Need to Know: What happens if Canada and the U.S. can’t come to an agreement on CUSMA?

Welcome to Need to Know, The Hub’s twice-weekly roundup of expert insights into the biggest economic stories, political news, and policy developments that Hub readers need to be keeping their eyes on. It’s raising alarms, but CUSMA’s “sunset clause” is less ominous than it sounds By Joseph Steinberg, professor of economics at the University of Toronto Canada’s most important trade agreement, CUSMA, faces its first scheduled review next summer. U.S. Ambassador Peter Hoekstra told The Hub on Monday that this review is unlikely to conclude with a deal, raising alarm bells across the country. But CUSMA’s so-called “sunset clause” is less ominous than it sounds. CUSMA has a 16-year duration and is currently scheduled to terminate in 2036. Next summer’s joint review gives Canada, Mexico, and the United States the chance to negotiate modifications and vote on whether to extend the agreement. If all three countries agree, CUSMA will be renewed for another 16 years. If not, the agreement does not end immediately. Instead, it shifts into annual joint reviews until 2036, giving the parties another decade to reach consensus. Ambassador Hoekstra’s comments suggest that the July 2026 review is unlikely to produce an extension, meaning the agreement will likely enter the annual-review phase. While that prolongs uncertainty, it poses no immediate threat to Canada’s economy. CUSMA would remain fully in force until either an extension is agreed upon or the agreement expires in 2036. The greater risk lies in CUSMA’s termination clause, which allows any member country to withdraw entirely with six months’ notice. President Trump could try to use this clause to pull the United States out much sooner than 2036, but he would face two significant legal hurdles. First, CUSMA is an international treaty, but also a piece of domestic legislation: the USMCA Implementation Act. The president has the power to withdraw from the former on his own, but only Congress can repeal the latter. Use of the termination clause could lead to a clash between the executive and legislative branches, especially if the Republican Party loses the midterm elections in November 2026. Second, the original 1989 Canada–U.S. Free Trade Agreement (CUSFTA) was never repealed, only suspended when NAFTA superseded it in 1994. Whether CUSFTA would automatically “revive” if CUSMA is terminated is an open legal question. During the first Trump administration, Canada’s position was that CUSFTA was an automatic fallback if trade negotiations failed and NAFTA dissolved; the Trump administration took the opposite position. Ultimately, Congress and the courts would probably weigh in on this issue as well. In short, the upcoming CUSMA review means continued trade-policy uncertainty, not imminent danger. Canadian exports are likely to remain largely tariff-free until at least 2036, preserving our status as America’s lowest-tariff trading partner. The real question is whether Ottawa will use the review as a chance to pursue smart compromises—on dairy, telecom, or air travel—that could both smooth negotiations with Washington and deliver lasting benefits for Canadian consumers. Nigel Wright was a good man and a true patriot By Ian Brodie, professor of political science at the University of Calgary and former chief of staff to Stephen Harper As important as it was, Nigel’s service in PMO was one of his less important contributions to Canadian conservatism and politics. There is hardly a think tank or interest group in the movement that he didn’t help out with his generosity of time and insights. He took the ideas and arguments of the conservative side seriously. When the conservative movement at the federal level divided in the early 1990s, he spent years devoting his intellect and community standing to trying to repair the rift. An early supporter of Stephen Harper, his standing in the movement, more than his credibility in the financial community, helped boost the future prime minister. And when Harper and Peter MacKay finally overcame the old divisions, Nigel brought his credibility to the project of standing up a new Conservative Party. Behind all that was Nigel’s abiding faith. That led him to his stalwart support for Israel. And I am sure contributed to that uniquely Harper era “scandal” in which he used his own money to reimburse the taxpayers for something he thought they ought not to have paid for. Hard to explain to young people today that paying back the government was once seen as a scandal rather than what it was: a singular act of patriotism. Before Carney commits to troops in Ukraine, he should remember how we abandoned Afghans By Harrison Lowman, The Hub’s managing editor This summer marked four years since the Taliban takeover of Afghanistan, a humiliating spectacle for a West that had pledged for 10 years to vanquish the terrorist group from the country and then deliver democracy. Canada has its own unique reason to feel ashamed. Last month, Blacklock’s Reporter detailed that then Canadian ambassador to Afghanistan Reid Sirrs boasted at a private 2022 ceremony that Canada’s Afghan evacuation “set the standard.” His speechwriter apparently reminded him to make sure to mention the many examples of “bravery” from department staff. Global Affairs Canada has a strange way of defining bravery. When the Taliban descended on Kabul, our ambassador reportedly boarded a half-empty RCAF plane, leaving thousands of Canadian citizens and interpreters who helped our armed forces during our 13-year mission stranded. “[I]t just seemed to be far too dangerous for us to stay put,” admitted Sirrs. Our ambassador did not fulfil his duty, nor did he even attempt to. He would later be quietly reassigned to a post in Argentina. “Nobody’s perfect,” Minister of Foreign Affairs Melanie Joly would later testify. The Americans and Brits stayed behind to evacuate friends and allies. The French dispatched commandos to rescue their citizens and Afghan families. The Ukrainians even chartered a bus to drive through firefights and save their nationals, along with some Afghans who had helped Canada. But the overwhelming majority of Afghans who had helped us were left only with government of Canada text messages telling them to travel alone to the airport, where they could try shouting “Canada” or wearing something red, so that they might be seen or heard. It became clear that it was up to Canadian veterans to figure out how to get Afghan translators and their families out of harm’s way. While the government would eventually arrange, after years, the settlement of 19,635 Afghans who had assisted our country (along with their family members), we must not lose sight of this botched exit. Looking beyond Afghanistan’s current hunger crisis, or the fact that female education now ends at grade six, the UN has reported that more than 200 former Afghan government officials and security forces have been murdered in what can only be described as reprisal Taliban attacks. We’d be naive to assume these revenge killings didn’t claim the lives of Afghans who helped Canadians—Afghans left with the false Canadian promise of protection if things ever fell apart. As Prime Minister Carney now publicly ponders putting Canadian boots on the ground in Ukraine, and the major responsibilities that come with that, he should understand what Canada’s word is worth now on the world stage. Hint: very little. One step in the right direction would be to correct the record by demolishing the $9,214 plaque that now sits outside Global Affairs Canada and shamefully commends our exit from Afghanistan, reading: “This plaque pays tribute to all the government of Canada employees who contributed to this heroic effort.”