Canada: McCarthy Tétrault US Election Briefing Note

Given the longstanding close diplomatic and business relationships between, and the highly integrated economies of, the US and Canada, we wish to comment on certain possible outcomes of the election of Donald J. Trump as president of the US on Canadian-based businesses and on other businesses that interact with Canada. Whenever a new US President and Congress are elected and a new US presidential administration is appointed, there are resulting changes in US policies that may impact trade, investment, business, regulation, treaties and mobility between the US and Canada.

At McCarthy Tétrault, lawyers and senior advisers are here to help our clients navigate these likely upcoming changes, and we wish to – in a very preliminary way – weigh in on a few of these.

Investment and Trade:

Looking ahead, there is an opportunity for Canada to position itself more favourably as a destination for investment and trade within North America.

  • TPP and NAFTA: Mr. Trump has publicly stated that he does not plan for the US to move forward with the Trans-Pacific Partnership (TPP) and that he also plans to have the US either renegotiate or terminate the North American Free Trade Agreement (NAFTA). Nevertheless, Mr. Trump's apparent principal issues with NAFTA to date have been directed at the US relationship with Mexico, rather than its relationship with Canada. If NAFTA were to be terminated, the default position for Canada should be to revert back to the original Free Trade Agreement (FTA) negotiated by Canada and the US in 1988 to 1989. Of course, the potential implications on automotive and other industrial and manufactured products would need to be considered and addressed should the US decide also to terminate the original FTA. In the last year, however, Canada has been the largest foreign participant in US mergers and acquisitions and an important source of investment for the US, which should help underscore the importance of the US-Canada economic relationship. As regards the TPP, Mr. Trump has voiced very strong opposition to the US agreeing to that treaty. Rather than seeing it disappear altogether, Canada might consider persuading the co-signatories to proceed without the US, which would afford Canada a considerable competitive advantage in the Pacific markets concerned. A similar Canada-alone policy might also be pursued in relation to Japan.
  • Possible Retaliatory Actions: If Mr. Trump follows through on some of his election campaign promises regarding trade, these actions will be taken while the US is still a party to various trade agreements, which would potentially trigger retaliation from its major trading partners as permitted under these agreements. Canada is not immune to trade disputes with the US, as is clear from the ongoing softwood lumber dispute between the two countries, and Canada is especially vulnerable to US trade action given the level of investment and trade between the two countries. To date, however, many of Mr. Trump's election campaign positions regarding trade have focused on Mexico, China and other countries, rather than on Canada.
  • CETA: Canada has just recently signed the Comprehensive Economic and Trade Agreement (CETA) with the European Union, which is considered to be the most advanced trade agreement in the world. As a result, Canada should be able to position itself even better as a trade and investment hub within North America for European businesses and other investors and as an investment destination for American businesses and other investors seeking better access to the European market, which market (including the UK) of 500 million consumers is the richest consumer market in the world.
  • Other Countries: The other potential post-election opportunity is for Canada to become more attractive to businesses and other investors from countries around the world seeking to invest in and trade within North America. In particular, for businesses and other investors from China and Middle Eastern countries which have already been very active in Canada, Canada may potentially be even more attractive today than it was before November 8.

Labour Mobility:

  • Mr. Trump was clear during the election campaign about deportations, restricting immigration and building a wall between the US and Mexico. Canada, on the other hand, has a different approach to immigration and continues to recruit well-educated and skilled immigrants. 20% of Canada's population is born abroad.
  • Canada should continue to attract talented immigrants to counterbalance its aging and shrinking domestic workforce. In the recent Economic and Fiscal Update, the Canadian government announced some measures that will help facilitate the entry of highly skilled temporary foreign workers.

Ongoing Analysis:

  • In the days to come, you will hear more from McCarthy Tétrault's experienced lawyers on the US election-related matters outlined above and other issues as they continue to evolve, including with respect to investment flows, tax policy and energy policy. Please do not hesitate to reach out to me, our Trade lawyers John Boscariol and Simon Potter, or any of your contacts at the firm regarding any post-election changes affecting Canada's most important trading partner, closest friend, and ally, and how these may impact your business.

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