USMCA: national treatment and MFN

The Agreement between Mexico, the United States and Canada (USMCA) includes concepts of Most Favored Nation (MFN), national treatment and minimum standard of treatment.

With respect to MFN and national treatment, the USMCA, like the North American Free Trade Agreement (NAFTA), requires each Party to accord to investors and covered investments of another Party treatment no less favorable than that it accords, in like circumstances, to its own investors and their investments (in the case of national treatment), or to investors and investments of another Party or of a non-Party (in the case of MFN treatment).

The USMCA includes additional language for greater certainty that whether treatment is granted in «like circumstances» depends on the totality of the circumstances, including whether the treatment in question distinguishes between investors or investments based on legitimate public welfare objectives.

With respect to the minimum standard of treatment, the USMCA, like NAFTA, requires each Party to accord covered investments «treatment in accordance with customary international law.»

USMCA

Furthermore, the USMCA clarifies that the concepts of «fair and equitable treatment» and «full protection and security» do not require treatment in addition to or beyond that required by the minimum standard of treatment of aliens under customary international law, and do not create additional substantive rights.

Finally, the USMCA includes additional language for greater certainty that the mere fact that a Party takes or fails to take an action that may be inconsistent with an investor’s expectations does not constitute a breach of the minimum standard of treatment, even if there is loss or damage to the covered investment as a result.

On July 1, 2020, the USMCA, a trilateral free trade agreement between the United States, Mexico and Canada, entered into force. The USMCA is substantially based on the previous trilateral agreement between the three countries that the USMCA was intended to replace, NAFTA, in force since 1994.