OTTAWA – Signing on to an article in the new USMCA that requires Canada to consult the agreement’s other signatories when it embarks on a new trade deal with a "non-market" country is the "practical reality" in the business world, says Finance Minister Bill Morneau.
At the eleventh hour last Sunday, Canada concluded fourteen months of NAFTA renegotiations by agreeing to a new North American trade pact, called the United States-Mexico-Canada Agreement, or USMCA. The new deal includes a varying degree of concessions and changes to the trade rules between the three countries.
One of the final chapters in the deal has raised the eyebrows of some trade experts, and critics of the federal Liberal government are asking how it could impact Canada's sovereignty when it comes to making future trade deals, specifically with China, given the trade threats and tariffs that U.S. President Donald Trump has levelled against the Asian nation.
Chapter 32 of the USMCA includes an article on "non-market country" free-trade agreements. It states that the signatories are required to give notice to the other countries in the deal, if they intend to negotiate a free trade agreement with a “non-market” country that is not already in a free trade agreement with one of the UMSCA countries.
The other two countries in USMCA would then have time to review the full text of whatever agreement is reached to assess what impact it would have on the USMCA, and allow for a country in the deal to trigger the six-month pullout mechanism to withdraw from the USMAC if they don’t like the new deal their partner is making.
Asked about this on CTV's Question Period, Morneau defended having to run possible new deals by the USMCA partners, as "just a practical reality" in the business world.
"We've got an ongoing agreement with the United States, we've of course got an agenda where we want to diversify trade and that includes to places like China. The United States knows this, this is not new," Morneau said.
"In the previous agreement of course, the United States had the ability to leave NAFTA on six months' notice, in the new agreement they have the ability to leave if they don't like what we're doing with China, we’re just going to be practical in dealing with this."
He said that having this new wording in the deal "changes absolutely nothing," and downplayed the concern voiced by some trade experts.
"Every person who had a business" would run a prospective new arrangement past a current business partner, he said.
Time to follow through: Burney
On Friday, a spokesperson for the Chinese Embassy in Ottawa issued a contemptuous statement about the clause and disputed being considered a non-market country, saying "we deplore the hegemonic actions taken by some country, which blatantly interferes with other country’s sovereignty."
Seeking to dispel concern over this aspect of the deal in the days following it being announced, Prime Minister Justin Trudeau said Canada still intends to further trade talks with China. Canada has moved towards formally engaging China in free-trade talks, though they stalled late last year, with little movement since. Meanwhile, Trump has engaged China in a trade war, with indications that it’s set to ramp up now that NAFTA talks have wrapped.
If the federal government is serious about following through on a Canada-China trade deal, now’s the time to follow through and prove that the clause is meaningless, said former Canadian ambassador to the U.S. Derek Burney on CTV’s Question Period.
"It really was a Trump knuckleball at the last minute that I don’t think anybody heard anything about this in all of the preamble to the negotiation. One argument is that it's a nothing burger because the six-month clause is there for the whole agreement regardless of circumstance, but it is a bit of a reach in terms of extraterritoriality that doesn’t make me feel particularly good," Burney said.
"It's a political shot across the bow of the agreement to China, no question about it."
In the wide-spanning interview, Morneau also said that dairy farmers and others in supply managed sectors will be "compensated in a way that's appropriate" for the concessions made by giving Americans more access to the Canadian market. He also commented on how the government could mitigate the cost of some biological drugs increasing as the result of patents being extended by two years.
Watch the entire interview on CTV News Channel, CTVNews.ca, CTV News GO, an don CTV News’ Facebook page at 11 a.m. ET on Sunday.
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