On Wednesday, July first, American, Canadian, and Mexican negotiators will all finally sit down together by teleconference to discuss the future of the USMCA trade pact. Canada and Mexico have both formally stated that they would like the agreement to be extended for 16 years. But the American team has made no concrete commitment.
In fact, twice over the past couple of weeks, President Trump has commented that he would prefer to walk away from the trade deal.
“I would rather not have the USMCA. We do better without an agreement. I would rather leave it unsigned. I’d rather have it terminated.”
Trump’s comments could simply be another negotiating tactic, but most analysts agree that chances of the trade agreement being renewed in its current form are pretty well zero.
The most likely scenario seems to be that discussions will continue well past July first, with a goal to revise and reframe USMCA. If that is the case, the agreement would then enter a period of annual reviews for, potentially, the next ten years and would expire in 2036 if it is not reworked or reframed in the meantime.
Former Quebec premier Jean Charest sits on the U.S.-Canada Relations Board.
“On the first of July, if there’s no agreement on the revision, it just goes on for the next ten years. If he chose not to renew, what the agreement now says is there would be a six month notice.”
The larger risk does lie in the USMCA’s termination-notice clause that allows any one of the three countries to withdraw entirely with a formal six-month notice. President Trump could try to use that clause , but he would then face some significant legal hurdles. Only the U.S. Congress can dissolve the agreement under U.S. law. Trump’s use of the six-month termination clause would almost certainly trigger a clash with Congress, and certainly if the Republican Party loses its majority this fall in the Mid-terms.
Erin McLaughlin, the senior international economist with the Conference Board, said that underlying all of this drama is a business and investment community with an ongoing feeling of uncertainty. McLaughlin thinks that it’s unlikely the Trump Administration wants to allow Congress to have final say on the future of the USMCA, and she thinks the most likely scenario will see a reframing of the existing agreement.
“Canada and Mexico have said they want to re-up the agreement. The U.S. has not said that. I don’t see any indication that there’s going to be a withdrawal. I just see a reframing of what the agreement is.”
So, with the July 1st meeting about to take place, the path forward for the USMCA looks rocky at best. The U.S. Ambassador to Canada, Pete Hoekstra, thinks that its now time for Prime Minister Carney and President Trump to have a meaningful discussion about that path forward.
“I don’t think we’re anywhere close to announcing any type of a framework or an interim agreement. I really think it’s in the hands now, on our side the President, and I’m assuming on the Canadian side it will be the Prime Minister to determine what the next steps are.”