A couple months ago, I pushed back on the idea that the USMCA sunset clause will help with enforcement. Now I see it popping up again. This is from Inside US Trade:
... [Tom] Vilsack also argued that the review function in the new agreement -- a watered-down version of a controversial U.S.-proposed sunset clause -- would be good for the industry.
“We’re going to have to see how the Canadians formulate their regulatory system in terms of the implementation of [the increased market access] to make sure that is indeed additional access. We’ve had situations in the past where games have been played by the Canadians,” he told Inside U.S. Trade in an interview ahead of the event. “If they were to play games, the idea that the agreement can be reviewed periodically gives us an opportunity to raise issues on a more regular basis than was the case with NAFTA.”
In my view, Vilsack's explanation of how the sunset clause could help with enforcement is misguided. On this issue, Inu and I wrote the following last year:
While there is nothing wrong with updating agreements to keep up with changes in the economy and to fix flaws that have been discovered, this provision takes “review” of the agreement a step too far. The possibility of automatic expiration after only 16 years adds an element of uncertainty to the whole enterprise.
If the United States was looking for a way to review the agreement, there were much simpler approaches that already exist. First of all, given that the new NAFTA is a renegotiation based on a review of the old NAFTA, it is obvious that a review of the agreement is already possible. No additional provision was required.
Furthermore, there is also a permanent mechanism embedded in the original NAFTA (and carried over into the new NAFTA) through which the parties can carry out regular reviews: The Free Trade Commission.
The commission is made up of ministerial level representatives of the government, usually the United States Trade Representative, Canada’s Minister of International Trade and Mexico’s Secretary of the Economy. These ministers can and should conduct regular meetings to review the functioning of the agreement.
In addition, the commission oversees various committees, which address all of the wide ranging technical issues covered by NAFTA.
Historically, the commission has done remarkably little. The original NAFTA requires the commission to meet at least once a year, but in reality, these meetings have been rare and have accomplished little. In fact, the most recent joint statement by the commission that appears on the Government of Canada’s website dates back to 2012.
The new NAFTA makes this worse by only requiring the commission to meet within one year of the agreement’s entry into force, “and thereafter as the Parties may decide.”
If the Trump administration wants a periodic review of NAFTA, it should push for a reinvigorated commission and committees that meet regularly, rather than a high-stakes game of chicken at six-year intervals. Such a negotiating environment may produce short-term “wins,” but it will undermine the countries’ relationship over the long-term.
Waiting for the sunset clause before raising these kinds of issues makes no sense. If the United States wants to ensure that Canada provides the promised market access, it should forget about the sunset clause and instead raise the issue in the relevant committees or with the Free Trade Commission, or file dispute settlement complaints.
