top of page

Jayson Myers, Elevate Senior Advisor, Provides His Key Takeaways from the new USMCA

Updated: Nov 26, 2018

The real lesson of the USMCA is that Canadian companies have to think strategically about exports.

Now that the dust is beginning to settle on NAFTA negotiations and the text of the new USMCA has been released, it’s time for Canadian exporters to take stock.

By far, the greatest benefit of the deal is that the looming threat of US tariffs on key export sectors has been lifted. Well almost. US tariffs remain in place on Canadian aluminum and steel, but I’m optimistic that this problem will be resolved soon. It will just take a little longer than the September 30th deadline that the United States and Mexico were so keen on meeting for political reasons of their own.

Canada’s exporters and businesses looking to invest in Canada can now breathe a sigh of relief that market access into the United States will not seriously be disrupted. No tariffs on Canadian auto exports to the States. Dispute resolution procedures remain in place, providing some protection against unwarranted tariffs in the future.

These are significant wins for Canada. But, of course only because we didn’t agree to the most egregious of US demands to dismantle NAFTA provisions and successfully dodged the bullet of further protectionist measures threatened by President Trump. No deal would definitely have been a bad deal for Canada.

Canada’s automotive sector will be the biggest winner from the USMCA. Exporters of vehicles and parts, and Canadian suppliers wherever they are located across North America’s integrated auto supply chains, will benefit from higher North American content rules and Mexico’s commitment to raise wages and improve working conditions in its auto industry. But, our gains in terms of US market access are limited – apart from auto, no real inroads that were not already a part of existing trade agreements, and the NAFTA in particular.

On the other hand, the Canadian market will be open to more competition from US dairy and poultry farmers, e-commerce providers, and wine producers. Canadian consumers won’t see that entirely as a bad thing. They may have a different take if more stringent data protection for pharmaceutical companies leads to higher drug costs.

The USMCA contains one surprise element – a notification requirement if Canada or other countries intend to enter into a trade agreement with a non-market economy (ie. China). But, this shouldn’t be blown out of proportion. Any deal worth entering into should lead to greater trade liberalization in China or be undertaken in the context of China’s accession to the Trans-Pacific Partnership. Either way, it would be difficult for our other North American trading partners to object to a deal that could help lower China’s protectionist walls.

The crazy politics of NAFTA negotiations has taught us the importance of looking to markets other than the United States to diversify our exports. Above all, though, they reinforce the lesson that today, export success depends on delivering a manageable and affordable solution to international customers, or even better to their customers. Companies that have that figured out are the least vulnerable to the risks of government trade policies gone awry. Foreign buyer finance can be a part of that solution and a critical element of any exporter’s value proposition.

bottom of page