International Trade Committee on Oct. 2nd, 2025

[The Chair, Liberal, Judy Sgro]

Thank you very much.

I'm sorry, Mr. Groleau. You were almost 40 seconds over your time.

Mr. Naqvi, go ahead, please.

[Yasir Naqvi, Liberal, Ottawa Centre, ON]

Thank you very much, Chair.

Thank you to all the officials for being here for this important conversation.

This study is about the CUSMA review. I want to focus on that with my time. Just so that we have the foundational piece in place, can you start with what provisions are within the existing agreement in terms of review, what's required and the timelines associated with it?

[Lynn McDonald, Director General, North America Trade Policy Bureau, Department of Foreign Affairs, Trade and Development]

Thank you for the question.

In CUSMA, also known as USMCA or T-MEC, depending on which country you're in, article 34.7 sets out the provisions and notes that in 2026, five years after the agreement came into force, the parties would take a review of the operation of the agreement and come forward with recommendations for consideration by the free trade commission, the ministers of the three parties.

The review was pre-set at the time of the agreement coming into force. There would be a look at what is working well and where some improvements might be brought. Currently, all three countries are undergoing public consultations. For Canada, it's our second set of public consultations to get insight and input into what some of those recommendations might be on how to improve aspects of the operation of the agreement for consideration by the three parties.

That's the general context for the review.

[Yasir Naqvi, Liberal, Ottawa Centre, ON]

I don't know if the term “review” is defined in the agreement. We're not talking about an end to the agreement. We're not talking about a wholesale renegotiation of the agreement. This is something less than that. I just want to clarify what a review means.

[Lynn McDonald]

That's correct. It's referred to in the text of the agreement as a “review” of the operation of the agreement. The terms “renegotiation” and “reopening” are not in the text of the agreement.

[Yasir Naqvi, Liberal, Ottawa Centre, ON]

That's fantastic. I think that's an important context for us to have, especially given the importance of the CUSMA to Canada and, in fact, to all three parties in terms of an integrated trading region in North America.

You just started on the path around consultations. Can you share with us what the building blocks are for the review for the Government of Canada beyond the consultations? It is important to hear from industry and Canadians about their thoughts on the operation of the CUSMA. What are some of the milestones for you, for the Government of Canada, in getting ready for that review?

[Lynn McDonald]

In addition to hearing, very importantly, the voices of stakeholders through the Canada Gazette notice—as I mentioned, this would be the second set of consultations—there also is, and has been, ongoing engagement with provinces and territories to get their sense of what is working and of some areas where maybe we could see improvement, both from a Canadian point of view and from an idea of collective North American prosperity.

In addition, we have regular meetings with stakeholders to get a sense of their perspectives on the agreement. From a perspective of readying ourselves for a review, there is also taking a look at some of the history of the agreement, such as areas where things have perhaps not unfolded or been implemented in the way that parties expected. There are also areas where the world has changed in the last five years that might give us room to say that we need to take a new look at or review some areas of the agreement to ensure that it's fit for purpose and up to date, given that we have seen quite major changes in the sense of both technology and the global landscape. Those may merit another look at how the agreement is put together. That analysis is ongoing and under way as well.

In terms of readying Canada for engagement in the review, I note that there are a few legislative steps that the United States has to go through in its own legislation in order to commence the review on its part. While we're ready to engage at any time, we're also being responsive to our American partners at a time when they need to go through their own consultation process and submit a report to Congress. We're watching to see what they come back with, and we're also taking a look at those areas so that we're ready to engage when they want to come to the table with us and with Mexico.

[Yasir Naqvi, Liberal, Ottawa Centre, ON]

I have 20 seconds left now.

One of the topics I want to come back to—and maybe one of my colleagues can pick up on it—is the application of section 232. We talk about unjustified tariffs. The application of that from the American side seems the most egregious to me. I wonder if, in that review process, there is an opportunity for us to tighten that application with the Americans.

[Martin Moen]

Should I speak to that question now?

[The Chair, Liberal, Judy Sgro]

If you can give us a brief answer, go ahead. It's an important question.

[Martin Moen]

It certainly is a very important question.

There are a couple of aspects to that. The CUSMA itself does not provide any particular provisions related to section 232. What the United States has argued is that section 232 actions are necessary for its essential security, for its national security, and therefore are covered by exceptions that are found within the CUSMA and also within the WTO agreement.

We don't agree with regard to Canada and the treatment of Canada, obviously. We have made that point very clearly and will continue to make that point, but the CUSMA itself does not directly deal with that because it has that national security exception that the United States is using in this case. There are side letters to it that are relevant, and our goal with the United States more generally, irrespective of the CUSMA review, is to return to a place where we are accorded treatment that is appropriate for Canada, given the fact that we are not a national security threat and that none of our exports are a national security threat to the United States.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Monsieur Savard-Tremblay, you have six minutes, please.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot—Acton, QC]

Thank you, Madam Chair.

