The one-year anniversary of the Canada-U.S.-Mexico Agreement (CUSMA) signing is on the horizon, and there is still unfinished business.
The trade deal was signed on Nov. 30, 2018, but it needs to be ratified in all three countries for it to become law. Mexico is the only country so far to do so.
Despite the delay, there is optimism among business leaders about the path to ratification and the potential benefits the deal will bring to their economies, according to a recent study by TMF Group. The professional services firm tapped 1,500 professionals with purchasing authority from each country for its report. The participants were mixed and included senior executives, mid-level managers, analysts and administrators.
Overall, 68 per cent of all professionals polled believe the deal will be fully ratified, with Mexico being the most optimistic (88 per cent).
But Canadian and American business leaders were more tepid, polling at 60 and 56 per cent, respectively.
“I think there’s a recognition here among business leaders that this isn’t going anywhere anytime soon,” said Moshe Lander, an economics professor at Concordia University in Montreal.
The trade deal’s ratification has stalled in the U.S. as the Trump administration and Democrats in Congress hash out changes on labour standards and environmental policies. Canada has said it wants to work “in tandem” with the U.S.
How long it will take to get there, however, is still up in the air nearly one year on.
“All signs lead to this deal passing,” said Jason Gerlis, subregional director for North America at TMF Group.
“Businesses that are already trading internationally should prepare for any impact or new opportunities it may have for them if they have not already. If this does not pass, or goes through a process where changes must be made, we’re left with NAFTA.
Until then, it’s still “business as usual,” Lander added, “even if it were to take another year.”
Lander said any uncertainty from business leaders around CUSMA likely isn’t because of negotiations or details of the deal but American politicking.
As the 2020 U.S. presidential election gears up, Republicans have expressed concerns that the unfinished trade deal could get stuck in campaign chaos.
U.S. House Speaker Nancy Pelosi has repeatedly tried to allay worries that an ongoing impeachment inquiry into Trump would not delay approval of the deal. While she’s been clear that the two sides were close to finalizing fixes to the agreement, she hasn’t ruled out the possibility that the final vote could slip into the election year.
Trump has criticized Pelosi for “taking too long” on the trade pact.
Lander believes it may be “months” before ratification.
“I don’t think this is at the top of Justin Trudeau‘s inbox, and it’s certainly not the one he wants to kick off his new government with in the U.S., and there’s no way that Donald Trump wants to turn this into an election issue,” Lander said.
“Optimistic talk is great, but remember, there’s still stuff to be done here.”
Canada’s business leaders lacking optimism could be a reflection of fears stirred up by tariffs on steel and aluminum exports, Lander said, which caused major friction between the U.S. and Canada during CUSMA negotiations earlier this year and were considered a potential barrier to its ratification.
“I think that’s rattling to Canadian businesses. This is supposed to be our closest trading partner, our best friend, our big brother, and this is what they start doing?” he said.
Canada was also the least optimistic of the bunch that the deal would lead to a stronger economy within two years. Only 45 per cent were confident in the possibility.
American respondents polled slightly higher, at 55 per cent, while Mexican respondents were considerably more positive, at 70 per cent.
Trade “isn’t an answer to all problems” for Canada, said Gerlis, which might also be why enthusiasm about economic impact is low.
“It can take quite some time for all parties to get in line with these sorts of deals. The European Union, for example, has a hard time getting others to comply with their food standards,” he said. “So rather than expect a quick, short-term win, Canadians might be playing the long game.”
Broken down into large businesses (more than 500 workers) and small businesses (fewer than 500 workers), the poll found large businesses were more likely to be optimistic about the deal’s benefit to their economies (63 per cent compared to 52 per cent of small businesses) and the ability to open more incoming trade and investment growth (67 per cent compared to to 56 per cent of small businesses).
“Despite some losses in some areas, the deal is generally good for all parties if you look at the big picture,” Gerlis said.
The distinction also lies within a company’s resources, according to Lander.
He said larger businesses already have an “international outlook,” which means they’re equipped to handle trade deals, tariff barriers, customs restrictions and more.
“Smaller businesses may not have an international ambition, but that means that the potential disruption in the absence of a trade agreement is more likely to scare them than big businesses,” he said. “Larger businesses have been through this before and know how to deal with it, if not in the U.S. then elsewhere in the world.”
Business leaders were also asked about which sectors they believe will see the most growth internationally because of the trade pact over the next five years. In Canada, oil and gas took the top spot (46 per cent) followed by tourism (40 per cent). Manufacturing and agriculture were tied at 39 per cent each.
Trump, his administration and congressional Republicans have put the pressure on Pelosi to take up the measures before American Thanksgiving on Nov. 28.
As the clock winds down, it ultimately comes down to the man in the White House, Lander said.
“Donald Trump has never met a trade deal he likes,” he said. “He views this as a zero-sum game, which is not the way it works. So we have to ask: Will he sign it? And, in what form?”
The TMF Group survey is considered accurate plus or minus 4.4 percentage points, 19 times out of 20. The participants completed an online survey between Aug. 23 and Sept. 3, prior to Canada’s 43rd general election. Representation between Canada, the U.S. and Mexico was equal, with 500 respondents for each.
— With files from Reuters
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