I’m not a big fan of Monbiot, but his column today on Trump's attempt to insert a five-year sunset clause into NAFTA is almost bang-on.
In the 1940s the world’s statesmen designed the Bretton Woods system, which they thought was an international monetary system built to last. Major exchange rates were fixed. Imbalances are supposed to be absorbed by inflation, capital controls, and occasional devaluations.
In the 1990s the world’s diplomats designed an elaborate international trade system of WTO and regional treaties. It abolished most non agricultural quotas, replaced the 1980s’ political agreements with a ostensibly rule-based system, and locked in the zeitgeist of free trade and free markets. They saw all that they created, and thought it was very good.
But things change over time. Priorities evolve. What was once held dear may become irrelevant. If one part of the machine were fixed, then either some other parts of it have to move more to accommodate the fluctuations, or tensions can build up and eventually break the fixed component. When Nixon nixed Bretton Woods in 1971, the system Keynes and Morgenthau designed already felt tired and has seen a few devaluation crises.
That’s why sunset clauses can be good. Five years is quite probably too short, but new issues and new priorities can be addressed in renegotiations every 10 or 15 years. Sunset clauses may also make agreements less controversial: as every mobile operator knows, it’s easier to get people on one-month rolling contracts than a two-year fixed contract, despite most of them then stay on for more than two years.
What about business certainty? Well, we at present have treaties that were written to last, and do we have a lot of business certainty? If there had been sunset clauses, investors at least could be more certain about when to lobby.
In the 1940s the world’s statesmen designed the Bretton Woods system, which they thought was an international monetary system built to last. Major exchange rates were fixed. Imbalances are supposed to be absorbed by inflation, capital controls, and occasional devaluations.
In the 1990s the world’s diplomats designed an elaborate international trade system of WTO and regional treaties. It abolished most non agricultural quotas, replaced the 1980s’ political agreements with a ostensibly rule-based system, and locked in the zeitgeist of free trade and free markets. They saw all that they created, and thought it was very good.
But things change over time. Priorities evolve. What was once held dear may become irrelevant. If one part of the machine were fixed, then either some other parts of it have to move more to accommodate the fluctuations, or tensions can build up and eventually break the fixed component. When Nixon nixed Bretton Woods in 1971, the system Keynes and Morgenthau designed already felt tired and has seen a few devaluation crises.
That’s why sunset clauses can be good. Five years is quite probably too short, but new issues and new priorities can be addressed in renegotiations every 10 or 15 years. Sunset clauses may also make agreements less controversial: as every mobile operator knows, it’s easier to get people on one-month rolling contracts than a two-year fixed contract, despite most of them then stay on for more than two years.
What about business certainty? Well, we at present have treaties that were written to last, and do we have a lot of business certainty? If there had been sunset clauses, investors at least could be more certain about when to lobby.