Good afternoon, witnesses.

An official statement has been issued stating that Canada and Mexico would like to coordinate their efforts in this potential renegotiation.

Could you give us an update on that, please?

[Martin Moen]

I think it's important that we understand that the review of the CUSMA is many things. One of them is the opportunity for all the signatories to actually look at, as was just said, the current environment, including the current policy environment, but also the technology environment and so forth, and to look at ways to strengthen trilateral work and trilateral operation.

Also, of course, we want to work very closely with Mexico. We have an important trading relationship with Mexico that is independent of our trading relationship with the United States. The CUSMA plays a very important role in underpinning that relationship. We would want to strengthen that and look for opportunities there as well.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot—Acton, QC]

So it would be done on a bilateral basis, in addition to creating a kind of common front in the trilateral renegotiation, correct?

[Martin Moen]

There are many aspects to it. I think one aspect is the idea that we hope, and I think we share this view with Mexico, that this is an opportunity to improve the operation of the agreement in a way that benefits all of us. In that regard, we definitely want to work with all our trading partners in the agreement, including the United States.

Now, we also recognize that certain aspects of the agreement are very important for Mexico. Certain aspects are very important for Canada. Obviously, we want to work to find common interests and to co-operate as we move forward in the review, but we don't see this review as some kind of opportunity for one side or another to push another side. It's about trying to build co-operative improvements to the agreement and the operation of the agreement, and being very careful to preserve the core value of the agreement. I think we do share that view with Mexico.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot—Acton, QC]

One of the scenarios cited for the review is that if the United States refused to extend the agreement, we would end up with joint reviews on an annual basis. So it would be a permanent negotiation, with a permanent power relationship, where, every year, the United States could go after and pocket gains at the expense of Canada and Mexico. I imagine that's a scenario you've noted, studied and analyzed. What would we do if that happened?

I am well aware that there is the issue of potential market diversification, but the North American market is and will remain the most important.

Such a scenario would lead to total and ongoing uncertainty for businesses. Do you have a plan to deal with that?

[Martin Moen]

I think you touched on a very important point. Uncertainty is not good for companies in the United States, Canada or Mexico. I think our goal here, as we look to the review and as we look more broadly at our trading relationship, would be to increase the degree of certainty and predictability. There's no question that the United States, and companies in the United States, benefit from CUSMA. They make investments and they make supply chain decisions because they believe Canada will continue to treat them in a certain way. That applies to all the parties to this agreement.

I think our goal is to have a discussion about the operation of the agreement that takes us forward in a climate of greater predictability and in a climate where we respond to the interests of all our businesses and all our stakeholders to have more predictability and certainty as we go forward. That's our goal. Without getting into the specifics of how best to do that—we'll have to see how it evolves—I think this is a goal that U.S. business should share with us and that we will be engaging them on.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot—Acton, QC]

I wasn't talking to you about uncertainty in general, but about a specific scenario that could generate uncertainty, namely annual joint reviews. Have you studied that closely?

[Martin Moen]

I think it will all depend on how we set up the structures for ongoing work. We've always had, whether under the NAFTA or the CUSMA, regular meetings of the free trade commission of ministers to review and look at the agreement. The concept of regular review is not new or foreign. It is not something that we are implacably opposed to. What we are opposed to is any suggestion that we're going to have a regular renegotiation. That, of course, we don't support and wouldn't support.

But I think that's not the path we're on. We're not on a path of annual renegotiation of the agreement. I think we're on a path of a substantial review, followed by periodic review of ongoing operation. That's the approach we want to take.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Strauss, go ahead, please.

Welcome to the committee.

[Matt Strauss, Conservative, Kitchener South—Hespeler, ON]

Thank you, Chair. It's nice to be here.

I represent the riding of Kitchener South—Hespeler, which is home to the largest Toyota plant in Canada. It's one of the largest outside of Japan. It employs more than 8,000 people in my riding. I can't tell you how important that plant is. I remember when that plant was announced 30 years ago in my hometown. It means a lot.

Have you been briefed on what the U.S. tariffs mean to that plant, and have you briefed the relevant ministers about the financial hit they're taking?

[Martin Moen]

I'm quite new to this job—

[Matt Strauss, Conservative, Kitchener South—Hespeler, ON]

That's fine.

[Martin Moen]

—so I personally haven't been briefed on the specifics of that plant. What I have been briefed on, and what ministers have been briefed on and are very aware of, is the impact of Toyota's investments in Canada and their importance at a general level—