Canada: CUSMA / USMCA / T-MEC - Status And Implementation In Canada, The United States, And Mexico

As anticipated, the three NAFTA governments signed the United States Mexico Canada Agreement (the USMCA) on Nov 30. The USMCA replaces NAFTA – the countries' historical deal of the '90s.

Canada has officially named the USMCA as "CUSMA," putting Canada first in the order of countries.¹ The rest of the parties have done the same. The Agreement is called the USMCA in the United States,² and T-MEC (El Tratado entre México, Estados Unidos y Canadá)" in Mexico.³

The scope of the Agreement has, in essence, not departed from what was published in advance of the signing ceremony. The Agreement covers the matters on which the three countries were able to agree "in principle" ⁴ earlier this fall.⁵

Ratification, and implementation of the Agreement domestically are the remaining two steps for the treaty to become enforceable in each state party. Mexico, a civil law country, may not be so concerned about the latter, as its international law instruments are directly enforceable as soon as they are ratified. Canada and the United States, to the contrary, will each have to pass their home legislation to give effect to the Agreement.

Note that this article has been prepared by lawyers licenced to practice law in Canada. The portions on the U.S. and Mexico are based on our understanding of the legal situation in these countries.

CANADA

Ratification

Canada's internal process with respect to the ratification of the CUSMA is expected to take no more than 21 sitting days of the House of Commons after the Minister of Foreign Affairs tables the Agreement in the House.⁶

The Minister's tabling will be supplemented by an Explanatory Memorandum addressed to the House. The Memorandum will outline the content of the Agreement, including obligations under the treaty, national interests, the likely economic, social, cultural, environmental and legal effects and impacts, federal-provincial-territorial implications, implementation, and the costs of compliance.⁷

Although debates may follow, the Cabinet is the ultimate controlling authority with respect to Canada's ratification process. The authorized government representative of Canada would be in a position to ratify the Agreement after the prescribed time has passed, on the Governor in Council's (Cabinet) Order. There is no requirement for legislation to be passed in the Parliament to enable Canada's ratification of the signed Agreement. The Order in Council will serve as the government's authorization to deposit Canada's instrument of ratification on the CUSMA (i.e. Canada's expression of its consent to be bound by the Agreement). Usually, the Minister of Foreign Affairs ratifies an international treaty for Canada.

Implementation

Once Canada ratifies the CUSMA, the Agreement will have to pass Canada's own legislative process to become a law enforceable in Canada.

Legislative steps in the Parliament include the government's introduction of a bill implementing the treaty and making consequential amendments to the statutes affected by the treaty if necessary (first reading), debates, submissions to Parliamentary Committee(s), and voting.

If the House ultimately votes in favour of the bill subsequent to the third time the bill is read and debated, the bill will be submitted to the Senate for consideration and passing.

If passed by the Senate, the bill will undergo Royal Assent, and come into force, consistent with Canada's law-making process.

THE UNITED STATES

Although the President of the United States has the constitutional authority to negotiate treaties, "with the Advice and Consent of the Senate, provided two thirds of the Senators present concur",⁸ this does not apply to commercial trade agreements.⁹

Rather, for trade agreement implementation in the United States, the process is determined by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015.¹⁰This law allows the President to request the extension of the trade promotion authority to June 30, 2021,¹¹ which President Trump did in May 2018.¹²

After an agreement is signed, the President has 60 days to submit a list of required changes to US law to Congress.¹³ Meanwhile, the US International Trade Commission (USITC) has 105 days after signing to submit its report to the President and Congress on the economic impact of the trade agreement.¹⁴ At least 30 days before the implementation legislation is considered final, the President must submit to Congress a draft bill, along with a statement of administration action.¹⁵

At this point, it is likely that a "mock markup" bill will be submitted to the House Ways and Means Committee and the Senate Finance Committee, to allow for non-binding input from these committees.¹⁶ Once the text of the bill is finalized, it will be introduced in the House of Representatives, and then must pass through both houses of Congress with a simple majority.¹⁷ The President can then implement the agreement via proclamation, including the date the agreement is to come into force.

