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Ready to engage on NAFTA

Canada and Mexico are prepared to engage the United States on one of its most contentious demands for NAFTA, in an early indication that proposals currently deemed non-starters could, in theory, be redesigned into something all three countries can live with.

It involves a U.S. idea deemed so hideous by the other parties that they refused to even look at it in the previous negotiating round. But with a significant facelift, the other countries say, the U.S. proposal could be turned into something a little more palatable, or at least worthy of discussion.

That controversial U.S. idea: a five-year sunset clause.

Also referred to as a termination clause, the proposal would end NAFTA after five years unless all three countries agree to extend it. Proposed by the Trump administration at the last negotiating round, the demand was derided by the other countries, business groups, and American lawmakers as a recipe for permanent uncertainty, contrary to the spirit of a trade agreement that is supposed to provide investor confidence.

But as the latest round of talks kicks off in Mexico City, the other countries are revealing a willingness to discuss modifying the idea. They say the termination clause could be turned into a review clause, meaning the agreement would still undergo assessments at regular intervals — without creating a climate of constant uncertainty, in which the deal could be cancelled by default.

The Mexican government has publicly and explicitly acknowledged its willingness to discuss this revised version. Now Canadian officials are saying similar things privately.

"We are going with a counter-proposal: Let's put more force into evaluations, but let's not establish an automatic phase-out mechanism," Mexico's economy minister, Ildefonso Guajardo, said this week. "Let's establish a commitment that every five years we will evaluate what is happening, an analysis, what effects the agreement is having. And based on those results, each country can decide what to do in the future."

Prime Minister Justin Trudeau and Foreign Affairs Minister Chrystia Freeland have frequently spoken about the value of reviewing trade agreements, but have not publicly discussed the idea of embedding such a practice in a formal clause of NAFTA.

Yet one Canadian official speaking on the condition that he not be identified opened the door on Thursday to discussing the idea.

He said the notion of periodic NAFTA performance reviews is not new in trade agreements, nor is it something Canada would be unhappy to discuss should other countries wish to.

But he said the original proposal of a so-called sunset clause remains out of bounds. He said it would make for permanent uncertainty, and is unnecessary as NAFTA already has a six-month termination clause that can be invoked at any time by an unhappy signatory.



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