The coming renegotiation of the USMCA has opened a window where increased labour market integration between the U.S., Canada and even Mexico could be possible.Sean Kilpatrick/The Canadian Press
Christopher Worswick is chair of the Department of Economics at Carleton University.
Last week U.S. president-elect Donald Trump said he’d impose a 25 per cent tariff on all products from Canada and Mexico. Next, Mr. Trump reportedly joked that, if Canada cannot bear the economic consequences of the tariff, then it should become America’s “51st state.”
Canadian leaders are now bracing for, and have to be open to, radical changes to our relationship with the United States once the new Trump administration is in place.
Our leaders should be taking this as an opportunity. Canada can use this reset in North American trade relations to realize benefits. And one way to do that is to take some inspiration from Mr. Trump’s “51st state” comment.
That comment was no doubt meant to be provocative but is also full of irony. Mr. Trump wants to put up walls between the United States and Canada through a tariff but at the same time jokes about removing borders altogether.
It is within that irony, that there may be an opening for serious progress. Between Canada and the United States, we do need fewer of the traditional barriers that countries have with each other.
It begins with Mr. Trump’s proposed tariff, which would have a serious consequence for our export-oriented economy if enacted. Canadian leaders must fight it. But our leaders must also think beyond the tariff and consider the additional benefits that would come from further economic integration.
We should look across the Atlantic. The common market of the European Union (EU) involves not only free trade across member states, but also a common labour market. Citizens of one EU country can apply to jobs in another EU country on a level playing field with citizens there.
What would be the advantages of a common labour market between Canada and the U.S.? Canadians would have the opportunity to gain work experience in the U.S. and could share those skills and professional networks after returning to Canada. Similarly, Americans would have the opportunity to work in Canada, expanding their understanding of Canada’s economy and building networks that could lead to new business opportunities.
The automatic renegotiation of the USMCA has opened a window where increased labour market integration between the U.S., Canada and even Mexico is possible.
For higher wage workers, this integration is already in progress. The importance of worker mobility between member states was recognized by the architects of the original Canada-United States free trade agreement. They included a temporary visa clause to be assigned to workers in a specific set of occupations. If a person working in one of those occupations in Canada received a job offer in the U.S. to work in the same occupation, then the person would be granted what the Americans now call a TN visa without a labour market impact assessment.
These visas were retained as part of NAFTA, and even through the highly contentious USMCA renegotiation, which suggests that Mr. Trump may be supportive of this type of temporary and reciprocal labour mobility, at least for certain higher wage occupations. These TN visas have a limit of three years, can be renewed in principle, and do not lead to permanent residency.
The existence of the USMCA visas means that we are already benefiting from some of the gains from worker mobility that arise from an EU-style common labour market, and more could be done in the upcoming USMCA renegotiation round.
First, the occupation list should be expanded as many higher wage occupations are not listed. For example, accountants, economists and even hotel managers are on the occupation list, but financial analysts are not. Given the importance of the financial sector in New York and Toronto, extending the occupation list in this way would have large economic benefits.
However, rather than adding new occupations to the list, it would be better to come up with a general mechanism for higher wage individuals to gain these visas. Perhaps, an ‘other high wage’ occupation category could be added with a minimum hourly wage rate stipulation. This could greatly expand the number of higher wage workers eligible to work in another USMCA country without having to list every possible occupation.
But what about lower wage workers? Since the creation of NAFTA, it has been hard to see a full labour market integration across the three countries, given that wages are very low for so many Mexican workers.
Could a movement in this direction be made under the next USMCA round? A lower wage mobility clause should be included, perhaps with numerical limits to avoid too large of an inflow of such lower wage workers entering either the U.S. or Canada from Mexico so as to limit any negative consequences for lower wage workers in the receiving country. If negative consequences were not found, then the numerical limits could be relaxed as part of subsequent rounds of USMCA negotiations.