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China's hopes of negotiating a free trade agreement with Canada and Mexico have suffered a serious setback, trade experts said Tuesday, after a clause in the new U.S. - Mexico - Canada trade agreement aimed at banning such agreements with "non-market" countries.
Container terminal, Yangshan Port, Shanghai, April 24, 2018. REUTERS/Aly Song
The clause specifies that if any member of the North American Free Trade Agreement (NAFTA) concludes a free trade agreement with a "non-market" country such as China, other member states can withdraw and establish their own bilateral trade agreements after six months.
This clause is in line with the wishes of U.S. President Trump, who wants to isolate China economically and prevent China from using Canada and Mexico as "backdoors" to sell its products to the United States duty-free. The provision was controversial in Canada.
Under this clause, members of the US-Mexico-Canada Agreement (USMCA) must notify other members three months in advance of such negotiations.
Derek Scissors, a China expert at the American Enterprise Institute (AEI) in Washington, said the clause enabled the Trump administration to effectively veto any trade agreement between Canada or Mexico and China.
If this clause is repeated in negotiations between the United States, the European Union and Japan, it could lead to China being isolated from the global trading system.
"For Canada and Mexico, we have reason to believe that a free trade agreement with China is possible. It's not very fast, but it's a very elegant solution, "Scissors said. "Any agreement with China is not worth comparing with the loss of the revised USMCA," Scissors added.


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