Is Canada doing enough to engage with the U.S.?

Key Concepts

• CUSMA (Canada-United States-Mexico Agreement): The trilateral free trade agreement currently approaching a scheduled review on July 1st.
• Bilateral vs. Trilateral Negotiations: The concern that the U.S. is engaging in separate talks with Mexico while neglecting Canada.
• Supply Chain Integration: The deep economic interdependence between Canada and the U.S., dating back to the 1960s Auto Pact.
• Trade Irritants: Specific policy disagreements, such as dairy market access, that strain U.S.-Canada relations.
• Critical Minerals & Energy Security: Strategic resources (e.g., potash, critical minerals) where Canada provides a secure, reliable alternative to Chinese supply chains.
• Geopolitical Alignment: The argument that a strong, independent Canada serves U.S. interests by providing a stable partner for global trade and security.

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1. The CUSMA Review and Diplomatic Strategy

The upcoming July 1st review of CUSMA has created anxiety regarding Canada’s standing in Washington. Jacques Shore, a trade expert at Gowling WLG, notes that while the U.S. has initiated bilateral discussions with Mexico, Canada has faced a "bandwidth issue" in getting the White House's attention.

However, Shore suggests a shift in momentum following Prime Minister Justin Trudeau’s recent visit to the Economic Club in New York. The strategy now focuses on:

• Emphasizing Independence as an Asset: Positioning Canada as a strong, independent partner that helps "make America great again" through integrated supply chains.
• Economic Certainty: Highlighting that businesses and industries on both sides of the border require stability. Unpredictability regarding the trade agreement threatens investment and economic growth.

2. Addressing Trade Irritants and Geopolitics

Shore acknowledges that "irritants" exist in the relationship, specifically citing the dairy sector. He argues that these issues must be addressed through proactive accommodation and moderation to prevent them from escalating into broader trade barriers.

Regarding China, Shore clarifies that Canada’s trade with China is only 1/10th of its trade with the U.S. He frames Canada’s relationship with China as a potential bridge for the U.S., noting that Canada has historically acted as a diplomatic gateway. The core argument is that Canada and the U.S. are "far better than the sum of their parts" when they align their strategies to address global geopolitical challenges.

3. Risks of Prolonged Uncertainty

A significant concern raised is the potential for U.S. companies to adapt to a post-CUSMA reality by decoupling from Canadian suppliers. Shore warns:

• Irreversible Loss: If the review drags on, U.S. firms may find alternative supply chains, leading to a permanent loss of business for Canada.
• Strategic Dependencies: The U.S. relies on Canada for essential resources like potash and critical minerals. Shore argues it is illogical for the U.S. to seek these resources from China or other distant nations when they are readily available from a secure, neighboring partner.

4. Notable Quotes

• "We are going to be in a very difficult moment if we reach July the 1st and we suddenly find ourselves in a position where we're going through a review. Businesses, industry does not like unpredictability." — Jacques Shore, on the necessity of a clear path forward.
• "It's far better for the Americans, I like to say our cousins, to get [critical minerals] from us rather than try to get that from China and elsewhere." — Jacques Shore, on the strategic value of the Canada-U.S. partnership.

5. Synthesis and Conclusion

The primary takeaway is that the CUSMA review represents a critical juncture for North American economic stability. While Canada faces challenges in securing U.S. attention, the narrative is shifting toward emphasizing the strategic necessity of the partnership. By focusing on supply chain integration, energy security, and the provision of critical minerals, Canada aims to prove that its economic health is inextricably linked to the prosperity and security of the United States. The consensus is that both nations must prioritize a swift, predictable resolution to the review to avoid long-term economic damage and the erosion of established trade relationships.