As Canada and the United States wrap up more than two years of work on the Canada-United States-Mexico Agreement (CUSMA), one pressing question remains for the cross-border business community—what can we expect after NAFTA? The answer rests not in Washington, D.C. nor Ottawa, but in state and provincial capitals throughout North America.
Before turning to state and provincial cooperation, it is important to note that, at this time, the future of CUSMA, or USMCA as it is known in the U.S., is uncertain due to politics in the United States Congress. There are more than 218 votes needed to ensure the passage of the USMCA implementing bill in the U.S. House of Representatives. If the bill was introduced today, it would pass with approximately 180 Republican votes and 50-60 Democrat votes. However, Speaker Nancy Pelosi will not squeak CUSMA over the finish line and provide President Trump with a clear victory leading up to the 2020 election.
The Democrats desire as matters of principle, as well as politics, to put their stamp on the new NAFTA. There will need to be a surge of Democrat votes, likely an additional 70-80 votes, arising from substantive changes to four key areas: labour, enforcement, pharmaceuticals, and the environment. The four Democrat working groups have made proposals regarding these areas and the United States Trade Representative (USTR) has responded. The parties now will meet twice weekly to reach a potential deal. The only way the Democrats will secure the necessary votes is to gain the support from organized labour. Labour need not “bless” USMCA, but it cannot “burn” or rewrite any deal. With less than 30 legislative days before year-end, and delays arising from the United Auto Workers (UAW) strike at General Motors and the rising tide of impeachment, this is the last gasp for the passage of USMCA in 2019. If the implementing legislation is not passed in this calendar year, it likely will remain stalled until after the November 2020 U.S. elections. Despite this, there is some good news. The threat of U.S. President Trump withdrawing the U.S. from the existing NAFTA seems to have subsided, for the time being. Companies can have confidence the NAFTA will be in force through 2020.
While CUSMA will likely continue to take centre stage, the key issues confronting the Canada-U.S. business community are occurring either side of the border at the state and provincial levels. Taxation, regulation, licensing, workforce and education, development of standards in areas such as autonomous vehicles and artificial intelligence, infrastructure, and procurement are all areas of state and provincial concern. The past two years of targeted advocacy regarding the inextricably intertwined nature of Canada-U.S. relations have yielded fertile ground with Premiers, Governors, and state/provincial elected officials supporting cross-border cooperation. Now is the time to advance the ball/puck to produce tangible results.
For example, a few weeks ago, Ontario Premier Doug Ford, Alberta Premier Jason Kenney and Ohio Governor Mike DeWine met in Ohio to discuss areas of Great Lakes management, providing reciprocal procurement markets access, and address regional infrastructure issues such as the Line 5 pipeline in the Straits of Mackinac. The overarching theme resulting from these discussions is that CUSMA leaves areas such as procurement (e.g. Buy American) open and that states and provinces can develop creative solutions, such as designating each other “neighbouring states/provinces” under each other’s procurement laws, to address areas of mutual concern such as infrastructure.
Additionally, given the rapid pace of development in autonomous vehicles and AI, there is an opportunity for state and provinces to meet now and jointly develop the regulatory regime. This would avoid falling into the traditional Canada-U.S. practice of each jurisdiction independently designing regulations then spending decades trying to align these standards with its neighbours across the border. Similarly, it is the battle cry of every Governor and Premier that their state or province is “open for business” and “cutting red tape is a priority”. Despite these familiar slogans, there has been no concentrated effort to bring together those officials responsible for regulatory reform in states and provinces to share best practices.
The Canada-U.S. business community must now target its efforts to states and provinces. The substance and support are there and the number of issues within local purview will only increase over time. There is the ever-present temptation to obtain broad-based federal solutions in order to maximize human, time and financial resources. This approach, unfortunately, has led Canada-U.S. to a never-ending cycle of moving to and seeking a solution for the next fire or crisis. If all politics is local, all trade is personal. Building Canada-U.S. from the bottom-up is the key to our economic success. And this is where the action of politicians and business leaders will be for the foreseeable future.
What is your business’ most pressing trade-related concern now and/or after NAFTA is ratified? We welcome your feedback and questions on this topic. Please post your comments on our LinkedIn page at: Dickinson Wright Canada, on Twitter at @DWrightCanada or on my LinkedIn page at linkedin.com/in/daniel-ujczo-893b486b
This post was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.”).