By requiring NAFTA to be affirmatively reauthorized every five years, if outcomes don’t improve, more changes can be made or the pact ended. Losses won’t continue indefinitely, as with the original NAFTA.
How does NAFTA 2.0 measure up?
The new NAFTA text does not include a meaningful sunset provision. Rather than requiring an affirmative vote to continue the pact after its first five years in effect, the text includes language stating that the new pact’s term will be 16 years. The parties are to meet for a review after the first six years, at which point if they all agree, the pact is granted another 16-year timeframe and so on. If during any such six-year review, one party does not agree to the next 16-year extension, the joint reviews are to be conducted annually. At any point in that process, the parties can agree to another 16-year reset. Requiring a mandatory review process is better than the status quo NAFTA, which requires no reviews. This will shine some attention on the new deal’s outcomes if it goes into effect. But the “Review and Term Extension” provision in the new text does not really provide a meaningful change with respect to either of the prospective benefits of an actual sunset clause. First, even if it were not extended, the 16-year term is too long to add uncertainty to investors’ outsourcing decisions. Second, given that the real test of NAFTA renegotiations – whether the deal is “fixed” – is whether changes, if enacted, would alleviate NAFTA’s ongoing damage. Establishing a limited time period to measure the results was critical, as was requiring the parties to have to take action to continue the pact, not to stop it.