♦In July, August, September (Q3) of 2018 the new NAFTA negotiation was in the final stages. The U.S. and Mexico had already come to the terms; Canada was the outlier having to re-join an agreement in September where they previously abandoned negotiations.
♦On October 1st, 2018, the first day of Q4, the USMCA was unveiled. Now the U.S., Mexico and Canada were all committed. Throughout the fourth quarter, all business interests had an opportunity to review the much anticipated USMCA outcome and details.
Multinational corporations, domestic corporations, U.S. and Canadian businesses were all looking for the same very specific detail: What happened with the NAFTA loophole?
Within the new USMCA the critically important NAFTA loophole was closed.
Over the past three decades both Canada and Mexico structured key parts of their independent trade agreements to take advantage of their unique access to the U.S. market. Under the existing NAFTA, 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 (and rules of origin that pertain to those 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 assembly facilities in Canada and/or Mexico; China, Asia and to a lesser extent EU corporations exploited a NAFTA loophole for rules of origin on finished goods.
Through a process of building, assembling or partially manufacturing their products in Mexico/Canada those foreign corporations could 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?
This exploitative approach, a backdoor to the U.S. market, was the primary reason for massive foreign investment in Canada and Mexico; it was also the primary reason why candidate Donald Trump, now President Donald Trump, wanted to shut down that loophole and renegotiate NAFTA.
At the conclusion of Round #6, just before giving up on Chrystia Freeland for good, this was the direct issue at the heart of a very frustrated U.S.T.R. Lighthizer’s strongly worded response to Canada:
[…] In another proposal, Canada reserved the right to treat the United States and Mexico even worse than other countries if they enter into future agreements. Those other countries may, in fact, even include China, if there is an agreement between China and [Canada]. This proposal, I think if the United States had made it, would be dubbed a “poison pill.” We did not make it, though. Obviously, this is unacceptable to us, and my guess is it is to the Mexican side also.
https://theconservativetreehouse.com/2019/03/02/canadian-economy-halts-gdp-growth-drops-to-0-1-percent-and-no-one-is-talking-about-why/