Beware the ‘zombie’ CUSMA: Trade expert warns of years of uncertainty

Joy Nott, partner on trade and customs at KPMG, joins BNN Bloomberg to discuss CUSMA and Canada-U.S. trade talks.

Canada could be headed toward a “zombie” version of Canada-United States-Mexico Agreement (CUSMA) that keeps businesses trapped in a cycle of uncertainty for years, according to a trade expert.

While Canada should enter upcoming trade negotiations confident in the value it brings to the table, the more likely outcome may be a trade agreement that remains in force, says Joy Nott, a partner in the Trade and Customs Practice at KPMG Canada⁠.

“We have value to offer, and we should put that value on the table,” says Nott.

She pushed back against suggestions that Canada should take a more aggressive approach to negotiations, arguing that all three countries benefit from the agreement.

She says, “everything’s on the table when it comes to bargaining chips, with examples being the automotive industry, rules of origin, the ways in which formal conversations take place with Canada, and even recent delays of the Gordie Howe Bridge.

“Realistically speaking, the U.S. needs this trade agreement, as does Mexico, just as much as Canada does,” she says.

Nott pointed to Canada’s proposal to extend CUSMA for another 16 years, describing it as the ideal outcome for Canadian businesses.

“That would be the big win for Canada,” she says.

However, Nott says a less certain outcome is more likely.

“We’re going to go into this type of zombie agreement, where technically it’s alive, but we have to meet and negotiate at the table once a year, every year,” says Nott.

“That’s just repeated uncertainty for Canadian, U.S., and Mexican companies that are trying to plan their business,” she says.

Automotive sector likely to play major role

Nott says the automotive industry is expected to be a central issue in negotiations, much as it was during the talks that led to CUSMA.

She pointed to recent reports suggesting the U.S. could push to increase North American content requirements for vehicles from 75 per cent to 82 per cent. Under the reported proposal, 50 per cent of a vehicle’s total value would also need to originate in the United States.

While nothing has been formally proposed, Nott says the discussion suggests there is at least a framework for future negotiations.

“Up to now we’ve been hearing we don’t need anything from Canada, right? So now there’s a path,” she says. “At least it’s something.”

Bridge as bargaining chip

Nott says delays involving the Gordie Howe International Bridge could become part of broader trade negotiations.

Built to improve cross-border traffic flow and offering the most lanes in the Windsor–Detroit corridor, the Gordie Howe International Bridge is a major collaborative infrastructure project between the U.S. and Canada serving as one of the largest land ports of entry along the Canada-United States border.

Nott says infrastructure projects, rules-of-origin requirements and even the timing of formal trade discussions can become negotiating tools.

“I think they like to ensure that they always have the upper hand every time that we sit down at the table with them,” she says of the current U.S. administration’s negotiating approach.

She says the delayed opening of the bridge is just the newest tool in the U.S. negotiation strategy.

Could Trump withdraw from CUSMA?

Nott says it remains unclear whether U.S. President Donald Trump has the authority to unilaterally withdraw from the trade agreement.

Because CUSMA is already law, Nott says legal questions remain about whether a president could withdraw from the agreement without congressional involvement.

“If the president does take unilateral action and withdraw the United States from the deal, I think it’s pretty safe to say you will see litigation happening in the U.S.,” she says.