The Canada-U.S.-Mexico Trade Agreement (CUSMA) renewal deadline of July 1 has passed without a deal, as the United States rejected a 16-year extension. Amid the uncertainty, a controversial proposal known as "Fortress North America" has emerged, suggesting a customs union that would harmonize external tariffs among the three partners. However, this approach poses significant risks to Canadian trade sovereignty, according to Stuart Culbertson.
The Fortress North America Proposal
The idea of a customs union would go beyond the current free trade framework, requiring Canada, the U.S., and Mexico to apply common tariff rates on imports from non-member countries. Ontario Premier Doug Ford has promoted this concept, arguing that CUSMA members should match or exceed U.S. tariffs on strategic products like Chinese electric vehicles or risk losing their seat at the table. Professor Joel Baum of the Institute for Research on Public Policy warns that such statements by Canadians will be quoted back to them in future negotiations.
Who Sets the Tariffs?
A fundamental concern is determining who would control tariff-setting in a customs union. Unlike the European Union, which built its common external tariff on a balance of power among members like France and Germany, North America lacks such equilibrium. Given the aggressive America-first stance of the current U.S. administration, there is little doubt that Washington would seek to dominate the process, likely demanding tariff rates aligned with U.S. levels—which are generally higher than Canada's current rates on third-party imports.
Closing Back Doors
The U.S. would also aim to close perceived "back doors" that allow countries like China to access North American markets through minimal manufacturing or assembly in Mexico or Canada. For instance, Japanese automakers Toyota and Honda operate large facilities in southern Ontario that rely on open access to the U.S. market. Under a customs union, Canada could face pressure to forfeit its independent trade policies, including its approach to foreign investment and manufacturing.
Impact on Canadian Sovereignty
Adopting Fortress North America would represent a significant surrender of Canadian trade policy sovereignty. Canada would be forced to align its tariff and trade measures with U.S. priorities, potentially undermining its ability to pursue independent economic strategies. As Culbertson notes, the path forward requires careful consideration to avoid a dangerous mistake that could leave Canada subservient to U.S. trade whims.
