Why The USMCA “Non-Market” Clause is Not a “Trump Veto” and Is Actually Good For Canada & Mexico

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There is much hype on the so-called “non-market” clause in the USMCA (aka. NAFTA 2.0):

  • ‘Astonishing’ clause in new deal suggests Trump wants leverage over Canada-China trade talks: experts SOURCE
  • Chinese embassy in Canada condemns ‘US veto’ clause in North America trade deal SOURCE
  • Beijing attacks USMCA clause seen as blocking efforts to expand trade with Canada, Mexico SOURCE
  • Alarm bells ring over non-market economy clause SOURCE

and it many political opponents wrote things like:

Conservative MP Michael Chong accused the Liberals of giving up a significant degree of sovereignty in the USMCA deal. “We now have to ask for Washington’s permission to enter into trade negotiations with certain countries that the U.S will designate as non-market countries,” he said Friday. “It literally makes us a vassal state of the Americans.” SOURCE 

These headlines may sell newspapers, make points for political parties or garner clicks but they seriously mislead the reader and miss a critical point.

What Does the USMCA Non-Market Clause Actually State?

usmca-non-market-economy-full-textSo what does the clause actually say?  We have the full text available for you in USMCA Chapter 32 -Exceptions and General Provisions a PDF and to the right is a copy of the of the Non-Market clause.

In summary this Non-Market clause simply requires Canada, the US and Mexico to notify each other if they start working on a Chinese trade deal.

How Is the USMCA Non-Market Clause Not A ‘Trump Veto’?

The Non-Market clause is not a Trump veto in many ways:

  1. The clause does not give President Donald Trump, or any other US Government official the right to block Canada or Mexico from negotiating with China
  2. The clause does give all 3 parties to the contract (US, Canada and Mexico) the OPTION to withdraw from the USMCA if one of the other countries negotiates a deal with China, but:
    1. The US, Canada or Mexico can give notice and pull out of the USMCA for any reason at any time with just 6 months notice
    2. In the end all functioning trade deals are ‘good faith’ deals meaning that they only work when the parties agree to have them work.  Any party can just walk away at anytime even without notice and there is little that can be done about it.  If you doubt that, consider the number of times Canada has won trade disputes against the US in various courts but not collected a penny in compensation or even had the illegal tariffs and taxes refunded.
  3. President Trump may only be in power for 2 more years but the USMCA will likely live on for decades

How Is the USMCA Non-Market Clause Good For Canada & Mexico?

  1. This clause is reciprocal to all three parties, meaning that the US must also notify Canada and Mexico if the US starts a negotiations with China.  That is very likely to happen with in next US President’s term
  2. This is the first time in history the US has been REQUIRED to notify Canada and Mexico of any other trade talks
  3. Just as a general principle, trade partners should be notifying each other of any large scale deals they are working on as a matter of good relations
  4. The Chinese are not upset about this clause because it limits Canada or Mexico.  The Chinese are upset about the clause because they are now unable to negotiate a secret deal.  This is bad for China but keeps the US, Canada and Mexico informed and strong

What Does Former Canadian Prime Minister Brian Mulroney Say About The Non-Market Clause and the USMCA in General?

Former Canadian Prime Minister Brian Mulroney who drove the original NAFTA 1.0 told Bloomberg:

“I think when you join any organization – the United Nations, NATO, NORAD, the G7 — you surrender a little bit of sovereignty in the interest of international cooperation, advancement, and success,” Mulroney told BNN Bloomberg’s Amanda Lang in an interview Wednesday:

 

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