The USMCA Review: Whither North American Integration?

Abstract

After three decades of adaptation to continental free trade, the North American economies are preparing for the first review of the US-Mexico Canada Agreement (USMCA), the successor to the North American Free Trade Agreement (NAFTA), in a context of rapidly evolving economic and technological conditions, a deteriorating geopolitical context, and rising socioeconomic pressures on trade. Globalization and regional integration have both suffered reversals in recent years with market access impacted by the rise of contingent protection, including the resurrection of long-buried unilateral instruments, nationalist industrial policies, and heightened uncertainty. The transition from the NAFTA to the USMCA enshrined these new conditions as part of the architecture for North American regional trade. That said, neither Canada nor Mexico have diversified their exports away from North America, despite the USCMA headwinds, and global and regional value chains forged over decades appear to reflect a deep-seated rationalization and optimization of production systems that has not been uprooted by supply chain politics and nationalist industrial policies. Nonetheless, it remains an open question as to whether North American integration will be deepened, and if so, as a platform to enhance the region's global competitiveness or as a fortress for economic security.

Keywords: Canada, Mexico, United States, NAFTA, USMCA, regional integration, market access, uncertainty, geopolitics, geoeconomics, socio-economic pressures, political transition JEL Codes: F13, F15, F53, F55

JEL Classification: F13, F15, F53, F55