Key Trade Pact Faces Extension Decision or Annual Review
A significant milestone is approaching for the Canada-United States-Mexico Agreement (CUSMA), a crucial trade pact for North America. By July 1, the three signatory nations must formally decide whether to extend the agreement for 16 years, pushing its potential expiration to 2042, or to transition to an annual review process.
Nations’ Stance on CUSMA Extension
Both Canada and Mexico have formally communicated their desire to extend the CUSMA for the full 16-year term. These communications were sent to Washington D.C. recently. The United States, however, has not yet made a public declaration regarding its intentions. Nevertheless, statements from U.S. President Donald Trump and other administration officials suggest a strong inclination to move past the July 1 deadline without a formal extension.
Earlier this month, President Trump indicated he was “not looking to renew” the agreement. Greta Peisch, former general counsel for the Office of the U.S. Trade Representative and now a partner at Wiley Rein in Washington D.C., anticipates that the current administration will refrain from agreeing to an extension in July. “If that is the case, the parties will discuss what changes could be made to address concerns about the operation of the agreement,” Peisch stated via email. She added, “The parties have already started this conversation, particularly between Mexico and Canada.”
Consequences of No July 1 Extension
Should the United States not agree to an extension by July 1, the trade pact will remain in effect. Peisch explained that CUSMA would continue for an additional 10 years before automatically terminating if an agreement on extension cannot be reached by the parties. In the interim, negotiations are expected to focus on potential modifications to the agreement that could pave the way for a future extension. While discussions between Mexico and the United States have commenced, official talks between Ottawa and Washington have not yet begun. Canada-U.S. Trade Minister Dominic LeBlanc has held recent meetings with United States Trade Representative Jamieson Greer, both in Washington and on the sidelines of the G7 summit in France. These discussions are set to continue until a resolution is reached, either through an extension or the agreement’s eventual expiration.
Can a Country Withdraw from CUSMA?
If the United States does not consent to the extension on July 1, the trade agreement will persist unless one of the member countries provides six months’ notice of withdrawal. As previously noted, both Canada and Mexico have expressed their commitment to maintaining the trilateral trade arrangement.
President Trump has previously referred to the agreement as “irrelevant” and suggested it may have fulfilled its purpose, casting uncertainty on its future. Greer has expressed openness to pursuing two separate bilateral agreements, while also acknowledging that certain “pillars” of the current continental trade pact function effectively. Given the deep integration of North American industries, many observers believe a U.S. withdrawal from the agreement is unlikely to be a swift decision. Numerous business, agricultural, and lobbying organizations have informed members of Congress about the significance of CUSMA to their sectors, while also advocating for specific revisions to the trade pact.
Congressional Approval for CUSMA Changes
CUSMA was negotiated during the previous Trump administration, superseding the North American Free Trade Agreement (NAFTA). It received broad bipartisan approval from the U.S. Congress, which holds the constitutional authority over trade agreements.
However, Peisch suggests the current administration might argue that modifications to CUSMA do not necessitate changes to U.S. law, and therefore would not require congressional ratification. “The (CUSMA) implementing bill contains procedures for making many changes to tariffs and rules of origin, and many other provisions could be amended without impacting U.S. law,” Peisch noted. Prime Minister Mark Carney has indicated that the administration has made it clear it wishes to avoid bringing the agreement to a congressional vote by altering the “fundamental architecture” of the trade pact.
