If free trade is over, Canada needs a competitiveness agenda

Although the Canada-U.S. trade negotiations failed to secure a deal last week, we know that the Canadian government wasn’t bargaining for the restoration of zero-tariff trade. Ottawa was prepared to preserve free trade for most CUSMA-compliant commerce while accepting ongoing tariffs in sectors such as aluminum, steel, and automobiles. Whatever ultimately caused the talks to collapse, that negotiating baseline itself marked a break with the past. CUSMA may ultimately survive as a legal agreement. What’s ending is the spirit of NAFTA: the presumption that firms can organize production on a continental basis without the border materially affecting where they put their next plant, product mandate, or research facility. That presumption has been foundational to Canadian macroeconomic policy for four decades. The Auto Pact, the Canada-U.S. Free Trade Agreement, and then NAFTA progressively created something close to a borderless continental market. A company could locate in Canada, serve the much larger American market, and treat the border as a minor administrative inconvenience rather than a decisive business cost. Continental free trade did more than increase exports. It became Canada’s de facto competitiveness strategy. Our smaller market, shallower pools of capital, slower approvals, weaker industrial clusters, and lower productivity remained liabilities. Yet a Canadian plant could reach the same continental customer base as an American one. Access to that market blunted the effect of Canada’s structural disadvantages on investment decisions. That economic shelter is disappearing. The border has returned as a factor in Canadian investment decisions, and a four-decade assumption can no longer be taken for granted. Canada must replace the competitiveness advantage it borrowed from continental free trade with one it builds at home: an Ireland strategy for the post-NAFTA era. President Donald Trump listens as U.S. Trade Representative Jamieson Greer, right, speaks to reporters aboard Air Force One while en route from Kuala Lumpur, Malaysia, to Tokyo, Japan, on Monday, Oct. 27, 2025. Mark Schiefelbein/AP Photo. The arithmetic of the returning border Current trade data can obscure the change. Ottawa estimates that about 85 percent of Canadian exports to the U.S. remain tariff-free and that the effective average U.S. tariff on Canadian goods is 5.2 percent. Those figures describe today’s commerce, much of it generated by investments made under the old assumptions. But economies are built at the margin. The future industrial structure will be shaped by marginal decisions about the next plant, production line, or product mandate. To borrow Ross Perot’s phrase, the “giant sucking sound,” if it comes, will be quiet. Existing factories will not all move south at once. The next model will simply be assigned to Michigan or Tennessee. The next expansion will go to Ohio or Texas. Each decision will look individually rational and attract little attention outside the affected company and community. Together, they’ll determine the structure of the Canadian economy. Canada risks losing its economic future one boardroom decision at a time. Sean Speer discusses the implications of the recent Canada-U.S. trade negotiations, highlighting the shift from a presumption of zero-tariff trade to a reality where tariffs are a factor in investment decisions. Canada must develop a new competitiveness strategy akin to Ireland’s, focusing on creating an attractive environment for international capital. Canada can no longer rely on the benefits of continental free trade and must instead build a robust domestic agenda to ensure future economic growth and investment. Ask about this article — or anything in Canadian politics, economics, and public policy — powered by The Hub’s 5,000-article archive and deep area expertise. Comments (4) This is a very good piece. The fly in the ointment is the ideology of the Liberals. They prefer excessive State control of the economy, heavy regulation and large deficits to placate the electorate who want more without work. As long as Liberals form a national government real productivity gains and free market prosperity cannot flourish.