North American resiliency depends on a strong trade agreement
As published in the series, “USMCA AT 2: Visions for the next steps,” by the Brookings Institution.
This July marks the second anniversary of a modernized North American trade pact, and yet all three signatories to the United States-Mexico-Canada Agreement (USMCA) must do more to ensure the deal reaches and realizes its full potential. Our region faces a number of consequential challenges since the trade pact was negotiated, making the USMCA even more indispensable.
The global economy – already weakened by the COVID-19 pandemic – is now facing a second shock caused by the enormous geopolitical pressures placed on supply chains. In this context, USMCA has the unrealized potential to serve as the foundation for expanded regional cooperation to address the resulting threats to our national and continental economic security.
Unfortunately, since USMCA has come into force, governments in all three countries have introduced policies which at times evidence little apparent regard for the letter or spirit of the agreement. Trade disputes are perfectly normal, even among allies. What is cause for alarm is the degree to which some North American decision-makers are advocating policies contrary to USMCA.
Governments must adhere to the commitments they made when the USMCA was negotiated and assess whether domestic policies could adversely affect our regional economy. In an increasingly competitive world, a weaker North American economy means a weaker United States, a weaker Mexico, and a weaker Canada – none of which is in our individual or collective interests.
Our shared continent is rich in natural resources and food production, boasts cutting-edge technology and is home to diverse, well-educated, hard-working populations. Working together, our three countries have the potential to address global food and energy shortages while being a rare source of economic stability in an increasingly unstable and uncertain world.
To achieve this, however, the public and private sectors of all three countries must combine their efforts to ensure USMCA is not only a success but that it is seen as a success both internationally and domestically. More specifically, we should work together to identify tangible examples which show how the agreement can and will benefit all of North America.
Fortunately, there are many areas where USMCA has the potential to yield significant benefits for Americans, Mexicans, and Canadians. North Americans share a concern for the environment and have experienced firsthand the effects of climate change. USMCA offers us a framework within which we can both achieve meaningful emissions reductions and manage the green energy transition.
For example, North America has the potential to be a global leader in the production of electric vehicles and the batteries that power them. Collectively we have the critical minerals, the production facilities, and the skilled workforces required to create an integrated value and supply chain.
When it comes to energy, North America can ensure its own independence today and into the future by coordinating our efforts and investments. Moreover, as the world transitions to cleaner energy, we can also do more to responsibly provide a steady and secure supply of different forms of energy to likeminded partners in Europe, Asia, and beyond.
Another shared value we hold is that economic growth should create jobs which allow people to make full use of their skills and allow them to support their families. This is particularly important at a time of rising inflation. USMCA contains many provisions intended to improve labour standards and outcomes and, in so doing, improve the lives and livelihoods of our citizens.
These opportunities must be seized just as we must stand firm against attempts to undermine the agreement whether in the form of misguided protectionist policies or misinformation about the nature of trade. Each party to USMCA has the obligation to hold itself to account and not fall prey to the easy practice of pointing fingers at others. We must all have clean hands.
Between now and 2026, when the future of the agreement will be formally discussed, Canada, Mexico, and the United States will hold federal elections. Without knowing which leader and party may be in power four years from now, we cannot be certain that those who will be in office will share the same favourable view of equitable, sustainable, and liberalized trade.
It is incumbent on all of us – in both the public and private sectors – to promote the many benefits of the USMCA to ensure economic resiliency for our region in the years to come.
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