Shipping containers stationed in the Port of Montreal last week. The U.S. Trade Representative is beginning 45 days of public consultations ahead of the mandated review of the United States-Mexico-Canada Agreement.Christopher Katsarov/The Canadian Press
The United States is formally kicking off discussions about the future of the North American free-trade pact, setting the stage for months of intense negotiations over continental trade in an era of U.S. protectionism.
On Tuesday, the Office of the U.S. Trade Representative posted a preliminary notice online saying that it would begin 45 days of public consultations on the United States-Mexico-Canada Agreement, with hearings planned for November.
This is the first official step in launching a review of the USMCA, which replaced the North American free-trade agreement, or NAFTA, in 2020.
The trilateral agreement, which underpins trillions of dollars of continental trade, was always scheduled to be reviewed after six years. However, the stakes have become much higher since U.S. President Donald Trump returned to the White House and began placing heavy tariffs on his neighbours in clear breach of the agreement.
Mr. Trump has shown some attachment to the treaty, which he negotiated during his first term and once called the “fairest, most balanced, and beneficial trade agreement” ever.
When he placed a blanket 25-per-cent tariff on Canadian and Mexican goods earlier this year – which increased to 35 per cent on Canada in August – he offered a carve-out for products that comply with USMCA rules of origin. That crucial exemption has allowed around 85 per cent of Canadian exports to continue entering the U.S. tariff-free.
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The Canadian government has said that preserving that exemption is a top priority in any negotiations with Washington.
At the same time, Mr. Trump has repeatedly breached the letter and spirit of the agreement, placing steep tariffs on Canadian steel, aluminum and automobiles and saying repeatedly that the U.S. does not need Canadian-made cars – calling into question a pillar of continental economic integration.
Analysts expect the U.S. to use the review to push hard for concessions from Canada and Mexico, including better access to Canada’s supply-managed dairy and poultry markets and higher U.S. content in North American cars. Mr. Trump may also threaten to walk away from the deal like he did during the NAFTA negotiations in 2017 and 2018.
The formal review date isn’t until July 1, 2026, but the U.S. has to go through a number of legislated steps before getting there.
The federal register notice asks for public “recommendations for specific actions that USTR should propose ahead of the Joint Review to promote balanced trade, new market access, and alignment on economic security with Mexico and Canada.”
It also asks for comments related to promoting investment and “co-operation on issues related to non-market policies and practices of other countries.”
What happens after the consultations depends on whether the Trump administration seeks formal trade promotion authority from Congress, which would allow it to reopen the text of the agreement. The President may also look to make changes to the agreement through side letters or other informal arrangements with Ottawa and Mexico City.
There are essentially three options on the table for the USMCA: The parties can extend the treaty for another 16 years; they can start a process of annual reviews, after which the agreement will expire in 2036; or they can withdraw from it with six months notice.