As published by the North Capital Forum

The private sector thrives on certainty. When business leaders make long-term investment decisions, among the most important factors is their level of comfort that the existing legal and economic frameworks on which their calculations and assumptions are based will remain in place. Markets offering such certainty have a competitive advantage.

Without a high level of certainty, companies won’t invest in a country or, more accurately, they will look elsewhere to make those investments. That means fewer jobs and lower wages for workers where uncertainty exists. The less business certainty, the lower the economic growth; the lower the economic growth, the harder it is for all working families.

For three decades, business has benefited from a preferential degree of certainty and comfort afforded by the North American Free Trade Agreement (NAFTA), succeeded by the United States-Mexico-Canada Agreement (USMCA). These two agreements helped the private sector make North America a global trade and investment superpower.

That is why private sector business leaders from across our continent and around the world were so disturbed to hear the United States Trade Representative, Ambassador Katherine Tai, make the controversial and counterintuitive assertion that uncertainty and discomfort are ‘features, not bugs’ of the USMCA. It was nothing short of trade apostasy.

Tai’s comments were made at a Brookings Institution event this past March in response to a question asking for her thinking about the mandatory six-year review of the USMCA. Whatever Tai answered would have been significant, given no senior Biden Administration official had publicly discussed the American government’s thinking on the USMCA review.

Ambassador Tai’s answer had far greater significance, it sent shockwaves through the political and financial capitals of the U.S.’s main economic partners. Tai characterized the review not as a mere technical exercise but a political process with a negotiated outcome – it is “an inflexion point for, essentially, a reevaluation of how the agreement is working…”

…one question that you posed, which was: “How do we take up this review in 2026 without fundamentally destabilizing relationships?” I think that that’s absolutely valid and important, but I do want to also caution you do not want that review to happen in a way that all three parties come to that conversation too comfortably. 

The whole point is to maintain a certain level of discomfort which may involve a certain level of uncertainty to keep the parties motivated to do the really hard thing which is to continue to reevaluate our trade policies and our trade programs to ensure they’re really responding to the changes that are happening around us.”

Prior to the Brookings event, few private sector business leaders were concerned about the 2026 USMCA review – with most not giving much thought to it at all. Common sense was expected to prevail. The ink was barely dry on the deal, and the conventional wisdom was that nobody wanted the economic anxiety and upheaval of politicized renegotiations.

To many, Ambassador Tai’s comments turned this logic on its head. What she described was less of a periodic review to validate an agreement that was widely seen to be working well and more an extensive renegotiation intended to resolve definitively any outstanding trade disputes or revamp it to deal with emerging issues such as Chinese transshipment.

In this, Tai’s characterization of the review process conveys some conceptual alignment with her predecessor, Trump Administration U.S. Trade Representative Robert Lighthizer. In his extensive writings after leaving office, Ambassador Lighthizer has argued the USMCA was meant to be a bulwark against Chinese overcapacity and alleged dumping.

To the extent that Tai and Lighthizer, among other Democrats and Republicans, have a shared philosophy about the USMCA, it suggests the U.S. elections in 2024 may not offer two starkly different views of how the review in 2026 should be undertaken. Whoever is in the White House and both Houses of Congress could well adopt the same approach.

A week after Tai’s Brookings event, Canadian Ambassador Kirsten Hillman was asked about her comments during a Wilson Center webinar. Hillman noted, correctly, “stable, predictable, transparent, enforceable trade rules lead to investor confidence, lead to business confidence…[USMCA] is the foundation of that predictability, stability – period.”

Poignantly and pointedly, Ambassador Hillman added: “I have to say, you know, there is often a little bit of loose talk around the process that is set out in the agreement. The process set out in the agreement is a review of the USMCA for the three countries to come together to look at how it’s working…but I think it’s about predictability and stability.”

U.S. Ambassador to Canada David Cohen seemed to walk back Tai’s comments during the webinar: “I love the press, but you should always be careful about reading a single reporter’s interpretation of any official’s commentary on a complicated topic.” Readers can listen to Tai’s words and judge the accuracy of subsequent reporting for themselves.

Whether Tai’s comments are to be taken at face value, constitute loose language, or were misinterpreted by the media, they point to the worst-case scenario for the North American economy: A highly politicized reopening of the USMCA talks with multi-year negotiations requiring, absent presidential trade promotion authority, ratification by the U.S. Senate.

It would also establish a dangerous precedent if, as Tai suggested, reviews are intended to revisit trade disputes related to the proper interpretation of the USMCA text. If a party facing an unfavorable decision is able to hijack the review process to amend the text of the agreement to bolster their position, the text of the USMCA will become meaningless.

More specifically, from a private sector perspective, it would undermine the certainty associated with having a meaningful dispute resolution mechanism to inform and enforce a definitive interpretation of the text. No dispute would ever truly be resolved between the parties, rather, any conclusions would simply be the starting point for future negotiations.

This would put private sector business leaders in an impossible position, forced to make long-term investment decisions based on an alterable text subject to change in the short or medium term. Such a dynamic would undermine the case and worsen the climate, for increased business investment in North America. Our economies would suffer as a result.

This point was emphasized in a rare public comment on trade policy by the Governor of Canada’s central bank, Tiff Macklem. Sitting beside U.S. Federal Reserve Chairman Jay Powell at a separate Wilson Centre event, he went further than his American counterpart. Where Powell simply noted the mutually beneficial trade relationship, Macklem cautioned:

“The final thing I’ll say is on USMCA. Obviously for both countries the market access is key. The other thing I would underline, though, is the certainty about market access, the certainty that American companies will have access to Canadian markets and Canadians will have access to American markets. That allows businesses to make investments, to deploy their risk capital, to commit to the future – and it’s that certainty of access that is really key to building investment.”

Without question, there are private sector business leaders in all three USMCA countries who would like to see changes to the USMCA to make their industries more competitive. Yet most recognize making a change would be akin to pulling on a proverbial thread which unravels a knitted sweater. If one small change is made for some, others will want more.

For most, then, the private sector business perspective on the USMCA review can be best encapsulated by the Latin maxim primum non nocere – first, do no harm. While it may be accurate to say that a good agreement could always be better, the private sector cautions governments that, in the same vein, the perfect can’t be the enemy of the good.

Let’s all the North American community strengthen our ties, advance our trust and reflect on our prosperous history to keep making the region an economic, political and social powerhouse.