A monumental trade deal may have slipped away because of a controversial US demand, Canadian Prime Minister Justin Trudeau told reporters Thursday.
Trudeau held a press conference to announce Canada’s response to President Donald Trump’s steel and aluminum tariffs. He said the US and Canada were inches away from locking down a new version of the North American Free Trade Agreement, or NAFTA.
But the Trump administration made one demand a precondition of talks, Trudeau said, which ruined the chances of a deal.
Trudeau said the three countries were down to a “final dealmaking moment” for NAFTA last Friday. With a deal so close, the Canadian leader told Trump that the two should meet with Mexican President Enrique Pena Nieto to hash out final details. Typically, such high-level talks come only later in the negotiations.
But Trudeau received word on Tuesday from Vice President Mike Pence that any sit-down would require that Canada agree to a sunset clause for the new version of NAFTA.
A sunset clause would require the three countries to reevaluate NAFTA after five years at a time. The sunset clause could allow any of the countries to walk away from the deal at those intervals.
Canada and Mexico are staunchly opposed to the sunset clause because the provision would introduce significant uncertainty into their respective economies. For example, a business considering where to place a new factory may not want to build in Canada if there a chance the US would pull out of NAFTA before it built the factory.
Instead of a sunset clause, Canada and Mexico have proposed a five-year review to study the effects of NAFTA on the members countries. In contrast to the US proposal, this type of review would not give the countries the option to jump out of the deal.
Given Canada’s opposition to the sunset clause, Trudeau told reporters that he called off the meeting.
A White House official disputed the prime minister’s characterization of the events to Business Insider. According to the official, Trudeau exaggerated just how close to a NAFTA deal the three sides were.
“It’s simply inaccurate for the prime minster to frame it as the parties having been on the cusp of a deal and then it fell apart over a sunset clause,” the official said. “There were still major issues that needed to be resolved.”
The official said that Trump and Pence believe that a high-level meeting with Trudeau on NAFTA would still be “premature” given the issues left to resolve.
In addition to the sunset clause, the three countries are also hung up on rules pertaining to auto imports and investor disputes with governments of the other members.
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