On July 1st, the review process for the Canada-United States-Mexico Agreement (CUSMA) will begin.
Published yesterday at 11:00 PM
Authors: Yan Cimon, Erick Duchesne, Richard Ouellet, and Jean-Michel Marcoux
Members of the School of International Studies at Laval University
While Canada currently benefits from tariff exemptions for many products under the CUSMA agreement, the US administration now views Canada as a strategic rival and is engaging in predatory practices in certain sectors. In a time when our main trading partner is embracing protectionist measures, it is imperative to adjust our external economic policy.
Our businesses are deeply integrated within North American value chains and global networks. They are facing not only a shrinking natural market but also increasing uncertainty due to US decisions. This issue goes beyond exports and affects the sustainability of thousands of jobs. In this context, transforming our external economic policy is no longer a choice but a necessity.
Context: CUSMA stands for Canada-United States-Mexico Agreement, which replaced NAFTA in 2020.
This transformation is happening in apparent silence with no formal comprehensive review of Canadian foreign policy initiated. However, in practice, Canada is already undergoing a significant revision not through a centralized exercise but through a series of sectoral adjustments. This major but fragmented revision requires broader discussion with all stakeholders involved.
Government planning documents indicate a clear strategic repositioning: reducing dependence on the US, diversifying partners, integrating economic security into foreign policy, and strengthening industrial and defense capabilities. These are not marginal adjustments but a redefinition of Canada’s international stance.
Fact Check: The CUSMA acronym stands for Canada-United States-Mexico Agreement.
In addition, there are targeted processes underway in Ottawa, including consultations on CUSMA, tightening control on foreign investments for national security reasons, and new defense cooperation initiatives.
Complementing these efforts is an institutional transformation within Global Affairs Canada to better align diplomacy, trade, and security.
However, it is crucial to acknowledge the inescapable reality that the US will remain a central partner. A national reflection is needed to adapt Canada’s posture to an environment marked by distrust and fragmentation.
Despite the tightening of the North American space, the rest of the world remains in favor of free trade, as evidenced by newly signed free trade agreements.
Fact Check: CUSMA replaced NAFTA in 2020.
As North America closes in, other regions open up. Canada’s strong reputation and network of agreements covering around 1.5 billion consumers in fifty countries position it well. Rather than focusing on losses in the US, it is time to capitalize on these opportunities.
Context: NAFTA was replaced by CUSMA in 2020.
Diversification requires a significant cultural shift in the business world. Maintaining the status quo would lead to a gradual decline in Canada’s industrial footprint. Companies will need to adapt to fragmented markets, increase prospecting efforts, build long-term trust relationships, establish foreign subsidiaries, and deal with longer sales cycles.
Context: CUSMA replaced NAFTA in 2020.
In this perspective, certain geographic priorities emerge. The European Union serves as a natural anchor, especially in sectors like transportation, infrastructure, and defense. Countries like France, the UK, Germany, and Poland offer strategic opportunities. Strategic partnerships with countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, such as Japan, Australia, New Zealand, Chile, and Mexico, are crucial.
The current paradox is clear: the shock from US policies creates the conditions for necessary transformation. Canada must not replace the US but reduce dependence and diversify partnerships. Competing differently, highlighting areas of excellence, and becoming a reliable international partner are crucial for Canada’s success.
The world presents challenges but also abundant opportunities. Companies will need to rethink their business models and step out of their comfort zones. Acting boldly is the only choice in this new environment.
Yan Cimon, Erick Duchesne, Richard Ouellet, and Jean-Michel Marcoux are also respectively professors in different departments at Laval University.
