In recent years, domestic policy debates in Canada have focused on its heavy economic reliance on the United States, facilitated by the United States-Mexico-Canada Agreement (USMCA). Critics of the agreement argue that Canada's regulatory alignment with the US restricts its ability to pursue independent trade policies with rapidly expanding markets in the Asia-Pacific region. They suggest that terminating or substantially renegotiating USMCA terms would allow Canada to establish distinct standards better suited for global trade. However, major manufacturing and agricultural trade bodies warn that leaving the USMCA would immediately trigger high tariff-rate quotas, border delays, and a loss of preferential market access, potentially disrupting key Canadian exporting sectors.
Fig. 1.1 – Destination of Canadian Merchandise Exports
| Year | % of exports to USA | % of exports to Rest of the World |
|---|---|---|
| 2015 | 76.5 | 23.5 |
| 2023 | 72.0 | 28.0 |
Using Fig. 1.1 and the information in Extract 1, explain whether Canada's balance of payments on the current account is likely to worsen as a result of Canada withdrawing from the USMCA.
