What happened at CUSMA on July 1? Ways to go as the review begins – Nationally
The future of the Canada-US-Mexico Free Trade Agreement is expected to be discussed between the three countries on Wednesday when there will be a mandatory joint review.
July 1 is the date set in CUSMA for countries to formally extend the agreement for another 16 years or continue under annual review for up to ten years.
A spokesperson for Canada-US Trade Minister Dominic LeBlanc told Global News that the minister “looks forward to meeting with his American and Mexican counterparts on July 1.”
“This will be an opportunity to build on the positive, constructive bilateral discussions that both countries have had in recent weeks,” spokesman Jean-Sébastien Comeau said in an emailed statement.
“He looks forward to continuing the work to support Canadian workers, farmers and businesses, on July 1 and beyond.”
Mexico’s Economy Secretary Marcelo Ebrard confirmed earlier this month that the meeting will take place.
The meeting comes as U.S. President Donald Trump and his administration have given mixed signals about whether the U.S. will renew the deal, renegotiate it through extended talks, or cut it altogether.
That has created growing concerns for integrated sectors such as the auto and manufacturing industries that rely on CUSMA’s tax-free trade provisions, affecting investment and the North American economy as a whole, according to experts.
“We really need more stability. We need more certainty in this situation,” said Michael Devereux, a professor at the Vancouver School of Economics at the University of British Columbia.
Here’s what you need to know about Wednesday’s update and possible ways ahead.
What is CUSMA on July 1st?
CUSMA came into effect in all three countries on July 1, 2020, for a period of 16 years.
Article 34.7 of the agreement states that a “joint review” will be held on the sixth day of that enforcement date, where the representatives of the three countries will consider “the implementation of this agreement, review any recommendations for action brought by the group, and decide on any appropriate measures.”
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As part of that review, each country will confirm in writing whether it wishes to extend CUSMA for another 16 years. Both Canada and Mexico have sent letters urging an extension, which would take the agreement to 2042.
If all three countries agree to a full 16-year extension, a new joint review will take place after another six years – in 2032.
Otherwise, if the US does not confirm that it wants a full extension, then a joint review will be held every year for the remaining 10 years of the original term, an agreement that remains in place as written.
At any time during those 10 years, the agreement can be extended for a new period of 16 years if all three countries agree to do so, and with a mandatory review every six years.
If there is no agreement to agree to a full extension, the trade agreement will expire in 2036, at the end of the initial 16-year period.
Any country can also choose to withdraw from CUSMA entirely with six months’ notice. If that happens, the agreement will remain in place for those who remain unless they also choose to withdraw.
US Trade Representative Jamieson Greer said there are pillars of a well-functioning continental trade agreement, but he said other issues related to agricultural import controls – referring to the Canadian goods management system – and rules of origin.
Those laws refer to the acquisition of materials that are then traded freely across North American borders. Concerns have been raised about countries like China using loopholes to get their products into the market duty-free.
Greer also expressed openness to two separate agreements that would replace the continental deal.
“US interests in Mexico versus US interests in Canada are very different,” said Marc Gilbert, an international trade consultant who heads the Center for Geopolitics at the Boston Consulting Group in Toronto.
Gilbert said he has seen “a change in temperature from May of last year to May of this year,” as the US and Mexico’s talks on the CUSMA review continued while talks with Canada stalled.
However, he added, “We’ve seen recently that Mexico and Canada are trying to talk with one voice. Your guess is the same as mine about the administration’s reception to that.”
LeBlanc also said the July 1 review date is “not set in stone,” and that CUSMA will remain in place even if all three countries do not commit to a full extension by that date.
Prime Minister Mark Carney told reporters last week that Canada will not be in a rush to make a “bad deal” and will take the time necessary to ensure that a renegotiated CUSMA, as well as potential agreements to lower or eliminate tariffs on the industry, is beneficial to all parties.
The most likely scenario, said Devereux and Gilbert, is that the countries will continue to negotiate the development of the agreement beyond July 1, and there is still a possibility of a long-term extension once those issues are resolved.
“There’s going to be a series of demands … and they’re going to get into serious discussions about their sticking points,” Devereux said.
“If we give some reason and respect Trump and the US a little bit, the situation is that we hope to get an extension – maybe not a 16-year extension, but some kind of certainty, some kind of stability.”
Although Trump said earlier this month that he wants to see CUSMA “terminated,” Devereux said this option is unlikely since many American businesses rely on the agreement, as do Canada and Mexico.
“American businesses will suffer greatly if this happens,” he said. “They’re going to have a significant tariff on their exports from Canada. Canada, I think, is going to retaliate a lot. That would be a real nuclear option.”
The prospect of a 10-year annual review period also leaves open the possibility of CUSMA being renewed under a different US administration, after Trump leaves office in early 2029.
“It’s not guaranteed that even after Trump leaves office we’ll be in a better position,” Devereux warned, noting that a future Republican administration could include Trump advisers and hawks like Peter Navarro.
“But at least we could … know what could happen, and now we don’t know anything. It’s at the whim of some social media writer who posts this news in the middle of the night. It’s not really the way to do international discussions.”
However, Gilbert said businesses do not encourage or prepare for the wait method.
“They don’t play that game,” he said.
“There is a clear push by USTR, by Ambassador Greer, by the administration, to redo the current deal. And truth be told, the wheels are in motion for that purpose.”
