\u201cGiven the worsening trade relationship with the U.S., Canada had wanted to explore a free trade agreement with China\u201d \u2014 Eric Miller<\/em><\/p>\n<\/blockquote>\n \u201cThe continent as a whole now stands united against what Im going to call unfair trading practices by you know who \u2014 it starts with a C and ends with an A,\u201d he told reporters on Tuesday outside the White House.<\/p>\n The Canadian government has made a policy priority of diversifying trade away from its heavy reliance on United States markets. Asked how much influence the U.S. will have on any Canadian talks with China at a press conference Monday, Prime Minister Justin Trudeau said only that \u201cwere going to continue to engage in increasing our trade footprint around the world.\u201d<\/p>\n Foreign Minister Chrystia Freeland played down the significance of the measure, noting that any party to the agreement can leave for any number of reasons. \u201cEach country should have the right to make a sovereign decision about whether it wants to remain in a trade agreement.\u201d<\/p>\n However, the provision could complicate any attempt to open negotiations with China \u2014 something the Trudeau government attempted last year.<\/p>\n Chinese Premier Li Keqiang (right) and Canadas Prime Minister Justin Trudeau (left) listen to their national anthems during a welcoming ceremony in Beijing, China | Lintao Zhang\/Getty Images<\/p>\n The nonmarket economy clause did not receive much attention during the negotiations, but it is something Canada initially resisted. A senior Canadian official told POLITICO last month that the language was the No. 3 or 4 remaining sticking point in the negations at that time.<\/p>\n The provision is a major victory for the U.S., which was laser-focused on checking Chinas \u201cbackdoor\u201d reach across North America and dealing with Mexicos auto industry, said Dan Ujczo, a Canada-U.S. trade attorney at Dickinson Wright. \u201cThats what NAFTA was about at the end of the day,\u201d he said, and the inclusion of the language is \u201ca message to the rest of the world.\u201d<\/p>\n One of the turning points in the negotiations was when Trudeau visited China in December 2017 in hopes of launching trade talks with the nation \u2014 a trip that raised concerns in Washington.<\/p>\n \u201cGiven the worsening trade relationship with the U.S., Canada had wanted to explore a free-trade agreement with China,\u201d said trade consultant Eric Miller. However, the Trudeau team left Beijing without a commitment to begin work on a free-trade agreement. Such a prospect looks unlikely now.<\/p>\n \u201cThe Trump administration crafted this provision very clearly as a way of putting pressure on Canada,\u201d Miller said.<\/p>\n Don Campbell, a former Canadian deputy minister of trade and NAFTA negotiator, agreed that the clause would prevent the Canadian government exploring free trade with China any time soon. \u201cIn the absence of this clause, they might have been a bit more bold in looking at it,\u201d he said.<\/p>\n \u201cI cant see how a major economy would accept such Finlandization of their trade policy to the U.S.\u201d \u2014 Hosuk Lee-Makiyama<\/em><\/p>\n<\/blockquote>\n Some in Canada, however, see the provision as a challenge to the nations sovereignty. \u201cIts quite astonishing to see that in here. Its unprecedented as far as trade agreements go,\u201d said Rachel Curran, former director of policy to former Canadian prime minister, Stephen Harper. \u201cI dont think free and fair trade with China is possible right now \u2014 but we should be making those decisions ourselves, not handing over the authority to make those decisions to the U.S. \u2014 which is essentially what weve done.\u201d<\/p>\n Meanwhile, Mexico has also been working on extending its trade ties with China. China is now Mexicos third-largest export partner, receiving $5 billion in goods in 2016. Mexico also imports almost 20 percent \u2014 roughly $70 billion \u2014 of its goods from China. Yet, Mexico City probably doesnt view the provision as too bitter of a pill to swallow.<\/p>\n \u201cThere is absolutely no interest in Mexico, none whatsoever, to establish a free-trade agreement [with China],\u201d said Jorge Guajardo, who served as Mexicos envoy to Beijing from 2007 to 2013. \u201cWe have a humongous trade deficit with China. They are killing us, to use the words of President Trump.\u201d<\/p>\n Chinas trade ties have been growing, but to the detriment of Mexico, he said, adding that Mexico was the last country to support Chinas entry into the World Trade Organization. \u201cI dont think any of the three countries will lose anything from this and it just signals to China that they are cornered or isolated,\u201d he said. \u201cI thought it was brilliant, to be honest.\u201d<\/p>\n Juncker and Tusk meet with Chinese President Xi Jinping in Beijing, July 2018 | Pool photo by Ng Han Guan\/Getty Images<\/p>\n European trade officials may see it differently though. Brussels has long treated Chinas economic status with more sensitivity.<\/p>\n \u201cI cant see how a major economy would accept such Finlandization of their trade policy to the U.S.,\u201d said Hosuk Lee-Makiyama, a former Swedish trade diplomat who now serves as director of the European Center for International Political Economy, a Brussels-based think tank.<\/p>\n He noted that Japan is already negotiating Regional Comprehensive Economic Partnership, which includes China, and speculated that Europe is probably destined to enter into some form of negotiation with China within a decade to offload its excess inventories of cars and industrial equipment.<\/p>\n Last year, the European Union approved legislation that scrapped the term \u201cnonmarket economy\u201d as it applied to China, but it still kept a method of calculating anti-dumping tariffs that accounted for Chinas state-run economy.<\/p>\n Analysts perceived the U.S.s insistence on the language as an attempt to create a new partnership hemming in China, much as the 12-country Trans-Pacific Partnership was intended to do when it was signed in 2016, before the U.S. withdrew from the pact.<\/p>\n \u201cThe U.S. will try to reach a similar agreement with other countries surrounding China, including Japan\u201d \u2014 Kotaro Tamura<\/em><\/p>\n<\/blockquote>\n Kotaro Tamura, an Asia fellow at the Milken Institute and a former senator and parliamentary secretary in charge of economic and fiscal policy in Japans Cabinet office, said the new North American trade deal \u201cwill definitely be the [new] blueprint to contain China in terms of trade.\u201d<\/p>\n \u201cThe U.S. will try to reach a similar agreement with other countries surrounding China, including Japan,\u201d Tamura told<\/a> the South China Morning Post, a POLITICO content partner.<\/p>\n Christine Loh, an adjunct professor at the Hong Kong University of Science and Technology, predicted the U.S. moves to form new trade alliances during its heated trade war with China would \u201cchange supply chains all over the world.\u201d<\/p>\n Some industries, such as garment and shoe manufacturing, have already started to move out of China to other developing economies with lower labor, energy and rental costs, Loh noted. Chinese businesses have started to join the exodus, with the U.S.s recent tariffs on Chinese goods the final blow to their ability to make a profit at home, the South China Morning Post, a newspaper based in Hong Kong, reported.<\/p>\n The fine print of the new United States-Mexico-Canada Agreement includes a provision that requires a..<\/p>\n","protected":false},"author":1,"featured_media":92926,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[202],"tags":[],"class_list":["post-92925","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\n![](\"https:\/\/www.politico.eu\/wp-content\/uploads\/2018\/10\/GettyImages-885255022-714x476.jpg\"\/)
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