Economy Minister Ildefonso Guajardo said Mexico is willing toreview the North American Free Trade Agreement every five years,accepting part of a U.S. proposal, while insisting that there mustnot be any clause that would lead to automatic termination of thedeal.

The Mexican counter-offer comes after U.S. President DonaldTrump's administration proposed a sunset clause, under which NAFTAwould end after five years unless the parties can agree to extendit. Guajardo told Mexico's Radio Formula on Wednesday that theclause is unnecessary because the nations already have the abilityto withdraw by giving six months' notice.

“We're going to bring a proposal that every five years weevaluate what has been happening with an agenda of analysis of whateffects our agreement has had, and based on this each country candecide what they want to do going forward,” Guajardo said. “But itwouldn't have the impact of a sudden death, because this would senda bad signal to investors.”

The Mexican peso pared its loss following Guajardo's comments,falling 0.4 percent to 19.2509 per dollar in afternoon trading inMexico City.

The fifth round of NAFTA talks began in Mexico City Wednesdaywith Guajardo, U.S. Trade Representative Robert Lighthizer andCanadian Foreign Minister Chrystia Freeland announcing that they'llskip the talks for the first time and leave discussions to theirnegotiating teams. They held “substantial” discussions at aAsia-Pacific Economic Cooperation gathering in Vietnam last week,according to a joint statement Wednesday. This round of talks isscheduled to run through Nov. 21.

Guajardo said that while a U.S. NAFTA withdrawal can't bediscarded entirely, the chance of that happening by the end of thisyear is not high. Negotiators in this round will try to wrap uptalks on topics where work is already at an advanced stage,including telecommunications and e-commerce, and Mexico is pushinghard to finish work on anti-corruption measures, he said.

At last month's round, the parties agreed to extend talksthrough March, abandoning a December deadline, after the U.S.introduced its toughest proposals that were essentially rejected byCanada and Mexico. The challenge remains to seal a deal beforepolitics overwhelm the trade agenda next year when Mexico holdspresidential elections and the U.S. has congressional midterms.

U.S. Commerce Secretary Wilbur Ross said on Tuesday it “would bean enormously complex thing” to get a deal by the end of scheduledtalks in March, though he expects “some sort” of agreement forTrump to consider. “NAFTA is on a very short time fuse,” hesaid.

There are 28 negotiating areas in total, with the mostcontentious U.S. demands being on dairy, automotive content,dispute panels, government procurement and the five-year sunsetclause. All parties appear to be waiting for the other to blinkfirst. Ross stood his ground this week, saying “the idea of afive-year sunset has been part of the president's thinking sincethe campaign.”

From: Bloomberg News

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