The Chinese government is denouncing provisions in the proposed U.S.-Mexico-Canada trade deal that would place restrictions on Canada’s ability to negotiate a free-trade deal with China, calling it a “hegemonic action” that “blatantly interferes" with another country’s sovereignty.
A spokesman for the Chinese embassy in Canada also said Beijing will not be deterred from striking trade deals where possible. “No matter how other countries adopt trade-restricting actions against China, China will consistently pursue opening-up at its own pace and continuously [carrying] out mutually beneficial and win-win economic and trade co-operation with countries worldwide," Yang Yundong said.
Asked for comment specifically on the provisions in the trade agreement, the Chinese embassy offered a carefully worded response. “We deplore the hegemonic actions taken by [one] country, which blatantly interferes with other countries' sovereignty. We also feel sad for the harm of economic autonomy inflicted on the relevant country,” Mr. Yang said.
The Chinese embassy did not identify the countries by name in its statement, but a spokesman said anyone could clearly understand the gist of the remarks given the context of recent news stories about the tentative U.S.-Mexico-Canada Agreement (USMCA) and Section 32.10.
That section of the USMCA, reached on Sept. 30, obliges Canada, the United States and Mexico to give one another three months’ notice before starting free-trade talks with a “non-market country.”
The United States has refused to recognize China as a market economy even 17 years after the Asian country joined the World Trade Organization, a position Beijing is now challenging before the global trade body. Washington argues the Chinese economy is too distorted by state subsidies. This U.S. policy makes it easier for American trade regulators to find Chinese firms guilty of dumping goods.
Canada and China have already conducted many rounds of exploratory talks on a free-trade deal but not yet launched official negotiations, and Canadian officials have previously cited a preoccupation with North American free-trade talks as one reason discussions had not moved forward.
Under the USMCA concession, Canada would be obliged, upon request, to “provide as much information as possible regarding the objectives for those negotiations” to the United States. The United States and Mexico would face the same obligations in similar talks.
At least 30 days before Canada would sign a trade deal with a country such as China, it would be required to provide the United States with an opportunity to review the full text of the accord and assess its impact on the USMCA. This concession also gives the United States or Mexico the right to withdraw from the USMCA within six months of Canada signing a trade deal with a non-market economy such as China.
The embassy also decried the USMCA’s decision to distinguish between market and non-market economies, calling it an “excuse made by some countries to shirk their obligations and refuse to meet their international commitments.”
University of Ottawa international affairs professor Roland Paris, who served briefly as Prime Minister Justin Trudeau’s foreign-policy adviser, expressed astonishment Canada would give the United States the ability to vet a bilateral free-trade deal with China.
“It is unusual to give another country a formal role in vetting a trade negotiation that they are not directly involved in,” he said in an interview. “There may be good reasons for us not to want to pursue a free-trade agreement with China, but that should be our decision entirely. It shouldn’t be based on a formal vetting of trade negotiations by a third country.”
However, Mr. Paris said in practice he would expect any Canadian government to be consulting with Washington on the outlines of a trade agreement that could affect U.S. interests, but it is the “formalization of the role that I find unusual.”
The Ontario government accused the Trudeau government of jeopardizing Canada’s sovereignty in the proposed USMCA.
"We’re extremely concerned that the deal forces Canada to inform the U.S. of any intention to pursue negotiations with a non-market economy like China,” Ontario Minister of Economic Development Jim Wilson said in Question Period on Thursday. “We fought to be a sovereign nation, not to give our rights to the Americans.”
The Trudeau government played down the inclusion of Section 32.10. “Under the terms of the USMCA, any party may withdraw from the agreement for any reason, with six months' notice. The provisions for non-market country FTA do not change this,” said Alex Lawrence, a spokesman for Foreign Affairs Minister Chrystia Freeland. “Nothing in this agreement would prevent Canada from deepening its trade ties with other countries.”
The China Canada Business Council, which has long lobbied for a free-trade deal with China, expressed concern with the proposed USMCA and noted that for decades Canada has forged an independent path in its commercial relationship with China. “Section 32.10, as currently worded, appears to complicate any Canadian decision to launch FTA negotiations with China, as well as the process of the negotiations and how approval is obtained,” CCBC executive director Sarah Kutulakos said.
A senior Canadian official said the Liberal government believes the Section 32.10 clause – pushed by U.S. Trade Representative Robert Lighthizer – strengthens Canada in any trade negotiations with Beijing because it allows Canadian negotiators to reject proposals that would offend this country’s North American trading partners.
The official said while Canada had not ceded any sovereignty to Washington, any free-trade negotiations with Beijing would have to be handled very carefully in the current circumstances, in which the United States has launched a trade war with China.
However, the official stressed the agreement does not preclude Canada from doing a bilateral trade deal with China. Finance Minister Bill Morneau will hold preliminary trade and economic talks with senior Chinese officials in Beijing in November.
The official said under the existing NAFTA deal, Canada, the United States or Mexico could leave with six months' notice.
The Canadian official said the Trudeau government’s view is that nothing has changed under the new agreement.