The text of what is being called the United States-Mexico-Canada Agreement (USMCA) has been released. It would be much easier to call this agreement NAFTA, rather than some unwieldy new name that someone thought was preferable for public relations purposes. We'll see what practice develops here. I will probably alternate between the two for a while.
There's a lot in here to talk about, and as you might expect, I will be doing some blogging on it (I encourage others to do so as well!).
Let's start with the sunset clause. It was reported that the Trump administration was proposing a sunset clause under which the agreement would expire after 5 years unless all three parties affirmatively agreed to continue it. That proposal has been revised and appears in the final provisions chapter as follows:
Article 34.7: Review and Term Extension
1. This Agreement shall terminate 16 years after the date of its entry into force, unless each Party confirms it wishes to continue the Agreement for a new 16-year term, in accordance with the procedures set forth in paragraphs 2 through 6.
2. No later than the sixth anniversary of the entry into force of this Agreement, the Commission shall meet to conduct a “joint review” of the operation of the Agreement, review any recommendations for action submitted by a Party, and decide on any appropriate actions. Each Party may provide recommendations for the Commission to take action at least one month before the Commission’s joint review meeting takes place.
3. As part of the Commission’s joint review, each Party shall confirm, in writing, through its head of government, if it wishes to extend the term of the Agreement for another 16-year period. If each Party confirms its desire to extend the Agreement, the term of the Agreement shall be automatically extended for another 16 years and the Commission shall conduct a joint review and consider extension of the Agreement term no later than at the end of the next six-year period.
4. If, as part of a six-year review, a Party does not confirm its wish to extend the term of the Agreement for another 16-year period, the Commission shall meet to conduct a joint review every year for the remainder of the term of the Agreement. If one or more Parties did not confirm their desire to extend the Agreement for another 16-year term at the conclusion of a given joint review, at any time between the conclusion of that review and expiry of the Agreement, the Parties may automatically extend the term of the Agreement for another 16 years by confirming in writing, through their respective head of government, their wish to extend the Agreement for another 16-year period.
5. At any point when the Parties decide to extend the term of the Agreement for another 16-year period, the Commission shall conduct joint reviews every six years thereafter, and the Parties shall have the ability to extend the Agreement after each joint review pursuant to the procedures set forth in paragraphs 3 and 4.
6. At any point in which the Parties do not all confirm their wish to extend the term of the Agreement, paragraph 4 shall apply.
So there are two components here: A mandated review, plus eventual automatic expiration if the review does not confirm the parties' desire to extend the agreement.
In my view, this provision is completely unnecessary. You can always review a trade agreement, as shown by the review of the existing agreement that led to this new U.S.-Mexico-Canada/NAFTA text, so there is no need for such a review provision. And this sunset-ish clause could in theory trigger the agreement's expiration in 16 years, although that seems unlikely.
Now, you can imagine that at the first 6 year review, which will almost certainly take place after Trump is no longer in office, the three parties review the agreement and make one and only one change: Take out this sunset clause. So maybe it won't be a big deal in practice. Nevertheless, it does create a bit of a risk.
There is also the issue of what Congress will think of it. I suspect they will not like it, but even if they accept it in principle, they better weigh in on how it is supposed to operate in the U.S. political system. The agreement references "the Parties," but does not make clear who within each Party has the responsibility here. Paragraph 3 states that "each Party shall confirm, in writing, through its head of government," but that's just who notifies, as opposed to who decides the question. So which U.S. government branch gets to decide on whether the agreement should be extended as part of this review? What is the role of Congress here? Congress has ceded a lot of power to the President on trade over the years, and if it allows this provision to stay in, it better make sure that it has a full say on whether to confirm that the United States wishes to extend the new NAFTA deal as part of the review.
