U.S. proposes NAFTA sunset clause, raising tensions in talks
(Recasts throughout, adds comments by Canadian union leader,
By David Lawder and Dave Graham
ARLINGTON, Va., Oct 12 (Reuters) - Washington has increased
tensions in talks to renew the North American Free Trade
Agreement by insisting that any new deal be allowed to expire
after five years, two officials familiar with the negotiations
said on Thursday.
Canada and Mexico both strongly oppose the concept of a
so-called sunset clause, a provision that had been floated
But the officials, who asked not to be identified because
the talks are confidential, said the U.S. side formally proposed
it late on Wednesday during the fourth of seven scheduled rounds
to update the rules governing one of the world's biggest trade
The Trump administration says the clause, causing NAFTA to
expire every five years unless all three countries agree it
should continue, is to ensure the pact stays up to date.
But Mexico and Canada insist there is no point updating the
pact with such a threat hanging over it, arguing the clause
would stunt investment by sowing too much uncertainty about the
future of the agreement.
"It's a source of total uncertainty," said one of the NAFTA
government officials familiar with details of the negotiations.
U.S. President Donald Trump says NAFTA, originally signed in
1994, has been a disaster for the United States and has
frequently threatened to scrap it unless major changes are made.
Business and farm groups say abandoning the 23-year-old pact
would wreak economic havoc, disrupting cross-border
manufacturing supply chains and slapping high tariffs on
agricultural products. Trade between the United States, Canada
and Mexico has quadrupled under NAFTA, now topping $1.2 trillion
As well as the sunset clause, the United States wants to
boost how much North American content autos must contain to
qualify for tax-free status and eliminate a dispute settlement
mechanisms that Canada insists must stay.
Some trade observers said it is difficult to see how
negotiators could reach an agreement given U.S. demands that
many see as nonstarters.
The head of Unifor, Canada's largest private sector labor
union, said it was clear the United States did not want a deal.
"NAFTA is not going anywhere. This thing is going into the
toilet," Jerry Dias told reporters on Thursday.
Despite clear signs of impatience from Canada in particular,
U.S. negotiators have yet to submit their proposal on rules of
origin for the auto sector. That looked unlikely to come before
Friday, another official familiar with the talks said.
Trump on Wednesday repeated his warnings that he might
terminate the pact and said he was open to doing a bilateral
deal with either Canada or Mexico if three-way negotiations
He was speaking at the White House with Canadian Prime
Minister Justin Trudeau, who said Canada was "braced" for
Trump's unpredictability but taking a serious approach to the
Negotiators were also set to cover the difficult issue of
government procurement on Thursday.
Canada and Mexico want their companies to be able to bid on
more U.S. federal and state government contracts, but this is at
odds with Trump's "Buy American" agenda. U.S. negotiators have
countered with a proposal that would effectively grant the other
countries less access, people familiar with the talks say.
On automotive rules of origin, NAFTA negotiators face tough
new U.S. demands to increase regional vehicle content to 85
percent from 62.5 percent, with 50 percent required from the
United States, according to people briefed on the plan.
The rules of origin demands are among several conditions
that the U.S. Chamber of Commerce has labeled "poison pill
proposals" that threaten to torpedo the talks.
U.S. Commerce Secretary Wilbur Ross said on Wednesday that
he believed higher percentages for automotive content would be
achieved, and "car companies will adapt themselves to it."
However, a study released on Thursday by the Motor Equipment
Manufacturers Association, which represents U.S. auto parts
makers, showed the higher content requirements would lead to the
loss of up to 24,000 U.S. jobs, as some companies would forgo
NAFTA's tariff-free benefits and ship in more components from
(Additional reporting by David Ljunggren and Anthony Esposito;
Editing by Lisa Von Ahn and Tom Brown)
First Published: 2017-10-12 01:01:20
Updated 2017-10-12 22:55:43
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