Canada is open to a Mexican proposal to review the North American Free Trade Agreement (Nafta) every five years instead of terminating the deal automatically if it is not renegotiated, as the United States has demanded, two government sources said late on Thursday.
The so-called sunset clause proposed by the United States last month caused dismay among Canadian and Mexican officials, who argue it will undermine investments and is redundant given that governments can already opt to exit from Nafta at any time.
Mexican Economy Minister Ildefonso Guajardo floated the idea last week of reviewing Nafta instead and said it was better to allow the 1994 accord to be analysed regularly than to expose it to sudden changes in the political mood.
“It’s in the national interest to review the effects of public policy, and actually that’s why we’re in this fix just now because we’ve spent 20 years without talking about how we perceive the effects of a public policy,” he told Mexican radio.
Speaking on condition of anonymity because of the sensitivity of the talks, one Canadian official said Canada’s government would consider Guajardo’s proposal provided it was not a sunset clause. A second government source, also speaking on condition of anonymity, said Canada was open to discussing the idea.
Guajardo and the officials were speaking as a fifth round of talks among the United States, Mexico and Canada on overhauling the trade deal was taking place in Mexico City.
US President Donald Trump has driven the renegotiation, threatening to dump the accord if he cannot rework it in favour of the United States. He argues that Nafta has hollowed out US manufacturing and sent jobs south of the border to Mexico.
Proponents of the deal say the economic integration of the three nations has boosted North American competitiveness by allowing a more efficient division of labour. Guajardo also said he did not agree with statements by US Commerce Secretary Wilbur Ross this week that it would be devastating for Mexico if the United States quit Nafta.
“Without a doubt, Mexico could face a short-term impact because the market is very sensitive to marketing, branding,” he said.”Our ability to adjust, and the manner in which we do it, is what will allow us to resist any potential change.”
Mexico is preparing a package of macroeconomic measures to help it withstand a short-term shock if the United States pulls out of the pact, Foreign Minister Luis Videgaray said this week.
Guajardo also noted that if the Nafta negotiations ended up stretching into March, the United States would need to ask itself if it wants the trade talks to influence Mexico’s July 2018 presidential election.
A schedule for the fifth round seen by Reuters showed that negotiators would discuss one of the most contentious issues over the four final days, beginning on Saturday. Last month, the United States proposed Nafta should set a 50% minimum US content requirement for autos, as well as raise regional content to 85% from 62.5%.
The four days of talks on rules of origin compare with three in the initial schedule for the previous round in Washington. Labour and cross-border trade in services, or CBTS, will both be discussed for three days in this round, compared with two days in the prior round, according to the schedules.
Officials from the Nafta nations said they did not expect major breakthroughs on the toughest items to be announced during the current negotiating round, but they were hopeful of progress on less contentious issues.
Ildefonso Guajardo Villarreal, Secretary of Economy for Mexico (right), speaks as Wilbur Ross, US Secretary of Commerce, listens during a news conference at the Department of Commerce in Washington, DC. Guajardo floated the idea last week of reviewing Nafta and said it was better to allow the 1994 accord to be analysed regularly than to expose it to sudden changes in the political mood.