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Perrin Beatty

June 2, 2023

Foreign policy starts in your neighbourhood. This simple yet fundamental insight was championed by the late George Shultz, the 60^th U.S. Secretary of State. In addition to being one of the most influential American statesmen of the 20^thcentury, Shultz was a founding co-chair of the North American Forum and was one of the strongest proponents of the North American idea.

He believed that Canada, the United States, and Mexico together constitute a global economic powerhouse, and that deeper collaboration among the three neighbours is key to our mutual success. Today, the significance of Schultz’s vision of a more integrated North America is especially clear.

Around the world, a confluence of disruptive forces has exposed major weaknesses in the global trade infrastructure. Although great strides have been made in managing pandemic-related disruptions, heightened geopolitical tensions, growing protectionist sentiment, and Russia’s invasion of Ukraine have fractured the trade environment and disrupted business operations. Governments and businesses alike are today acutely sensitive to the risks of overreliance on non-market economies for strategically valuable commodities.

In the current highly uncertain international climate, governments around the world are increasingly looking to reinforce the resilience of supply chains and their manufacturing capacity by prioritizing trade with reliable partners. The emergence and popularity of the concept of friend-shoring is an important expression of this renewed global focus on building trade security and resiliency. Canada, the United States and Mexico have no better friends than each other in this regard.

All three members bring significant advantages to the North American partnership, enabled in large part by the Canada-United States-Mexico Agreement (CUSMA). For instance, Canada’s agriculture and energy sectors are ranked as the fifth-largest exporters in the world, while our fertilizer industry ranks as the third-largest global producer and the number-one producer of potash fertilizer. All three sectors are considered among the most innovative and sustainable in the world, positioning Canada to play a vital role within North America and helping meet the growing demand among our international partners for the “three Fs”: food, fuel, and fertilizer. At this critical point in world history, it’s not only an opportunity, but an obligation to do so.

The current moment presents an important opportunity for North American leadership at a time when many in the international community are acting urgently to lessen their dependence on non-market economies such as China. Although all three CUSMA countries have their own foreign policies and national security objectives, we share a common interest in ensuring the availability of key materials and the resilience of supply chains. By deepening North American trading ties, CUSMA can serve as an important counterweight to China’s trade and manufacturing dominance, particularly in key supply chains, including critical minerals, batteries, and pharmaceuticals. Furthermore, in the competition between political and economic systems, our three market-based democracies are much stronger when we stand together than if we try to face the challenge alone.

The three governments will be sitting down in 2026 for the first six-year review of the CUSMA agreement. While CUSMA has provided a solid foundation for building our collective future prosperity, securing North American leadership on the international stage will require ambition and action from all three partners to realize the agreement’s full potential. The upcoming review should be used not only as a tool to assess how the agreement has been doing, but also as a mechanism for evaluating areas and sectors where we can strengthen trade and enhance our citizens’ prosperity.

The current moment presents an important opportunity for North American leadership at a time when many in the international community are acting urgently to lessen their dependence on non-market economies such as China.

There are many opportunities for intelligently deepening North American economic collaboration through CUSMA.

For instance, there is immense opportunity to leverage CUSMA to strengthen supply chain integration. Where there are known vulnerabilities in current supply chains, whether in raw material extraction, processing, or manufacturing, the existing framework of CUSMA provides a strong basis for developing a friend-shoring agenda that bolsters North American manufacturing capacity, economic security, and overall competitiveness.

Regulations are an important but often overlooked source of friction and inefficiency when it comes to trade. The legal and institutional framework of CUSMA provides a solid basis for a trilateral approach to regulatory alignment in strategic sectors among the three countries. By aligning technical regulations and standards in key supply chains, such as electric vehicle components, we can minimize unnecessary costs and enhance the competitiveness of trade within North America.

We can also do much more to both strengthen security and reduce friction at our borders for legitimate goods and travellers, which is essential to North American economic competitiveness. CUSMA partners should work to develop a shared agenda on borders, particularly in light of the experience during the pandemic where border closures by all governments were uncoordinated, leading to delays and confusion. All three governments should look for ways to expand trusted traveller programs like NEXUS and FAST that allow low-risk travelers and goods to pass across borders more efficiently and with enhanced security. Better coordinating our border management and improving customs procedures will also help us build more resilient supply chains.

In advance of the review in 2026, the three governments should appoint a joint task force to explore these and other opportunities for deeper collaboration. The goal should not be to circumscribe trade or even to simply hold on to what we have now, but to enhance and strengthen it to the benefit of our citizens.

For these efforts to be successful, our leaders must recognize that businesses, not governments, are on the front lines of global commerce. Businesses are intimately aware of the intricacies of their supply chains. They must be fully engaged to ensure that economic policies are properly aligned with business realities.

A genuine North American partnership is greater than the sum of its parts. This is important today as we assess the future of CUSMA, but it was understood even well before the inception of NAFTA.

In 1987, when President Ronald Reagan addressed the Canadian Parliament, he spoke about Prime Minister Mulroney’s proposal for a Canada-US Free Trade Agreement. In doing so, he said that “We can look forward to the day when the free flow of trade, from the southern reaches of Tierra del Fuego to the northern outposts of the Arctic Circle, unites the people of the Western Hemisphere in a bond of mutually beneficial exchange, when all borders become what the U.S.-Canadian border so long has been: a meeting place, rather than a dividing line.”

Today, the three partners must not lose sight of the importance of the North American idea. The strength and the shared prosperity that are born from a renewed unity of purpose and from closer collaboration through CUSMA offer the promise of a brighter future for all our citizens.

Perrin Beatty, P.C., O.C., is President and CEO of the Canadian Chamber of Commerce.