Harnessing USMCA to drive growth in strategic industries: Building an integrated manufacturing platform

In turn, Mexico and Canada have surpassed China as the United States’ top trading partners. Similarly, intra-regional investment has significantly increased, with capital investment in North America growing 134% since USMCA entered into force.

As we approach USMCA’s fifth anniversary and the review of the agreement slated for July 1, 2026, the parties should assess whether the USMCA could do more to support an integrated North American manufacturing platform. This is particularly important because the future of North American competitiveness and security depends on building manufacturing capacity and adopting artificial intelligence (AI) technology in advanced industrial sectors.

Enhancing USMCA to support strategic industries

The global trading system is currently governed by intense competition for market share in the production of advanced technologies and products. Governments have deployed industrial policy to capture the economic and security benefits associated with new foundational technologies since the dawn of the digital economy. Government-led “Industry 4.0” initiatives, beginning in Germany in 2011 and followed by the United States, China, Japan, Korea, and the European Union, have directed resources to private companies to make manufacturing more connected, sustainable, and efficient. By facilitating trade in critical minerals, data, and energy, USMCA can accelerate the next phase of this digitally enhanced industrial revolution.

Critical minerals are essential for producing batteries, semiconductors, and other high-tech components that form the backbone of modern advanced manufacturing industries. North America is uniquely positioned to develop an integrated supply chain for critical minerals due to its vast natural resources. Canada is the primary exporter to the United States of nickel, a key component in stainless steel and solar panels. Mexico has one of the world’s largest lithium resources, an important component of batteries, machinery, and equipment. The United States and Mexico are two of five countries with 65% of the global supply of identified unmined copper, an essential component in most electronic systems.

At the same time, AI has the capacity to greatly enhance manufacturing efficiency and reduce manufacturing costs through predictive maintenance, quality control, and process optimization. AI-enabled manufacturing requires data-intensive cross-border activities such as cloud computing and data collection from connected devices.

AI training, processing, and data storage also require a substantial and secure energy supply. A recent Lawrence Berkley National Lab report found that data-center power demand more than doubled between 2017 and 2023, largely due to the growth in AI servers. To meet this growing need, North America will require not only innovative power generation strategies but also infrastructure allowing cross-border energy transmission.

USMCA is the primary mechanism for integrating the North American economies. The agreement contains innovative chapters designed to promote good regulatory practices, incentivize cross-border investment and data flows, protect intellectual property rights, and eliminate tariff barriers to the trade in goods. The USMCA parties should approach the six-year review with a view to determining how each of the agreement’s chapters could be updated to support the development of manufacturing in advanced industrial sectors. Such updates could include:

• Strengthening investment protections to incentivize critical mineral extraction and processing.
• Reinforcing digital trade commitments to protect cross-border data flows.
• Enhancing intellectual property protections to encourage AI technology adoption.
• Expanding market access provisions to facilitate the trade in oil, gas, and electricity across borders.

Engaging stakeholders to ensure a successful review

The upcoming USMCA review is an opportunity to thoughtfully evaluate where USMCA’s implementation has fallen short. Each party needs to uphold its existing USMCA commitments or renegotiate those it can no longer honor.

The business community supported USMCA’s ratification because of the importance of continued integration of the North American economy. U.S. policymakers established a constructive stakeholder feedback loop during the USMCA negotiation and ratification process. As U.S. policymakers approach the USMCA review, they should engage stakeholders through the public consultation mechanisms set forth in USMCA’s implementing legislation, as well as through informal advisory committees. Only with robust public-private sector consultation can we use the agreement to unleash the next phase of the advanced manufacturing revolution.