U.S. President Joe Biden and Mexican President Andres Manuel Lopez Obrador listen to Prime Minister Justin Trudeau speak during a joint news conference at the North American Leaders Summit in Mexico City on Jan. 10, 2023.Adrian Wyld/The Canadian Press
The all-important North American free trade agreement is once again at risk. The treaty is up for review, and the Americans will be demanding changes.
They believe China is using the United States-Mexico-Canada Agreement, or USMCA – the successor to NAFTA that was negotiated when Donald Trump was president – to do an end run around tariffs.
It doesn’t matter whether Mr. Trump or Joe Biden is president after the Nov. 5 presidential election. Both Democratic and Republican leaders would be prepared to block the accord’s renewal unless Canada and Mexico make fresh concessions.
Justin Trudeau’s Liberal government launched a successful all-hands-on-deck strategy to save NAFTA the first time around.
It’s all-hands-on-deck time again.
Normally, once all parties sign a trade agreement, that agreement remains in effect until one of the parties withdraws. The USMCA is an exception.
During the last round of negotiations, the Americans demanded that the new treaty contain a sunset clause that would terminate the accord on a given date unless all sides agreed to renew it.
Canada and Mexico objected that businesses would be left with too much uncertainty. The compromise involved all sides agreeing that the USMCA would last from 2020 to 2036. In 2026, all sides would review the agreement and decide whether to extend the treaty for a further 16 years or make changes. If they fail to agree on the changes, the treaty will expire in 2036.
Since the accord was signed, China-U.S. relations have continued to deteriorate.
“There is bipartisanship on the issue of trade with China,” John Dickerman, who leads the Business Council of Canada’s Washington office, told me. “That hangs over every conversation that we have about trade.”
The Americans fear the Chinese could be using the USMCA to get around tariffs and enter the U.S. market through investments in Mexico, especially in the area of electric vehicles.
They want to see real action from Canada on restricting Chinese imports from the Xinjiang Uyghur Autonomous Region. Under the Uyghur Forced Labor Prevention Act, the Americans have turned back more than 3,000 shipments from China of products deemed to have been made with forced labour. Canada’s equivalent law is utterly toothless.
Expect the Americans to demand protections against cheap Chinese imports via the USMCA and insist that Canada adopt a forced-labour law with teeth.
There are other irritants involving energy, manufacturing and the dairy industry. The big questions are whether Canada and Mexico can accept new U.S. demands and whether Congress is prepared to authorize any changes.
International Trade Minister Mary Ng and Industry Minister François-Philippe Champagne have been touring the United States talking up Canada-U.S. trade.
But that’s only the overture. Ottawa will need to mobilize representatives from every level of government, business and labour organizations – and anyone else who might be useful – to remind the Americans why integrated North American trade benefits them.
“It’s going to be a lot more difficult for us” to preserve the USMCA than it was to negotiate it in the first place, said Carlo Dade, the trade director at the Canada West Foundation, a think tank. “We’re going to have to do a lot more work.”
We will need to make the case for the importance of preserving the USMCA, not only in Washington, but in all 50 state capitals, in city halls, in boardrooms and in union halls. Conservative Leader Pierre Poilievre and his caucus should join the effort.
And Canada needs to change its message. “Stop saying trade benefits everyone,” Mr. Dade said. “The Americans just don’t care about that. They want to hear about how trade benefits them. And unless we change our language, we’re going to be talking ourselves into trouble.”
Joshua Meltzer is a senior fellow in the Global Economy and Development program at the Brookings Institution, a Washington think tank. He is guardedly optimistic about the 2026 review, though things would prove more difficult with Mr. Trump than with Mr. Biden as president.
“I think ultimately it will get renewed,” he told me. “But I think we could be in for a period of pretty important uncertainty.”
It’s time to pull out every stop, once again, to convince the United States of the importance of preserving North American trade. Our future depends on it.
John Ibbitson