U.S. President Donald Trump points to a member of the media as he speaks during a news conference on trade between the United States, Canada, and Mexico, and the nomination of Brett Cavanaugh to the Supreme Court, in the Rose Garden of the White House, Monday, Oct. 1, 2018, in Washington. (AP Photo/Pablo Martinez Monsivais)

TORONTO — By signing on to the new North American free trade pact, Canada has chosen the United States over China and, in so doing, will be pulled into the Americans’ trade war with the world’s second-largest economy, say experts.

The United States-Mexico-Canada Agreement (USMCA), announced late Sunday night, includes a clause that essentially gives the U.S. veto power over free trade deals that Canada negotiates with a “non-market country.”

“Read: China,” said former trade negotiator Peter Clark in an interview with iPolitics about the clause.

A non-market country is a country that doesn’t operate on free-market principles, so pricing doesn’t reflect the true value of a product. University of British Columbia professor Yves Tiberghien said all countries have some interventions, but China “takes it to another degree.”

Section 31.10 of the USMCA requires all signatories to give three months’ notice before starting free trade talks with a non-market country and to provide the text of a trade deal with that country in advance. It also gives the USMCA signatories the option to bow out of the agreement if they don’t like what they see in the separate deal.

“It’s very, very unusual. I’ve never seen a clause like this in any trade agreement,” Clark said.

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To fit into the non-market category, all that one of the signatories has to do is have that country on its list before the USMCA deal is signed. And the United States has already added China to its list.

Ultimately, Clark said, the clause makes it “very unattractive and uncertain” for Canada to enter trade talks with China because it risks the wrath of the United States. “They’re trying to get us involved in their war against China.”

Put another way, Tiberghien said the new trilateral deal is “conditional on not having a deal with China.”

Asked about the clause at a Monday-afternoon news conference, both Prime Minister Justin Trudeau and Foreign Affairs Minister Chrystia Freeland downplayed its significance.

Trudeau said trade diversification is still an “extremely important part of growing the Canadian economy,” stressing that his government is going to “continue to engage in increasing our trade footprint.”

Freeland dismissed it as a standard element of any trade agreement.

It’s a “possibility which exists, no matter what. NAFTA, like any trade agreement, has a way for parties to leave,” she said.

While accurate, Clark said there’s a clear difference between this clause and other exit clauses because of what triggers it.

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Eric Miller, an adviser on trade negotiations and president of the Rideau Potomac Strategy Group, said it’s clear the clause “makes you choose between the United States and China.”

Canada’s decision to sign a new North American trade deal with a clause that limits the chances of a free trade deal with China comes after Canada tried — and failed — to start free trade talks with the world’s second-largest economy last year.

It also follows a ratcheting-up of the tit-for-tat trade war between the United States and China, in which the two countries are taking turns imposing tariffs.

“We’re entering a new cold war between China and the U.S.,” Miller said, adding there have been a “number of moves lately by the United States to attempt to limit China’s influence in the Western Hemisphere.”

He said the non-market-country clause in the USMCA is “consistent with that approach.”

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What’s motivating the White House, according to Miller, is that the United States doesn’t want China to have a free trade deal in America’s “backyard.” He said the Trump administration already has serious concerns about China shipping goods to the U.S. through Canada, and this was an “important geopolitical play” to limit that.

Tiberghien, who is also a distinguished fellow at the Asia Pacific Foundation of Canada, said the trade-off struck by Canada will come with a high long-term price.

“To let the number 1 economic power in the world control our access to the number 2 country in the world — which will be number 1 in the future — seems to be a very high cost. No country wants to lose the capacity to do a deal with other countries,” he said.

He agreed it’s a sign that Trump is trying to “drum up a coalition against China.” But he also said it shows Canada has chosen the United States over China.

That makes sense, says Miller, because Canada had to choose between access now and trade in the future.

It came down to a “bird in the hand versus two in the bush,” he said. With 70 per cent of Canadian exports going to the United States, the choice was clear.

Clark called the deal a “leap backwards,” but said Canada didn’t have a choice. If Trudeau’s government hadn’t signed the deal on offer before the Monday deadline, Clark said Ottawa would be “gambling with many, many Canadian jobs.”

“It’s the best (Trudeau) could get in the time available,” he said, adding it doesn’t mean China won’t have a lot of questions for the Canadian government.

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