Last week, President Donald Trump fulfilled one of his campaign promises by re-negotiating NAFTA in a way that would be more beneficial to the United States than the previous deal.
Among some of the provisions of the new NAFTA, now called USMCA, is a provision that will greatly benefit US auto makers and auto parts makers.
Also contained in the new USMCA deal is a provision that is designed to hurt trade with countries like China.
A provision basically nullifies any trade deals made by any of the three nations that are made with non-market economies, like that of China.
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(Washington Examiner) – The Trump administration has found a new tool in its trade battle with China: Using deals like the recent U.S.-Mexico-Canada Agreement to try to freeze China out of creating its own deals with trading partners.
Tucked away at the very end of the USMCA deal, under “exceptions and general provisions,” is a section dubbed “Non-Market Country FTA.” It effectively nullifies the deal should any of the three member countries strike a trade deal with a country that “at least one Party has determined to be a non-market economy for purposes of its trade remedy laws.” A country like, say, China.
In other words, the U.S. has pre-empted Mexico and Canada from entering into any kind of trade agreements with China. If they do, then the White House can break the USMCA into two separate bilateral deals, something President Trump has said was his policy preference all along.
“It’s logical, it’s a kind of a poison pill,” Commerce Secretary Wilbur Ross told Reuters Friday.
Trade policy experts say they have never seen anything like this before, even as a concept for policy. “This is completely novel in a trade agreement,” said Gary Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics, calling it the “latest strand in the Cold War that the administration has launched against China.” …
The provision does not specify China but all involved or claim to know about the provision believed that it was intended for China and to prevent any trade with China.
In other references, such as US anti-dumping laws, the term ‘non market economy’ is used as a reference for China.
While USMCA is designed to benefit American workers, this provision is seen more of a political and economic benefit for America more than its workers.
The provision prevents China from trying to circumvent the US tariffs by preventing them from trying to take their trade with either Mexico or Canada.
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