Though the process to implement the trade agreement is set out in the trade promotion authority law, both the House of Representatives and the Senate retain the constitutional right to apply the standard procedures rules of their respective houses.¹⁸ This means that, legally, Congress can opt to not apply the trade promotion authority's "fast-track" features, and therefore allow for the possibility of debate, amendment (and, consequentially, filibuster), which could scuttle or delay the implementation of the agreement.

Until the new trade agreement comes into force, NAFTA will remain operational. Recently, however, President Trump suggested he may withdraw the United States from NAFTA. NAFTA contains a provision stating parties to the agreement may withdraw given six months' notice.¹⁹ This would put pressure on Congress to implement the USMCA in order to avoid a legal lacuna between the U.S. and its two closet trading partners. Congress could move to implement the USMCA more quickly than required by accelerating the process laid out in trade promotion authority law. Were the U.S. to withdraw from NAFTA before full implementation in the U.S., NAFTA would remain in force between Canada and Mexico, though not between Canada, Mexico and the United States.

MEXICO

As noted above, in Mexico treaty implementation may be less of a concern than in Canada and the United States. Under the Mexican constitution, ratification of treaties falls within the authority of the Mexican Senate.²⁰ On approval of the Senate by majority vote, where consistent with the laws of Mexico, the treaty will then have the force of law.²¹ The President of Mexico can then decree the law into force. Once this happens, the agreement will be considered implemented and enforceable in Mexico.

CONCLUSION

Though negotiations of the new agreement are concluded, implementation hurdles remain, particularly in the United States. Given the legislated timelines in the United States, full implementation will not likely take place until 2020, though it could happen sooner, depending on how quickly the parties to the agreement move forward with implementation.

Footnotes

[1] Global Affairs Canada, Canada - United States - Mexico Agreement (CUSMA), 2018-11-30

[2] Agreement between the United States of America, the United Mexican States, and Canada, signed November 30, 2018, Office of the United States Trade Representative

[3] Government of Mexico, Textos del Tratado México - Estados Unidos – Canadá (T-MEC)

[4] Justin Trudeau, Prime Minister, News, "Prime Minister of Canada welcomes new United States-Mexico-Canada Agreement" (October 1, 2018)

[5] See review of the Agreement: Clifford Sosnow and Peter Kirby, " The USMCA: A First Look At Key Contentious Issues" International Trade and Customs Law Bulletin (October 4, 2018)

[6] Global Affairs Canada, Policy on Tabling of Treaties in Parliament

[7] Global Affairs Canada, Policy on Tabling of Treaties in Parliament, Annex B "Department of Foreign Affairs and International Trade; Procedures for the Tabling of Treaties in the House of Commons."

[8] U.S. Const. art. II, s. 2, cl. 2.

[9] The United States Court of Appeals, Eleventh Circuit determined as much in a challenge to the original NAFTA agreement on this basis: Made in USA Foundation v. United States 242 F. 3d 1300 (11^th Cir. 2001).

[10] Bipartisan Congressional Trade Priorities and Accountability Act of 2015, 19 U.S.C. 27 §§ 4201-4210.

[11] Ibid, § 4202, subs. (a) and subs. (c)

[12] Congress approved the extension in June 2018, see: "USTR Lighthizer Welcomes Extension of Trade Promotion Authority" (June 2018)

[13] Bipartisan Congressional Trade Priorities and Accountability Act of 2015, 19 U.S.C. 27 § 4205 cl. (a)(1).

[14] Ibid, § 4204 cl. (c)(2).

[15] Ibid, § 4205 cl. (a)(1).

[16] See, Congressional Research Service, "Trade Promotion Authority: Frequently Asked Questions (PDF)" (September 4, 2018), pp. 25-26

[17] This requires reporting by the House Ways and Means Committee and the Senate Finance Committee, see: Congressional Research Service, "Trade Promotion Authority: Frequently Asked Questions", ibid.

[18] Bipartisan Congressional Trade Priorities and Accountability Act of 2015, 19 U.S.C. 27 § 4205 subs. (c).

[19] NAFTA, Art. 2205.

[20] Constitution of Mexico, art. 76(1).

[21] Ibid, art. 133.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.