Canada must now secure CUSMA’s extension and eliminate its sunset clause. Explore the key steps that could preserve this vital trade agreement.

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Introduction

The Canada-United States-Mexico Agreement (CUSMA) is the backbone of Canada’s trade economy, but its future is still being determined.

Unless renewed, the agreement (USMCA in the U.S. and T-MEC in Mexico) could expire in 2036.

A critical decision in 2026 will determine whether the three nations will extend the deal for another 16 years.

The agreement could dissolve if negotiations fail, triggering years of economic uncertainty.

Losing CUSMA would be disastrous for Canada. The country’s economy relies heavily on free trade within North America, and even the potential expiration of the deal can deter business investments.

Securing CUSMA’s extension—ideally eliminating the sunset clause—is essential for Canada’s long-term economic stability. Here is how Canada can strengthen its position.

Securing CUSMA’s Future: Canada’s Key Priorities

Strengthen Forced Labour Regulations

One significant issue troubling the U.S. is Canada’s lack of strict measures against imports tied to forced labor.

The U.S. Uyghur Forced Labor Prevention Act targets goods produced in China’s Xinjiang region unless companies can prove they were not made using forced labor.

While Canada’s current regulations require companies to report efforts to avoid forced labor in supply chains, these measures fall short of U.S. standards.

Strengthening laws to align with U.S. regulations would demonstrate Canada’s commitment to ethical trade practices, improve the relationship, and remove a key obstacle to extending CUSMA.

Reevaluate the Digital Services Tax

Canada’s Digital Services Tax (DST), which imposes a 3% tax on large tech companies’ revenue from digital services, has sparked concern in the U.S. Washington has protested the tax through CUSMA’s dispute resolution system, arguing that it undermines the confidence of trade relations.

Canadian businesses also risk retaliatory tariffs from the U.S. if the tax remains in place.

By reconsidering the DST and working with the Organization of Economic Co-operation and Development (OECD) to develop a global approach to taxing digital services, Canada could ease tensions and secure smoother negotiations for CUSMA’s extension.

Phase Out Supply Management for Dairy and Poultry

One of Canada’s long-standing trade challenges is its supply management system for dairy and poultry, which uses quotas and tariffs to protect domestic farmers.

However, with fewer than 10,000 dairy farms and 5,000 poultry and egg producers in the country, the system no longer serves its original purpose of protecting small family farms.

Phasing out supply management could be a significant bargaining chip in CUSMA negotiations.

By signaling its willingness to reform this system, Canada could make it easier to win U.S. support for extending the agreement and possibly eliminate the sunset clause.

Why CUSMA is Vital for Canada’s Future

CUSMA, formerly NAFTA, has been Canada’s economic growth foundation for nearly 40 years.

With increasing global protectionism and trade tensions, ensuring North American free trade remains stable is more important than ever.

CUSMA is necessary for manufacturing, agriculture, and technology industries to avoid significant uncertainty.

Removing the sunset clause, which creates a renewal deadline every 16 years, would provide Canadian businesses with long-term stability to thrive.

Extending CUSMA now would protect Canada’s economic future and strengthen its trading relationships with the U.S. and Mexico.

Trivia

Did you know? The sunset clause in CUSMA, which could see the agreement expire in 2036, was introduced by the U.S. to safeguard its periodic review and renegotiation of trade terms. Eliminating this clause would provide long-term certainty for all three nations.

Conclusion

As the 2026 decision looms, securing CUSMA’s extension is critical for Canada’s economy.

By addressing critical concerns like forced labor regulations, the digital services tax, and the supply management system, Canada can strengthen its case for keeping the agreement in place.

Business leaders, provincial premiers, and federal officials must unite to lobby for the future of this crucial trade pact. The time to act is now.

Stay informed about CUSMA negotiations and the latest trade developments. Explore more insightful articles and updates on our website to understand how these decisions affect Canada’s economy.