Alternative federal budget 2026-27: Trade and investment

This is from a larger publication, Alternative federal budget 2026-27: Bridge to independence

Introduction

This year’s Alternative Federal Budget comes out amidst continued chaos in global trade and foreign relations. U.S. imperialism, war and beggar-thy-neighbour trade actions have sown destruction and death in Latin America, Africa and the Middle East, produced shortages of economically critical goods such as oil and gas, fuels, chemicals, fertilizer and pharmaceutical supplies, and suppressed business investment in almost everything but U.S. data centre construction.

The Canadian economy fared better than worst-case scenarios at the start of the second Trump presidency. However, tens of thousands of jobs have been lost to Trump’s trade war on Canada and Mexico, while the federal and provincial governments have been forced to subsidize export-dependent production or permanently lose critical industrial capacity. A federal trade diversification strategy focused mainly on signing more free trade agreements will not sufficiently replace lost U.S. exports.

Overview

Canada needs to bridge a more independent foreign and international trade posture with a more hands-on economic strategy at home. Like last year, the AFB diverges from both neoliberal free trade and deeper integration with the United States. The present “rupture” in the so-called international rules-based order that Prime Minister Carney observed in his World Economic Forum speech presents Canada with an opportunity to fashion more flexible but realistic international relations prioritizing economic resiliency, poverty reduction, climate change abatement, and sustainable growth.

U.S. trade war on Canada

The Trump administration’s sectoral tariffs on Canadian imports of automotive goods, lumber, wood products and metals (and their derivatives) have triggered or contributed to significant declines in Canadian manufacturing capacity and employment. Far from addressing “national security” concerns, these U.S. tariffs are designed to incentivize the relocation of industrial production from Canada to the United States. The threat is existential for Canadian automotive and steel production. Buy Canadian conditions on public infrastructure spending and trade diversification can make up for some, but not all, of the market access losses in the United States. A regional production-sharing arrangement involving Canada, the U.S. and Mexico could potentially preserve jobs and foster a large North American market for current and next-generation goods.

According to Article 34.7 of the Canada-U.S.-Mexico Agreement (CUSMA), the parties must meet, through the CUSMA Joint Commission, every six years to conduct a joint review of the operation of agreement, “review any recommendations for action submitted by a Party, and decide on any appropriate actions.” The first review commenced on July 1. In 2025, the federal government consulted widely on how Canada should approach the review but ignored recommendations from labour unions and civil society to strengthen the agreement’s relatively strong labour guarantees and first-of-its-kind facility-specific rapid response labour mechanism (RRM). A reshuffled Canada-U.S. advisory group, which will act as a sounding board for Canada-U.S. and CUSMA trade talks, contains two labour representatives and is largely made up of CEOs and former conservative politicians.

A renewed CUSMA that maintains U.S. tariffs on Canadian and Mexican imports while making concessions to Trump administration demands in new areas, including possibly critical minerals and artificial intelligence, would be the worst possible outcome from the current review. Civil society groups in all three countries are demanding, instead, that the agreement’s labour and environmental chapters be strengthened and its intellectual property rights and digital trade provisions weakened to expand sovereign capacity to contain pharmaceutical prices, better regulate potentially harmful practices by online firms, and foster domestic innovation in high-tech sectors.

Canada’s support for Israeli apartheid and genocide

Between October 2023 and April 2026, Israeli military operations in Gaza have killed at least 72,000 people and wounded at least 172,000. More than 1,000 Palestinians were killed by Israeli security forces or illegal settlers in the West Bank in the same period.¹ Daily killings continued through May, despite an October 2025 ceasefire, while Israeli defence forces continued to restrict humanitarian aid to Gaza, including by unlawfully intercepting 22 boats and detaining 180 civilians aboard an international flotilla on April 27. Crew on one boat reported severe mistreatment and sexual assault “that may amount to torture,” according to the UN.²

The federal government as a non-derogable obligation to take actions to stop the further genocide of Palestinians by the Israeli government. Canada’s free trade deal with Israel violates international law by categorizing trade from the Occupied Palestinian Territories (OPT) as originating in Israel, which “erases the Palestinian identity of OPT trade, and provides a material incentive and economic reward to Israel’s ongoing settlement activity.”³ In March, the group Just Peace Advocates released a report that identified 169 unique wines and alcohol for sale as “Products of Israel” in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec.⁴

Canada continues to approve the sale of weapons and military goods to Israel via the United States, despite an announced pause in 2024.⁵ Israel has used these imported weapons to wage an expanded war in Lebanon and Iran resulting in thousands of casualties. Canada supplies critical components to Israel’s F-35 fighter jet fleet, “a weapon that is central to Israel’s campaign of destruction in Gaza, where some estimate the total explosives dropped since 2023 are equivalent to more than six nuclear bombs.”⁶ One Quebec company manufactures propellants and mortar cartridges that are sent to the United States for final assembly before being shipped to Israel, according to Oxfam Canada.⁷

Investor-state dispute settlement

International investment arbitration is under intense scrutiny globally. The investor-state dispute settlement process (ISDS) found in hundreds of Canadian trade and investment treaties lets foreign investors bypass domestic courts to sue countries, sometimes for billions or even tens of billions of dollars, when the decision of a government, court, or other public body negatively affects their expected profits.

In December 2024, two Australian coal investors brought a $2 billion ISDS claim against Canada under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) related to Alberta’s coal mining regulations.⁸ Canada is also facing a $1 billion (at least) lawsuit from U.S. groups under the expired ISDS process in NAFTA, claiming unfair treatment from an impartial impact assessment that resulted in the rejection of a liquefied natural gas project in Quebec.

