As has been widely reported, the new NAFTA agreement (USMCA) contains what has been branded a “loyalty oath” among the US, Canada and Mexico.
What is this “loyalty oath”?
In short, the oath says that in the event any USMCA member enters into a free trade agreement (FTA) with a non-market country, the other two remaining countries can leave the agreement and form their own bilateral trade pact.
Why is this clause in the USMCA?
This clause is likely an effort by the US Administration to isolate China economically since neither Canada or Mexico would want to leave the USMCA. This clause is also aimed at limiting the imports from China to Mexico/Canada for shipment into the US duty free.
Is a “loyalty oath” found in other trade agreements?
Currently, no, however this inclusion in the USMCA may be an indication of what will occur in future trade agreements to further isolate China from their trading partners.
Is the “loyalty oath” set in stone?
Right now, no, the disclaimer on the current USMCA text states: “Subject to Legal Review for Accuracy, Clarity, and Consistency Subject to Language Authentication“. Only upon ratification by all countries can we know for sure whether this is in the agreement.
What is a market or non-market economy?
This loyalty oath against non-market economies is likely aimed at China while not specifically named in the agreement. Beijing has asked for recognition as a “market economy” within the World Trade Organization (WTO) since their accession agreement expired in December 2016. If China is branded a “market economy”, this would limit trade remedies such as anti-dumping/countervailing duties to be used against Chinese imports.
What are the non-market economies around the world?
According to the European Union, besides China, the other non-market economies include Vietnam, Kazakhstan, Albania, Armenia, Azerbaijan, Belarus, Georgia, the Democratic People’s Republic of Korea, Kyrgyzstan, Moldova, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan.
Where can I read the full text of the “loyalty oath”
I could not find any news sources that cited the USMCA section.
The exact text of the oath is copied below:
4. Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement).
The official PDF on the US Trade Representative website can be accessed here: (last accessed October 9, 2018).
See Article 32.10 (4)
If you have any questions about NAFTA or the USMCA and how this may impact your business, call experienced trade attorney, David Hsu at 832-896-6288 or by email at email@example.com.