Iran stance adds uncertainty ahead of review of regional economic agreement

Canada's efforts to secure the future of the United States-Mexico-Canada Agreement trade pact come as shifting political signals over the Iran conflict risk complicating an already delicate round of negotiations with the White House, experts say.

Earlier this month, the Canadian government's new chief negotiator, Janice Charette, was dispatched to Washington for high-level talks ahead of the July USMCA review.

Her visit also includes easing tariff pressures and sounding out positions on sensitive issues such as dairy market access and automotives rules of origin.

READ MORE: Mexico eyes keeping free trade pact, scrapping tariffs in talks with US

Kim Richard Nossal, a professor emeritus of political studies at Queen's University in Kingston, Canada, said Ottawa's primary objective is clear.

"The main objective that Janice Charette will work toward will be to secure an extension to the USMCA for another 16 years, to 2042," Nossal said.

Failure to do so could introduce significant uncertainty, he said.

If the agreement is not renewed, it would still remain in force until 2036 but face annual reviews, creating instability and opening the door for new US demands on "contentious issues, such as supply management, digital service tax and automotive rules of origin", he added.

In the worst-case scenario, Washington could withdraw entirely — "which can be done with six months' notice", Nossal said.

Against this backdrop, geopolitical tensions may weigh on negotiations. Canadian Prime Minister Mark Carney initially expressed support for US strikes on Iran but later emphasized diplomacy and de-escalation.

Nossal said such shifts could matter because of how the White House sees trade.

"Trump's reaction to the Spanish prime minister's criticism and policy — threatening to halt all trade with Spain — demonstrates that he does not — and will not — separate trade from politics," he said.

That dynamic, he added, helps explain Ottawa's careful messaging on sensitive international issues.

"The fear that USMCA will be affected by other issues is one of the reasons why the Carney government has been very careful not to criticize the US openly on a range of issues," he said, including conflicts in the Caribbean, Venezuela and Iran.

While Canada has sought to diversify its trade relationships, including outreach to Asia and other partners, Nossal said such efforts have limits when it comes to negotiations with Washington.

Mounting pressure

Radhika Desai, a professor of political studies at the University of Manitoba in Winnipeg, Canada, said recent efforts to deepen trade ties with partners beyond the US reflect mounting pressure on Ottawa to reduce its economic dependence on its southern neighbor.

"It is a sign of the tremendous pressure Canada is under," Desai said. "The government and the prime minister, who have spent decades fostering a close relationship with the United States, are now pursuing initiatives to diversify trade."

Canada faces significant structural constraints in that effort, she added.

"They have an uphill climb, given the degree of Canadian trade reliance on the US. They have a mountain to move before they can reduce that reliance to a level that gives Canada meaningful policy autonomy," she said.

The shift in Canada's trade strategy is closely tied to uncertainty surrounding US economic and foreign policy under President Donald Trump, Desai said.

"It is entirely due to the unpredictability of the Trump administration," she said.

ALSO READ: China to leverage Sino-US economic consultation mechanism to enhance talks

However, the volatility cannot be explained simply by the president's personal style, she said. "It emerges from the structural compulsions of the crisis of the US economy, society and politics."

Such structural pressures, Desai said, may have long-term implications for the global economic system itself.

"If more Western economies start pursuing independent trade and investment strategies, it will no longer be US-led," she said.

Many Canadian elites would prefer the current diversification push to remain temporary, she added.

"I have no doubt that Canada's economic and political elites wish" that the strategy is only a short-term response to US uncertainty, she said.

Contact the writers at gaoyang@chinadailyusa.com