NAFTA Mock Talks, Round 1: Sunset clause

Expert negotiators from each of the countries have three sessions to hammer out a new NAFTA. Will a sunset clause prove to be a true ’poison pill’?

There is no greater economic issue facing Canada in 2018 than the renegotiation of the North American Free Trade Agreement, the pact that for 24 years defined this country’s economy, along with those of Mexico and the United States.

So, with the sixth round of talks under way—and a near palpable sense of pessimism in the air—Maclean’s set out to answer an essential question: Can three qualified, knowledgeable and reasonable negotiators reach an agreement to save NAFTA? Given their governments’ opening positions—but absent the racket of politics—can a trio of delegates representing their respective countries achieve what the official negotiators have so far failed to?

What would such a deal look like?

Okay, that’s three questions. But they’re vital ones. And to answer them, we’ve enlisted expert volunteers to participate in a shadow NAFTA negotiation that will unfold over the coming weeks, more or less in synch with the real ones. To state the obvious, this is an exercise in broad strokes: our delegates are tasked with tweaking the framework of NAFTA, addressing only the devilish details that stand in the way of that challenge, on five major subjects: auto and rules of origin, supply management and agriculture, conflict resolution (chapters 11 and 19), the sunset clause, and intellectual property and data. At the end of the complex three-round negotiation, they will have one choice: Deal or no deal.

To that end, we asked our representatives to focus on five high-friction areas: the auto sector, agriculture, dairy and supply management, dispute-resolution mechanisms and a proposed “sunset clause” at which point the parties must renew the deal or end it. But they face no restriction. They are free to introduce other issues if they believe it could lead to an agreement. Read curated play-by-plays of this round of negotiations on the five topics specifically here. Or read the transcript in full, here.

Now, meet our negotiators:

Christopher Sands (United States) is a Senior Research Professor and Director of the Center for Canadian Studies at Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies (SAIS) in Washington, D.C. where he has previously worked for several think tanks, most notably the Center for Strategic and International Studies and the Hudson Institute. He is American, originally from Detroit, Michigan.

Dan Ciuriak (Canada) is a former Deputy Chief Economist at Global Affairs Canada, runs a consulting practice focussed on quantifying trade agreements, and holds fellowships with the C.D. Howe Institute, the Centre for International Governance Innovation, and the Asia Pacific Foundation of Canada.

Hugo Perezcano Diaz (Mexico) is the Deputy Director of International Economic Law with the International Law Research Program (ILRP), at the Centre for International Governance Innovation. Prior to joining CIGI, he was an attorney and international trade consultant in private practice. He worked for the Mexican government’s Secretariat of Economy for nearly 20 years, serving as head of the trade remedy authority, and formerly as general counsel for international trade negotiations. He was actively involved in the NAFTA and the Uruguay Round negotiations.

In this round of negotiations, the delegations only had the time to establish their initial opening positions on a potential sunset clause—a condition that would automatically terminate the agreement in five years if all three countries did not approve it again. That clause, pitched by America in a previous negotiation, has been railed against by Canada and Mexico as a “poison pill.”

In these negotiations, however, the opening positions seem much less belligerent, although Canada and Mexico drew a hard line against the incorporation of any kind of sunset clause.

The sunset clause is a blatant imposition of trade costs in terms of uncertainty: it is overtly protectionist, and it cannot be part of the final landing zone. We understand the imperative of being able to say politically that we are making sure that trade agreements are in the national interest.

But America did show a willingness to compromise on the issue, and it was receptive to a pitch from Canada on five-year analytical deep dives by a trilateral body—similar to what the European Commission does—as well as a supplemental ten-year political review of what’s working, with no automatic sunsets. But it did push for some mechanism to allow public citizens to push for change.

We’re very open to what Canada has proposed. As you know, we’ve had a NAFTA trade commission where our trade ministers have periodically looked at what’s going on, and we would suggest that, in addition to the deep dives on data, and perhaps a political review on some schedules—with no comment on dates, but we’re open—that there also be a possibility for the public, for interest groups, to weigh in with suggestions for further liberalization. We feel that this would be a way to make the agreement more transparent. You’ll remember we did something like this with the North American Competitiveness Council that was part of our old Security and Prosperity Partnership.

We feel that our citizens need to be able to cry foul or to ask for new changes or to challenge us to think more forward as the economy moves faster than electoral cycles, and certainly faster than most of our government officials. And we’d like to make this a more democratic process where petitions for change could come from the public, from the private sector, and through the data-driven reviews. We know that introduces some politics into the conversation, but we feel that’s important to make this agreement seem like it’s more responsive to the needs of citizens.

However, just as Canada and America seemed to find some common ground, Canada’s proposal was met with concern by Mexico.

I do think that it will not do anybody any good to have a sunset provision, but to be having these discussions on ending in five-year cycles. And of course, five years is not that long a time. We all thought that our NAFTA negotiations would be done in a few months, and here we are continuing our discussions. And I don’t think that is helpful—that will not solve problems, that will politicize issues further. But Mexico is open to discussing the Canadian proposal and the other elements that the U.S. has placed on the table vis-à-vis public participation and participation of interest groups. While that may politicize issues, Mexico does recognize that it is part of a broader democratic process, and all views should be taken into account.

Our next negotiation will take place in mid-to-late February. Keep your eyes out for our negotiators to take a second crack at this and other high-friction issues to see if they can find common ground.

Read the transcript in full, here. Or click below to go to the section topic they negotiated:

Edited by Charlie Gillis, Adrian Lee, Nick Taylor-Vaisey and David Thomas