay. Such a provision, if inserted into NAFTA, would all but guarantee that the current trade-related drama would play out in the United States again in five years’ time.”

David MacNaughton, Canada’s ambassador to the U.S., says, “Not to try to make light of it, but if every marriage had a five-year sunset clause on it, I think our divorce rate would be a heck of a lot higher than it is right now. The best thing you can do in these things is to try to have goodwill and try to work through tough times rather than set an arbitrary date.”

Both McNaughton and Mexico’s ambassador to the United States Gerónimo Gutiérrez Fernández said that such a provision would cause instability for businesses making longer-term investment decisions.

That said, it should be highlighted that there is currently a provision in NAFTA that allows any country to leave the deal with just six months notice.

U.S. Commerce Secretary Wilbur Ross acknowledges that provision, but comments, “it’s the kind of thing that probably wouldn’t be [triggered].” Ross argues, “The five-year thing is a real thing, would force a systematic re-examination. …If there were a systematic re-examination after a little experience period, you’d have a forum for trying to fix things that didn’t work out the way you thought they would.”

NAFTA at 7

In April 2001, this report by the Canadian Centre for Policy Alternatives, the Colegio de Mexico, and the U.S.-based Economic Policy Institute found that 766,030 jobs had been lost in the U.S. since NAFTA’s implementation, low-wage maquiladora employment in Mexico grew from 60,000 jobs in 1975 to 1.3 million in 2000, and in Canada imports destroyed more jobs than exports created (the net destruction of jobs had reached 276,000 by 1997).

NAFTA at 20

By March 2014, this report by the Council of Canadians, the Sierra Club, the Institute for Policy Studies, and the Mexican Network of Action Against Free Trade concluded that, “NAFTA ushered in a new model of trade that reduced the ability of governments to regulate in the interest of the public and the environment. NAFTA cemented and expanded changes to Mexico’s agricultural sector that impoverished and displaced millions of peasant farmers while increasing North America’s reliance on chemical and water-intensive agricultural practices. It increased mining activity and trade in fossil fuels while it decreased the ability of governments to put in place policies to regulate such polluting industries. And, NAFTA’s environmental side agreement was far too weak and the commission responsible for enforcing the side agreement far too under-resourced to make any meaningful difference.”

It’s unlikely that the Trump administration’s call to review NAFTA at 29 would reflect significantly different outcomes.

The Council of Canadians is calling for the Chapter 11 investor-state dispute settlement (ISDS) provision, water as a tradable good, service and investment, and the energy proportionality provision to be removed from NAFTA. We are unconvinced that the Trudeau government’s proposals for Indigenous and gender rights chapters, a ‘reformed’ investment protection provision, and an environment chapter will address the serious systemic failings of NAFTA. We join with allies to assert that no deal is better than a bad deal and that the Trudeau government should be prepared to walk away from NAFTA.

The next round of NAFTA talks will take place September 23-27 in Ottawa, likely at Old City Hall (111 Sussex Drive).

Please see this blog for background on Council of Canadians activities at that time.