LILLEY: One month until CUSMA could blow up if USA walks away
· Toronto Sun
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Exactly one month from now, Canada’s trading relationship with the United States could blow up. By July 1, representatives of Canada, the United States and Mexico need to meet and decide whether to agree to another 16 years of CUSMA, agree to annual reviews, or see one or more parties withdraw with six months’ notice.
Most media outlets won’t tell you these details; they will tell you this is a technical review – much like we are in a technical recession – but it is much more than that.
On July 1, we could actually be told that the United States is walking away from CUSMA, and if they do that, it would take effect by the end of this year. At this point, the best-case scenario is that the Americans will opt for an annual review of the CUSMA deal, which would only lead to greater and ongoing certainty.
The CUSMA/USMCA agreement came into effect on July 1, 2020, after negotiations that took place in 2017 and 2018. This agreement replaced the NAFTA agreement between Canada, the United States and Mexico that came into effect on January 1, 1994, itself an expansion of the Canada-U.S. free trade agreement that took effect on January 1, 1989.
Unlike those previous agreements, the CUSMA/USMCA deal came with built-in review mechanisms.
Any party can walk away from deal
Despite what many are claiming, this current deal doesn’t continue for another decade in any automatic fashion. The deal clearly states that as of July 1, any of the states can walk away by the end of this year.
“A Party may withdraw from this Agreement by providing written notice of withdrawal to the other Parties. A withdrawal shall take effect six months after a Party provides written notice to the other Parties,” the treaty text states.
If the United States walked away on July 1, we would still have a free trade deal with Mexico, but that wouldn’t mean much to us. In 2024, Canada’s exports to Mexico amounted to US$6.1 billion, compared with exports to the United States, sitting at US$419.7 billion.
Most of our trade with Mexico involves us importing large quantities of cars, trucks, computers, auto parts, medical devices, and agricultural goods valued at more than US$45 billion.
Now, let’s say that the Americans decide they don’t want to walk away with six months’ notice.
That doesn’t mean we are free and clear.
The Americans, or any other country in the agreement, could decide that we need ongoing annual reviews.
Walking away adds deep uncertainty to Canadian economy
“If, as part of a six-year review, a Party does not confirm its wish to extend the term of this Agreement for another 16-year period, the Commission shall meet to conduct a joint review every year for the remainder of the term of this Agreement,” the text reads.
That move wouldn’t be as bad as the Americans walking away, but it would add a deep amount of uncertainty to the Canadian economy.
Last month, appearing on Fox News , Donald Trump’s top trade negotiator, Jamieson Greer, said it’s unlikely Trump would rubber stamp extending the deal, meaning the 16 year extension. Greer, whose official title is United States Trade Representative, has expressed his frustration with Canada’s negotiating stance to Congress including concerns about what he sees as over retaliation to the Trump tariffs including removing American alcohol off the shelves and anti-American campaigns discouraging tourism or business with American companies.
“It’s hard to see necessarily where that ends,” Greer said of the fractured relationship with Canada.
In a month, we may see where this ends and that could be with the United States cutting us out of CUSMA or putting it on perpetual review.
Neither option is good for Canada’s economy.