New USMCA “Free” Trade Agreement will shut out China

Mexico, the United States, and Canada

have agreed that signing a trade agreement with countries such as China, Venezuela , or economies that are not considered to be market-oriented could jeopardize the new trilateral agreement.

According to conditions signed by the North American governments which are subject to revision by each of their congresses, restrictions were made to prevent said countries from participating in trade agreements with nations that show a strong government intervention in productive activities.

This clause, which appears in the United States, Mexico, and Canada Agreement (USMCA) establishes that if one of the North American countries wants to negotiate with a non-market-oriented economy, it will be forced to notify its counterparts, which will in turn be allowed to intervene.

If any of the countries considers that the relationship with a non-market-oriented third party represents a risk for the region’s commercial activity, partner countries can cancel the trilateral agreement and sign bilateral ones in turn.

The chairman of Mexico’s Business Coordinating Council (CCE), Juan Pablo Castañón , stated that the United States was looking to protect North America’s productive plant so that they would not become associated with countries in which the government granted subsidies, intervened in the market, and prevented unfettered free trade. Trump’s initiative has forced Mexico and Canada to commit to his partnership, preventing them from partnering with said type of economy.

In the chapter 32 of the newly signed agreement, entitled “Exceptions and general provisions: Commercial trades with non-market economies,” rules are established that make if difficult for the countries involved to establish agreements with countries that have not been acknowledged as “market economies.”

Juan Pablo Castañón stated that it was very important that the clause was included in the agreement. “We are associating with countries that foster market freedom and free trade in a globalized world, which is why it is important that we don’t associate with countries in which the government intervenes in the economy by giving subsidies and such, because that would put us in an unequal competition with other economies. What we want is to protect jobs and avoid unequal competition,” he stressed.

The agreement establishes that any negotiation with a country that is not considered to be part of the free market must be notified 3 months in advance to the other parties involved in the USMCA so that they may revise the conditions established and evaluate the “potential impact” to the North American “free” trade agreement.

“If one of the parties establishes a free trade agreement with a non-market-oriented economy, the other partners will be able to cancel the agreement in six months time , after which the trilateral agreement would be replaced with customized bilateral ones.

USMCA: The new trilateral agreement signed by Canada, the US, and Mexico

Despite of the fact that Mexico could not sign a free trade agreement with China, because of the new trilateral understanding. The next mexican administration said that they are considering to strengthen the relationship with this asian country. “We are considering to expand the relationship with China”, said the next vice minister of international commerce of the Minister of Economy of Mexico, Luz María de la Mora.

Between Mexico and China there is a lot of trade, mexican authorities now that said the coordinator of the Laboratory of Analysis of Economy, Trade, and Business from the National Autonomous University of Mexico, Ignacio Martínez. “China es the second largest parther to Mexico, despite there is no free trade agreement, between them”, said.

In 2017 the bilateral trade reached the amount of 81 billions of dollars. From this total 74 billions of dollars where products sent from China to the mexican market and almost 7 billions of dollars were the export from Mexico to that asian economy.

Although the intention of the next mexican government of strengthen the relationship with China, there is no possibility to sign a free trade agreement, there is real fact, said the specialist.

United States is not going to approve that Mexico signs an understanding with the Chinese economy, so the reality is that there is no space to reach something with the Chinese government, because is not a market economy, said Martínez.

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