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During testimony to Congress on Dec. 16 and 17, U.S. Trade Representative Jamieson Greer made clear that the United States’ renewal of the Canada-U.S.-Mexico Agreement (CUSMA) is far from assured.
“The shortcomings are such that a rubber stamp of the agreement is not in the national interest,” said Greer, adding the administration would recommend renewal only if those shortcomings were resolved.
Such statements have Canada considering whether to push for renewal of a trilateral agreement that includes Mexico, or to take a bilateral approach to North American trade.
“ I think everyone is thinking about the bilateral option,” said Kathleen Claussen, a law professor at Georgetown University in Washington, D.C.
“We know that this administration likes bilaterals,” she said.
CUSMA’s uncertain future
North American trade was governed by bilateral agreements before trilateral ones.
In 1988, Canada and the U.S. entered the Canada–United States Free Trade Agreement, a bilateral accord that was replaced in 1994 by the North American Free Trade Agreement (NAFTA), which added Mexico as a third partner.
CUSMA, known in the U.S. as the USMCA, is the trilateral trade pact that replaced NAFTA in 2020. It is subject to a mandatory review by July 1, 2026.
If the parties cannot agree to extend CUSMA by this date, the agreement does not expire immediately. Instead, it would run to its current, 2036 termination date. And the parties would continue to meet annually about a potential extension.
In his congressional testimony, Greer outlined a wide range of concerns with the current U.S.-Canada trade relationship. These include supply management, Canada’s Online Streaming Act and Online News Act, provincial procurement rules, alcohol distribution policies and customs procedures.
Greer said these issues would need to be resolved for the review to be successful.
“[The U.S. trade office] will keep the president’s options open, negotiating firmly to resolve the issues identified, but only recommending renewal if resolution can be achieved,” Greer said.
Canada has so far signalled it has no intention of forfeiting supply management, a system that shields industries such as dairy and poultry from competition.
“[Supply management is] not the only reason we’re locking horns with the U.S., but it’s the one that never really goes away,” Sylvain Charlebois, a professor at Dalhousie University, told Canadian Affairs in August.
The bilateral route
Ed Fast, Canada’s international trade minister from 2011 to 2015, says a bilateral treaty with Washington would have greater economic upsides for Canada than the current trilateral framework.
In August 2018, during the final negotiations of the current agreement, Mexico “threw us under the bus,” said Fast, who recently retired from politics. After three-way talks had failed to produce consensus, the U.S. and Mexico had jointly resolved their issues, putting pressure on Canada to agree to their terms to remain part of the deal.
This time, if Canada and the U.S. were to approach talks one-on-one, they could focus on a narrow set of issues, says Fast, citing resource development and continental security as two examples.
Fast says it is imperative Canada maintain a strong trade relationship with the U.S. He dismisses the idea that Canada can meaningfully decouple from the U.S. by diversifying trade with Asian and European markets.
“Quite frankly, I consider that to be a fool’s game,” he said. “ We will always have the United States as our largest economic partner; geography makes it so, culture makes it so, values make it so, supply chains make it so.”
In 2024, the combined value of total Canada-U.S. trade flows surpassed the $1-trillion mark for a third consecutive year, according to Statistics Canada. That year, the U.S. was the destination for 76 per cent of all Canadian exports, and was the source of 62 per cent of Canadian imports.
Claussen, of Georgetown, questioned the efficacy of replacing CUSMA with bilateral trade agreements, but noted the impact would depend on what gets negotiated.
“The importance of the North American supply chain is so great that it’s hard to imagine [trade] being as successful if you had two bilateral deals. But it all comes down to the content.
“I think it’s really hard to say [who would be] the winners and losers in that circumstance.”
‘Perfectly legal’
CUSMA’s review process itself reflects how much authority Congress has delegated to the executive branch on trade matters, says Claussen.
“In the Cold War, Congress gave the president a bunch of authority on the basis of economic security and said, ‘If you want to raise tariff rates because national security requires it in this circumstance or that circumstance, you can do it’,” said Claussen.
That delegation of power leaves few external checks on how the Trump administration can conduct its trade review.
“I often get this question: ‘How is [Trump] doing all this stuff, just running roughshod over everything?’” Claussen said. “The fact of the matter is a lot of what he’s doing — we’ll wait and see what the Supreme Court thinks of the big tariffs — but, it’s perfectly legal.”
In Greer’s testimony, he said his office would determine “which shortcomings can be addressed on a bilateral basis and which require trilateral resolution.”
“The success of the joint review will depend on a variety of factors, including the ambition of our USMCA partners,” he added.
The Carney government, for its part, is projecting that ambition.
“The CUSMA is a successful trilateral agreement that strengthens the whole North American region,” a Global Affairs Canada spokesperson told Canadian Affairs in an emailed statement.
“It is in our common interest to ensure it continues to support our shared success.”
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