Neighbours 3: the superpower next door

Neighbours 3: the superpower next door

Our friends to the south are celebrating the birth of their country’s independence today so we thought, what a better time to look at the relationship between our two nations. The holiday, which is normally marked by fireworks, hotdog eating contests and parades, will look a little different this year because of our good friend COVID-19, but you know what else happened this week? The long-awaited United States, Mexico Agreement (USMCA) went into effect on July 1^st. So, what does this mean? And, how does it impact the “special relationship” that Canada and the United States have?

Canada and the US share the longest international border on the planet (9,000km/5,500m) and according to the U.S. State Department the two countries’ close relationship is “reflected in the high volume of bilateral trade – nearly $2 billion a day in goods and services – and people-to-people contact – about 400,000 people cross between the two countries every day.”

Do you know what makes all that cross-border action easier? Trade agreements, most recently the USMCA, which is an agreement between the U.S., Canada, and Mexico. The agreement builds on the original North American Free Trade Agreement (NAFTA) which was agreed upon more than 25 years ago, and was signed by U.S. President Trump, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau on November 30, 2018, and then again on December 10, 2019.

The original trade agreement, NAFTA, was an agreement signed by Canada, Mexico, and the U.S. to create a trilateral free trade zone across the continent. It came into effect on January 1, 1994, and resulted in the elimination or reduction of trade barriers between the three countries. A review of the agreement by economic scholars found that the agreement was generally beneficial for most economies and the “average” person, but may have negatively impacted a small minority of workers in industries exposed to trade competition.

When Donald Trump was running for President in 2016, he turned his ire to NAFTA (which was notably signed by then-President Bill Clinton), later calling it the “worst trade deal the U.S. has ever signed.” The USMCA fulfilled his promise to “fix” the agreement and the USMCA has been touted as a modernized NAFTA which is “good for Canada and good for Canadians.”

The agreement covers a range of industries including agriculture, homelessness, manufacturing, labour conditions, and digital trade. A major area of focus for President Trump was giving U.S. dairy farmers greater access to the Canadian markets (yeah for cheese and butter options!), and requiring higher numbers of cars to be manufactured in North America. Interestingly, the new deal also includes changes to patent protections for pharmaceuticals which could mean higher prices for drugs in Canada.

Notably (for us because we love an online sale), the USMCA increases the amount of U.S. products Canadians can buy online without stressing about duties and taxes.

But, it’s not all shopping and people that make the relationships between the two countries so close, it’s also guns (and other military stuff). The U.S. defense arrangement with Canada is said to be more extensive than with any other country. The two countries are a part of the North Atlantic Treaty Organization (NATO) which ensures mutual security. However, the two countries take it one step further with the binational North American Aerospace Defense Command (NORAD). The Permanent Joint Board on Defense also provides policy-level consultation on bilateral defense matters.

While the agreements, military arrangements, and proximity would make you believe everything is hunky-dory the good vibes are far from assured. The COVID-19 pandemic has certainly put the relationship to the test with President Trump threatening to station troops near the border and trying to block PPE exports to Canada. And just as the USMCA was taking effect President Trump was threatening to hit Canadian aluminum with tariffs.

You see, Canada and the U.S. share a long and mutually beneficial relationship, and like any long-lasting marriage there are bound to ups and downs. Each partner has to give and take to make it work, so let’s not cry of spilled (Canadian dairy) milk. And, Happy 4th of July to our American friends!