Trade representatives and leaders from the oil and gas, auto and agriculture industries condemned a proposed “sunset clause” for the North American Free Trade Agreement Monday, decrying a measure they said would destabilize business under the agreement.
Testifying in San Antonio before a U.S. Senate subcommittee on the fate of NAFTA, the business leaders and trade officials contended that it would be detrimental to include a five-year, do-or-die clause as suggested by U.S. negotiators acting on behalf of the Trump Administration.
“In agriculture, not only is the investment long, but the investment is long term,” said Russell Boening, president of the Texas Farm Bureau. “Once you lose markets … and you lose some of that infrastructure, you may never get it back. And that’s, you know, it’s scary for lack of a better term. So I think anything that creates uncertainty will [negatively] impact our industry.”
U.S. Sen. John Cornyn (R- Texas), chairman of the Senate Subcommittee on International Trade, Customs, and Global Competitiveness, agreed with the panelists, telling reporters after the hearing that a sunset clause would “dampen” the benefits of free trade by introducing regulatory and market uncertainty. The sunset proposal, he said, “strikes me as undermining the whole process.”
Despite support for NAFTA in Texas, a state he won handily, President Trump has long disparaged and vowed to renegotiate the NAFTA agreement. The sunset clause, which would require the United States, Mexico, and Canada to renew NAFTA 2.0 in five years or accept its termination, was officially introduced to the already-tense negotiations by the Office of the U.S. Trade Representative during the fifth round of talks earlier this month in Mexico City.
But the proposal has been circulating since September and was lambasted by trade negotiators from Canada and Mexico. Many industry leaders in the U.S. agree.
Cornyn heard testimony Monday from the panel at the conference center of the San Antonio Marriott Plaza Hotel – in the same room that the original NAFTA deal was signed in October 1992.
“The numbers speak for themselves,” he said, citing the millions of job and billions in shared economic impact the agreement has had. But updates are needed that will “do no harm.”
For example, the auto manufacturing industry and energy sectors depend on long-term contracts and regulations that last well beyond five years, said Mitch Bainwol, Alliance of Automobile Manufacturers CEO and president, and Todd Staples, president of the Texas Oil and Gas Association.
Threats by President Donald Trump to pull out of the agreement and the negotiation process itself have “already had a negative impact,” said Paola Avila, chair of the Border Trade Alliance based in San Diego, California and “that uncertainty would carry over for five years.”
Richard Perez, president and chief executive officer of the San Antonio Chamber of Commerce, said San Antonio business leaders have already felt the “chilling effect on growth” that the NAFTA 2.0 negotiations have brought.
Before hearing from the panel, Cornyn asked Stephen Vaughn, General Counsel for the U.S. Trade Representative, why the proposal was brought to the table.
“One of the things that we want to avoid going forward is another situation like what we’re in now, where we have an agreement that is somewhat out of date,” Vaughn said. “One of the things I think that the process shows is that it takes a fair amount of political pressure in order to get nations together to work on these agreements.”
A sunset provision could essentially force them all to discuss the agreement, he said, and “make sure that it’s working the way it was intended.”
One of the U.S.’s negotiating objectives, according to an updated summary released on Friday is to: “Provide a mechanism for ensuring that the Parties assess the benefits of the Agreement on a periodic basis.”
Click here to download the full summary.
According to the Associated Press, Mexico would consider a review of NAFTA every five years, but “but not the kind of ‘sunset clause’ the United States is reportedly seeking.”
About 14 million American jobs are supported by trade with Canada and Mexico, according to the U.S. Chamber of Commerce, and 970,000 of those jobs are in Texas.
Threats to withdraw from the talks may just be part of a “negotiating technique,” Cornyn said after the hearing, adding that he’s confident the negotiations will be successful.
“I don’t see failure as an option,” he said.
If Trump pulled the U.S. out of NAFTA, there would likely be lengthy litigation over his authority to do so, Cornyn said. Once a deal is drafted by the negotiating team, he emphasized, it will still need to be approved by Congress.
“The economic impact that NAFTA has had on our city has been fruitful to all parties involved,” Mayor Ron Nirenberg said before the testimony began. “We expect that impact to continue if NAFTA remains in place. … Successful negotiation is critical to all of our countries. A new NAFTA that operates under a system that works more efficiently and provides balanced trade for all will help us move forward.”