On March 21, 2023, McCarthy Tétrault hosted “2022 U.S. Midterm Elections and the Road to 2024 – What Canadian Business Needs to Know”, a panel discussion that focused on developments in Canada-U.S. relations and their impact on Canadian business.

If you are interested in receiving a recording of the panel discussion, please e-mail [email protected].

The panelists of political and legal experts included:

• Alex Burns, Associate Editor, Global Politics, POLITICO and Author, This Will Not Pass: Trump, Biden, and the Battle for America’s Future;
• The Honourable Jean Charest, Former Deputy Prime Minister of Canada, former Premier of Quebec and Partner, McCarthy Tétrault LLP;
• Moderator, Adam Goldenberg, Partner, Litigation Group, McCarthy Tétrault LLP; and
• With remarks from Dave Leonard, CEO, McCarthy Tétrault LLP, and Martha Harrison, Partner, International Trade and Investment Law, McCarthy Tétrault LLP.

The conversation came at a timely moment in Canada-U.S. relations. News of former President Trump’s potential (and now confirmed) indictment by the Manhattan District Attorney made international headlines. President Joe Biden was soon to touch down in Ottawa for a two-day visit with Prime Minister Trudeau. The two leaders were set to discuss a range of hot-button issues, including cross-border trade, the transition to a green economy, and security concerns abroad.

This blog post offers a snapshot of the panel’s conversation on these topics, and the impact of the Canada-U.S. relationship on the Canadian economy.

1. Buy American… Buy North American

It is difficult to underemphasize the significance of the Canada-U.S. trade partnership. Trade between the two countries totaled $1.3 trillion in 2022. Around 80% of Canadian exports to the U.S. are incorporated into U.S. supply chains.  

The panelists discussed the particular challenges – and opportunities – arising from President Biden’s “Buy American” trade agenda. Since taking office in 2021, the Biden Administration has pushed trade and procurement policies that prioritize American workers, suppliers, and industries. These policies directly affect Canadian exporters who rely on contracts south of the border.

Our panel offered a hopeful perspective: “Buy North American”. Alex and Jean discussed the importance of maintaining existing supply chains across the border while also protecting American industry. For Democratic lawmakers in particular, the opportunity to deepen ties with Canada’s clean industries could make maintaining cross-border supply chains even more attractive, given the alignment with the Biden administration’s prioritization of “green” economic initiatives.

2. “Friendshoring” or De-Risking Supply Chains

Governments and industries on both sides of the border are eager to wean themselves off high-risk trade relationships. One solution is “friendshoring”, or rerouting of supply chains to like-minded nations, such as the U.S. and Canada. “Friendshoring” is touted as a means of mitigating risk in international supply chains, especially in the face of rising tensions with China.

Rather than de-coupling trade relations from particular countries, the panelists spoke of de-risking trade. Jean advised that policy-makers would be prudent to reduce risk by expanding trade options with other countries. Canada’s ongoing free trade negotiations with the Association of Southeast Asian Nations (ASEAN) were cited as an example of mitigating risk in supply chains by exploring new trade relationships.

3. Critical Minerals to Fuel the Green Transition

Canada’s critical minerals are essential to the global green transition. As an illustration, electrical vehicle (“EV”) production is in some respects driving the climate conversation. A significant and critical input in the  production of EVs are battery components, which is reliant on critical mineral extraction. Jean observed that the importance of EV batteries in the industry is transforming automobile companies into battery companies. These batteries require the critical minerals that Canada possesses, incentivizing preferential terms between Canada’s critical mineral industry and the US-based automotive industry.  

Canada is well-positioned to be a leading supplier of critical and strategic minerals, such as lithium, graphite, and cobalt. The U.S. and other allies are lining up to access our supply of these vital resources. One challenge is delay: Jean commented on the need for Canada to find efficiencies in the regulatory approval process while protecting environmental and other important commitments.

4. Security & the Border: Haiti, Roxham Road and China

The rise of China as a superpower, Russia’s invasion of Ukraine, and other points of state-to-state friction are top priorities for both nations. The panel discussed the crisis in Haiti, a significant subject during President Biden’s visit. The U.S. has put pressure on Ottawa to lead a direct response to the crisis in Haiti and, during the President’s visit, the Prime Minister promised to contribute $100 million to support Haitian police forces.

The question of unregulated border crossings — such as Roxham Road, at the border of Québec and New York State — was also top of mind during the President’s visit. Canada successfully pushed for a revision to the Safe Third Country Agreement, the treaty governing crossings. The agreement allows Canada to better control unofficial border crossings in exchange for a commitment that Canada would welcome an additional 15,000 asylum seekers in the next year.

Finally, the panel discussed President Biden’s China policy and the impact that the rising superpower has on Canada and the U.S. bilateral relationship. Alex explained the risks that may arise from a perception that President Biden is not sufficiently tough on China, and notably the potential for any perceived leadership void to be filled by more hawkish policies and rhetoric. Jean also spoke of the imperative Canada faces: to determine what its common interests are with China as we face the rise of this global superpower, given the practical challenges associated with a decoupling of our respective supply chains.

McCarthy Tétrault LLP’s Strategic Advisors and International Trade & Investment Group are here to assist your navigate the complex issues that constitute the Canada-U.S. relationship.