‘Relitigating’ NAFTA renegotiation could jeopardize ‘opportunity’ of six-year review, says senior trade official.
Three years out from a review of Canada’s most important trade deal, the federal government has yet to “put pen to paper” on proposals, as some fear a return to the chaotic days of the NAFTA renegotiation.
Before the mandated review takes place in 2026, all three countries party to the Canada-United States-Mexico Agreement (CUSMA) will go through elections that will lead to at least one new government in place, as Mexican President Andrés Manuel López Obrador is term limited and can’t run for re-election. Both Mexico and the U.S. will go to the polls in 2024. Canada will have an election in or before 2025.
A potential return of U.S. president Donald Trump to office has some recalling the turbulence of the rocky NAFTA renegotiations in 2017 and 2018, which the federal government called at the time an “existential threat” to Canada. Concern over what may happen during the first six-year review has some calling on the Canadian government to be proactive.
Senior Global Affairs Canada (GAC) trade official Aaron Fowler indicated it’s too early to lay out proposals for the CUSMA review, but said when the time comes, Canada will have to bring forward those ideas.
“We’ll need specific proposals in certain areas that we’re ready to kind of bring forward. I don’t think, in 2023, we’re really at the stage yet in putting pen to paper on proposals … we will get to that,” said Fowler, associate assistant deputy minister for trade policy and negotiations, at a Sept. 26 panel hosted by the Canadian Global Affairs Institute (CGAI) and Brookings Institution think tanks
“What we are trying to make sure is that we have the structure in place and the people in place and the conditions in place that we can be successful when we get to that point,” he said, remarking that Canada is at a similar position preparing for the reviews as its North American counterparts.
Fowler said the agreement is “generally viewed as positive” in both the U.S. and in Mexico.
He suggested Canada will use the review as an “opportunity” to deal with issues that have arisen under CUSMA, and issues that weren’t being thought of during the NAFTA renegotiations that have since emerged, but won’t relitigate aspects that Canada failed to have included during the past talks.
“If we focus on relitigating issues that we already went through, then this opportunity would become a moment of jeopardy for the agreement and the three countries and the industries that rely on this instrument,” he said.
Fowler added that some issues with the agreement may be worked out through committees and discussion groups before the 2026 review.
CUSMA mandates a review occur six years after the agreement comes into force, and during that review all three countries can agree to add a new 16-year term to the agreement. If that decision isn’t reached, it will expire after 16 years in force or in 2036. If a decision is made in 2026 by a party of the pact not to continue with the agreement, the countries will meet every year for the next decade to conduct a joint review until it expires. During those annual reviews, the three countries can, once again, decide to extend the agreement for a 16-year term
Fowler said that at the moment the review is “not really defined.”
“There has been … a very preliminary discussion between ministers this year at the third Free Trade Commission, as to what [the review] will look like in practice,” he said. “There are some pieces that will need to fall into place before we will be in a position to really elaborate specific proposals. That will also be a function of what the political environment is in the three countries. What are their preoccupations and their trade policies at the point of time? And more broadly, what is the geopolitical environment in which we are all operating?”
“The way we see our relationships with each other in many respects is going to be function of how we see our place in the world. That is very different in 2023 than it was in 2018,” he said. “And I would expect it would be very different in 2026 than it is in 2023.”
Right now, Fowler indicated that Canada needs to put the right communications and advocacy teams in place in the U.S. and Mexico.
The proposal mirrors the so-called “charm offensive” that Canada put in place during the NAFTA renegotiations to trumpet the importance of the integrated North American trading relationship.
Carleton University professor Meredith Lilly, a former trade adviser to then-prime minister Stephen Harper, said it is “great to hope” that the review will be an “opportunity,” but suggested Canada take a more “realistic” approach and prepare for a “complete and total disaster.”
“This is what happened with NAFTA renegotiations. Canada had this idea—it’s all going to be about modernization, we’re going to keep it slim and quick, and we’re all going to hug and its going to be great—and of course the Americans had a very different idea,” said Lilly during the CGAI panel.
“We should go forward with an opportunity, but make sure we’ve got our bulletproof vest,” she said.
Steve Verheul, who served as chief negotiator during the NAFTA renegotiations, said during the panel discussion that preparation is “the key.”
“You have to game out every single scenario, by sector, by chapter, by virtually every issue that could come up or might come up [to] have your position, your fall back, all your offensive interests, all your defensive interests. All of that, all in a roadmap, so that you are ready to go whichever way the wind starts to blow when we get closer to this,” said Verheul, who has since retired from GAC.
“The preparation is the foundation of all of this. So, you have more knowledge, you’ve thought more extensively about these issues than the other side has been thinking about them. That’s always the key,” he said.
Verheul said efforts should be made to see how the three countries can get ahead of the review, indicating a role for the business communities in the three respective nations, remarking that trade negotiators can only go so far with counterparts to map out a potential review. He added that business communities can start to set the agenda.
“That would have a powerful influence,” he said, noting that governments could then pick up on that advice
CGAI vice-president Colin Robertson, a former trade negotiator and moderator of the Sept. 26 panel, said while Canada doesn’t know what will happen in 2026, it should be preparing now, by setting up a working group. He said advocacy and communication work in the United States should be unfolding now to ensure Canada knows what works down the line.
“When you go to Americans with creative solutions, I always find them very receptive,” said Robertson.
Former diplomat Louise Blais, who served as Canada’s consul general in Atlanta, told The Hill Times that CUSMA’s renewal is the priority, not advancing specific proposals.
“We’re hoping for a very smooth rollover of the agreement as opposed to arriving with a list of things to change or improve,” said Blais, now a senior special adviser with the Business Council of Canada.
She said renewing the agreement will create certainty, adding that, in the meantime, there needs to be continued engagement with the Americans, in particular, to outline the benefits of the agreement with both Democrats and Republicans.
She said she is “cautiously optimistic” that all three sides will decide to move forward with an extension to the agreement.
International trade lawyer Lawrence Herman said Canada’s focus should be on ensuring that, in 2026, there is a contained review that doesn’t see the whole agreement come under the microscope.
“The important thing is to ensure that this review is properly managed or it could go off the rails,” he said. “If there isn’t an agreement among the three parties, the three governments, as to the issues to be addressed in the review, it could lead to a process that is undisciplined and uncontrolled and would lead to an opening up of the entire [trade deal], which is to be avoided.”
Herman said the three governments need to come to an understanding on the issues and provisions that need to be adjusted.
Herman said that before their respective elections take place, the three countries should be working on a pathway towards the review to help depoliticize it.
Bloc Québécois MP Simon-Pierre Savard-Tremblay (Saint-Hyacinthe-Bagot, Que.), his party’s international trade critic, said he doesn’t see any of three sides making a decision whereby the North American market wouldn’t have free trade coverage.
He said he wants to see both the oft-troubled softwood lumber dispute be addressed in the 2026 review, as well as the countervailing and dumping of aluminum from outside North America.
Savard-Tremblay added that he would like to see the Canadian government present more information regarding the review to Parliament.
“We should have the [House] International Trade Committee push for more transparency because there’s always a horrible lack of transparency when Ottawa is negotiating deals,” he said. “We’re going to push to have more information.”