The Intergovernmental Panel on Climate Change says the prevalence of such ISDS cases threatens the global response to the climate emergency.⁹ In 2015, the Special Rapporteur on the Rights of Indigenous Peoples found that ISDS has “significant potential to undermine the protection of [Indigenous Peoples’] land rights and the strongly associated cultural rights.”¹⁰ In 2023, another United Nations report found that ISDS poses “catastrophic” risks to the achievement of human rights.¹¹

Canada continues to negotiate new treaties containing ISDS, including free trade agreements with Indonesia, Ecuador and Association of Southeast Asian Nations (ASEAN), primarily to strengthen the hand of Canadian mining firms abroad when faced with public or governmental opposition to their projects.¹² The presence of investment treaty protections does not noticeably increase foreign direct investment or make projects more likely to succeed. Canadian firms are behind at least 20 of 57 recent ISDS cases related to critical minerals.¹³

Forced labour

Following the ratification and implementation of the Canada-United States-Mexico Agreement (CUSMA), Canada amended its Customs Tariff to align with a U.S. ban on imports of products made using forced labour. While U.S. customs agents block thousands of shipments a year, Canada’s forced labour import ban has been ineffective, despite repeated promises to improve enforcement. Canada is one of several countries under a Section 301 trade investigation by the United States Trade Representative into ineffective enforcement of forced labour import bans.

International unions and human rights groups are pushing for a coordinated strategy to deal with forced labour and other core labour rights violations in global supply chains. The 18 members of the Coalition Against Forced Labour in Trade (CAFLT)¹⁴, representing groups from Canada, the U.S., Mexico, Chile, Japan, South Korea, Australia, the U.K. and the EU, advocate that no country should become a safe harbour for forced labour and are calling for worker-centred import bans.

Actions

The AFB will allocate $2 million toward the establishment of a trinational civil society advisory group to help Canada, Mexico and the United States develop worker- and climate-centred reforms for the Canada-U.S.-Mexico Agreement (CUSMA) benefiting all three countries. During the present six-year review of CUSMA, the group will reinforce and help build out proposals by labour unions in all three countries for expanding the CUSMA rapid-response labour mechanism, for example, to include Canadian farms and U.S. “Right to Work” states as “covered facilities” for the purpose of challenging unfair labour practices.

The AFB will extend support for the Mexico Labour Solidarity Project established under CUSMA to help democratic unions in Mexico monitor and implement ongoing reforms to Mexican labour laws and enforce their rights under the trade agreement’s labour chapter and rapid-response labour mechanism. The AFB will allocate $2.5 million per year over five years toward projects in conjunction with labour unions in Canada and Mexico.

The AFB will terminate the Canada-Israel Free Trade Agreement and ban all weapons sales to Israel—directly or via the United States—to pressure the Israeli government to end its genocidal campaign in the Occupied Palestinian Territories and wars against Lebanon and Iran. Canada will prevent the transit, docking and servicing of international vessels carrying military goods to Israel and review all public contracts, to prevent public funds from supporting Israel’s illegal occupation of the Palestinian Territories, as promised by 30 nations at the Emergency Conference of The Hague Group in July 2025.¹⁵

The AFB will invest $2.3 billion over five years in a Canada-Africa Strategy to expand trade and development partnerships across the African continent. This initiative will support inclusive green industrialization in Africa and position Canada as a trusted development partner and climate ally.

The AFB will allocate $50 million over two years to expand the number of professions covered by the Interprovincial Standards Red Seal Program, complementing the government’s Team Canada Strong funding to recruit, train and hire up to 100,000 new Red Seal trades workers in the next five years. The Red Seal program strengthens Canada’s economic union without the risk of a race to the bottom on health and safety standards that is created by federal and provincial mutual recognition plans.

The AFB will withdraw Canada from the free trade agreement with Ecuador and free trade negotiations with the United Arab Emirates. The Ecuador agreement, which will have negligible economic benefits for either party, could worsen the already terrible human rights situation in Ecuador by empowering Canadian mining companies over mining-affected communities, who face increased persecution from the Noboa government.

The AFB will direct Global Affairs Canada to remove investor-state dispute settlement (ISDS) from all existing Canadian trade and investment deals and to take ISDS off the table in current and future trade negotiations with Mercosur, the Philippines, and the Association of Southeast Asian Nations (ASEAN). Current investment treaty negotiations and modernizations will be cancelled. Instead, the government will join international efforts to plan a coordinated exit from the ISDS regime.

The AFB will establish and fund an expanded labour-focused branch within Global Affairs Canada with an annual budget of $20 million. The branch will facilitate bottom-up monitoring and enforcement of treaty provisions—in Canada and in trading-partner countries—through state-to-state dispute settlement, similar to how the rapid-response labour mechanism functions in CUSMA.

The Monitor

Our Schools/Our Selves

Alternative federal budget 2026-27: Trade and investment

Introduction

Overview

U.S. trade war on Canada

Canada’s support for Israeli apartheid and genocide

Investor-state dispute settlement

Forced labour

Actions

About the author

Alternative Federal Budget Working Group

Alternative federal budget 2026-27: Health care

Alternative federal budget 2026-27: First Nations

Alternative federal budget 2026-27: Health care

Alternative federal budget 2026-27: First Nations

Budget fédéral alternatif 2026 : Commerce international

Alternative federal budget 2026: International trade

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