How Does CUSMA Benefit Canada and Its Economy?


The Canada-United States-Mexico Agreement (CUSMA) marks a significant leap forward for Canadian businesses of all sizes, from major corporations to small businesses. It is crucial in maintaining uninterrupted access to the US and Mexican markets, which are key destinations for many Canadian exporters.

Strengthens the Position of Smaller Players

For small and medium-sized business enterprises (SMEs), the benefits of CUSMA are many. It simplifies customs and origin procedures, easing the intricacies of cross-border trade and enhancing the transparency of government regulations. This allows them to easily navigate regulatory challenges, making compliance less overwhelming and more cost-efficient.

A notable difference between NAFTA and CUSMA is the inclusion of a dedicated SME chapter in CUSMA. This chapter is crafted to encourage collaboration among the CUSMA countries, with the objective of expanding trade and investment opportunities for SMEs. Moreover, it ensures SMEs are equipped with the necessary information and resources to effectively capitalize on the agreement. This support is indispensable for smaller businesses aspiring to broaden their market reach.

CUSMA also includes a Competitiveness Committee tasked with bolstering SME participation in the North American economy. This committee is responsible for formulating recommendations to enhance SME involvement to level the playing field so they can compete with their larger counterparts.

Strengthens Economic Stability

CUSMA brings more economic stability to Canada by strengthening its trade relationships with key partners. This foundation is pivotal for various business sectors. 

For instance, a Canadian auto parts manufacturer can strategically plan its production and inventory, knowing its products will have tariff-free access to US and Mexican markets. This assurance encourages them to invest in new machinery and workforce training, ultimately boosting its competitiveness and creating jobs.

Economic stability under CUSMA is also reinforced by its dispute resolution mechanisms. Under the North American Free Trade Agreement (NAFTA) that was replaced by CUSMA, there was a mechanism that allowed companies to sue governments. This was removed in CUSMA (except for some cases related to Mexico), meaning businesses will have to rely on their governments to address disputes. 

This change may appear to be detrimental to businesses at first glance, but it actually adds a layer of stability to the economic landscape because it removes the constant threat of lawsuits from foreign companies. Under NAFTA, lawsuits could lead to sudden and unexpected financial burdens on the government and indirectly on the Canadian economy.

Improves Transparency 

International trade regulations can be complicated. CUSMA helps demystify this issue by increasing transparency in government regulations and procurement processes. This is especially beneficial for Canadian SMEs in sectors like agriculture and dairy, where more explicit rules can improve market access and competitiveness. 

To illustrate the change, Canadian dairy farmers now have greater access to the US market under CUSMA, a crucial avenue for growth. This enables businesses to better understand and adhere to regulatory requirements, making it more straightforward to bid for government contracts and, ultimately, expand market reach. It’s essentially like having a road map for the complex international trade system.

Protects Key Sectors

A cornerstone of any trade agreement is the safeguarding of domestic interests. CUSMA does just that by fortifying protections for Canadian sectors such as the dairy, poultry, and automotive industries. 

While it opens up the Canadian dairy market to the US, it simultaneously maintains tariff protections for other dairy products, striking a delicate balance between market access and protection. This is particularly beneficial for Canadian cheese producers because it allows them to maintain a strong domestic market while exploring export opportunities.

Moreover, CUSMA bolsters intellectual property protections, a crucial development for the technology, pharmaceuticals, and entertainment sectors. This fortification of intellectual property rights for Canadian innovations fosters a nurturing environment for creativity to flourish.

Facilitates Trade

Facilitating trade is a crucial driver of economic expansion. CUSMA plays a vital role in simplifying customs and origin procedures, minimizing bureaucratic hurdles, and increasing the predictability of cross-border trade between the three countries. These enhancements conserve time and resources for businesses and facilitate their entry into new markets. 

For example, under CUSMA, Canadian agricultural products (such as maple syrup and beef) have a more straightforward process for entering US and Mexican markets, opening new doors for Canadian farmers and producers. This ease of access is particularly crucial for small-scale farmers who may not have the resources to navigate complex trade barriers, enabling them to compete on a more level playing field with larger producers.

The CUSMA Certification of Origin form is the basis for preferential tariff treatment. Who completes the CUSMA form may vary from one organization to another, although it can be completed by the exporter, producer, or importer of the goods. Typically, the exporter or producer has the required information to accurately complete the form.

In Summary

CUSMA was a major step forward for Canadian companies. It simplified trade, increased transparency, and fostered an environment that supports growth, ultimately contributing to Canada’s economic prosperity.

About the author

Author: FITT Team

The Forum for International Trade Training (FITT) is the standards, certification and training body dedicated to providing international business training, resources and professional certification to individuals and businesses. Created by business for business, FITT’s international business training solutions are the standard of excellence for global trade professionals around the world.

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