The longer term of the Canada-U.S.-Mexico Agreement on free trade is ready to be discussed between all three countries Wednesday when a compulsory joint review can be held.
July 1 is the date set out in CUSMA for the countries to either formally extend the agreement one other 16 years or proceed under annual reviews for as much as a decade.
A spokesperson for Canada-U.S. Trade Minister Dominic LeBlanc told Global News the minister “looks forward to meeting together with his U.S. and Mexican counterparts on July 1.”
“This can be a possibility to construct on the positive, constructive bilateral discussions he has had with each countries in recent weeks,” spokesperson Jean-Sébastien Comeau said in an emailed statement.
“He’s looking forward to continuing the work of supporting Canadian staff, farmers and businesses, on July 1 and beyond.”
Mexico’s Secretary of Economy Marcelo Ebrard confirmed earlier this month that the meeting can be virtual.
The meeting comes as U.S. President Donald Trump and his administration have given mixed signals about whether the U.S. will renew the agreement, renegotiate it through prolonged talks, or terminate it entirely.
That has created mounting anxiety for integrated sectors just like the auto and manufacturing industries that depend on CUSMA’s tariff-free trade provisions, with implications for investment and the North American economy as a complete, based on experts.
“Really we want more stability. We want more certainty in this case,” said Michael Devereux, a professor on the Vancouver School of Economics on the University of British Columbia.
Here’s what to find out about Wednesday’s review and the potential paths ahead.
What does CUSMA say about July 1?
CUSMA got here into force in all three countries on July 1, 2020, for a period of 16 years.
Article 34.7 of the agreement says a “joint review” can be held on the sixth anniversary of that enforcement date, during which representatives from all three countries will consider “the operation of this agreement, review any recommendations for motion submitted by a celebration, and judge on any appropriate actions.”
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As a part of that review, each country will confirm in writing whether it wishes to increase CUSMA for an additional 16 years. Each Canada and Mexico have submitted letters advocating for an extension, which might take the pact to 2042.
If all three countries conform to a full 16-year extension, a brand new joint review will happen after one other six years — in 2032.
Otherwise, if the U.S. doesn’t confirm it wants a full extension, then a joint review can be held yearly for the remaining 10 years of the unique term, with the pact remaining in place as written.
At any time during those 10 years, the pact may be prolonged for a brand new 16-year term if all three countries conform to achieve this, again with a compulsory review in six years.
If there isn’t a consensus to conform to a full extension, then the trade pact will expire in 2036, at the top of the unique 16-year term.
Any country can even decide to withdraw from CUSMA entirely with six months’ notice. If that happens, the deal would remain in place for the remaining parties unless they, too, decide to withdraw.
U.S. Trade Representative Jamieson Greer has said there are pillars of the continental trade pact that work well, but that some issues around agricultural import controls — referring to Canada’s supply management system — and rules of origin.
Those rules check with sourcing for materials which are then traded freely across North American borders. Concerns have been raised about countries like China exploiting loopholes to get their products into the market tariff-free.
Greer has also signalled openness to 2 separate bilateral agreements that will replace the continental pact.
“The demands of the U.S. on Mexico versus the demands of the U.S. on Canada are quite different,” said Marc Gilbert, a world trade consultant who leads the Center for Geopolitics at Boston Consulting Group in Toronto.
Gilbert said he’s noticed a “temperature change from May of last 12 months to May of this 12 months,” as U.S. talks with Mexico toward the CUSMA review progressed while talks with Canada stalled.
Nonetheless, he added, “We’ve seen of late that Mexico and Canada are attempting to talk as one voice. Your guess is nearly as good as mine by way of the receptivity of the administration on that.”
LeBlanc has repeatedly said the July 1 review date is “not a cliff,” and that CUSMA will remain in place even when all three countries don’t commit to a full extension by that date.
Prime Minister Mark Carney told reporters last week that Canada won’t rush into “a nasty deal” and can take the time needed to make sure a renegotiated CUSMA, in addition to potential deals on lowering or eliminating sectoral tariffs, advantages all parties.
The almost certainly scenario, Devereux and Gilbert said, is the countries will proceed negotiating improvements to the deal beyond July 1, with a longer-term extension still possible once those issues are ironed out.
“There’ll be a series of demands … and they might get into serious negotiations about their sticking points,” Devereux said.
“If we give some ground and we form of pay homage to Trump and the U.S. a bit more, then the optimistic scenario is that we’ll get an extension — probably not the 16-year extension, but some style of certainty, some style of stability.”
Although Trump said earlier this month he desires to see CUSMA “terminated,” Devereux said this selection was unlikely as many American businesses depend on the agreement just as much as Canada and Mexico do.
“U.S. businesses can be severely damaged if this happened,” he said. “They’d have significant tariffs on their imports that they get from Canada. Canada would, I feel, very seriously retaliate. That will be an actual nuclear option.”
The prospect of a 10-year period of annual reviews also leaves open the chance for CUSMA to be renewed under a distinct U.S. administration, after Trump leaves office in early 2029.
“It’s not guaranteed that even after Trump leaves office that we’ll be in a greater situation,” Devereux cautioned, noting a future Republican administration could still include Trump advisors and trade hawks like Peter Navarro.
“But not less than we’d … know what’s prone to be happening, whereas now now we have no idea. It’s just on the whims of 1 social media author who sends out these screeds in the course of the night. It’s really no solution to do international negotiations.”
Nonetheless, Gilbert said businesses aren’t advocating or preparing for a wait-it-out approach.
“They’re not playing that game,” he said.
“There may be a transparent drive by USTR, by Ambassador Greer, by the administration, to make an overhaul to the present agreement. And truth be told, the wheels are in motion for that purpose.”