Canada and Mexico Agree to U.S. Approval Authority of Any Future Trade Agreements With 3rd Parties

CTH: Biggest U.S. Trade Win in the History of all U.S. Trade Constructs !

I’m still going through the USMCA text (even speed reading, it will likely take a while); here’s the link to the AGREEMENT DETAILS.  However, many people have asked about how the NAFTA loophole was being closed.

Well, the answer is exactly what it had to be – there was really no option.  The U.S. now has veto authority over any trade deal made by Canada and/or Mexico with third parties.  This is what Ambassador Lighthizer described as the “Third pillar”.

Last year, despite the inevitability of it, we didn’t think Canada and Mexico would agree to it.  The NAFTA loophole was/is a zero-sum issue: Either Can/Mex agree to give veto authority to the U.S. –OR– President Trump had no option to exit NAFTA completely.

Well, Canada and Mexico have agreed to the former, so there’s no need for the latter.

Both Canada and Mexico structured key parts of their independent trade agreements to take advantage of their unique access to the U.S. market.  Mexico and Canada generate billions in economic activity through exploiting the NAFTA loophole.  China, Asia (writ large), and the EU enter into trade agreements with Mexico and Canada as back-doors into the U.S. market.  So long as corporations can avoid U.S. tariffs by going through Canada and Mexico they would continue to exploit this approach.

By shipping parts to Mexico and/or Canada; and by deploying satellite manufacturing and assembly facilities in Canada and/or Mexico; China, Asia and to a lesser extent EU corporations exploited a loophole.  Through a process of building, assembling or manufacturing their products in Mexico/Canada those foreign corporations can skirt U.S. trade tariffs and direct U.S. trade agreements.  The finished foreign products entered the U.S. under NAFTA rules.

Why deal with the U.S. when you can just deal with Mexico, and use NAFTA rules to ship your product directly into the U.S. market? more