A “Grand-Bargain” Term Sheet for US-Canada relations

June 4, 2026

The governments of both Canada and the United States are engaged in an ill-tempered dance of threats, hesitation, prevarication, and brinkmanship over renewing and expanding the relationship between our two countries. Yet the health of this relationship is vital to the national security, prosperity and geopolitical influence of both countries. It is our view that the US-Canada relationship is too important to leave solely in the hands of politicians.

Just to offer a few examples, after months of antagonistic comments directed toward the United States and saying that Canada’s relationship with the US had become a liability rather than a strength, Prime Minister Mark Carney reversed course on May 28 while speaking in New York. During his speech, he made the case for collaboration, claiming that “Canada Strong will help make America great again.” 

Unfortunately, Canada insists on sending mixed messages – for instance, by recently announcing that it will work to procure Sweden’s GlobalEye airborne early warning (AEW) aircraft from Saab instead of using American systems. This unnecessary ambivalence and lack of clarity exacerbates the ongoing tensions between the two countries over vital issues of trade, security, and much else.

Moreover, despite a steady stream of provocations from the current administration – including repeated references to Canada becoming the 51st state and ridiculing Canada’s hockey performance at the 2026 Olympics – Canada signaled its desire for the renewal of the United States–Mexico–Canada Agreement (USMCA) for 16 years as a relief from tariffs. This came on June 2, in the midst of talks between Canada-U.S. Trade Minister Dominic LeBlanc and US Trade Representative Jamieson Greer, and seems to ignore the fact that Greer and the White House have already told Canada that it will need to get used to the new reality of permanent tariffs. 

The behavior on both sides, in other words, leaves much to be desired. More importantly, it suggests that it is not in the political arena that we will find the adults both countries sorely need  if negotiations over our shared future on this continent are to bear fruit.

One way to wrest some power away from the politicians is to deny them the exclusive control over the conversation. They alone cannot be allowed to decide the outcome of these negotiations. We must reduce the incentives for political posturing by letting other voices in. That is exactly what this document aims to do: to start a public conversation about what a Canada-US agreement might look like – one that solves many outstanding issues in our relationship and doesn’t get bogged down in posturing and grandstanding.

This document, then, lays out the key elements of what a framework deal between the United States and Canada might look like if it were designed to encourage security, business growth, and investment on both sides of the border. Our shared goal must be to create the conditions for safety and broadly shared prosperity for citizens, workers, entrepreneurs and investors of both countries. It is based on the concept of a “Grand Bargain” between us for which we laid out the case in a paper last year entitled The grand bargain: A path to prosperity, security, and strength.

The term sheet does not pretend to be comprehensive nor technical. Rather it is intended to identify those vital areas where legitimate national interests are at stake and the outlines of a deal in principle are clearly visible. Agreement on such an outline would have to be followed by more technical negotiations to finalize a deal.

The term sheet is not the only deal one could imagine. Others will weigh in with criticisms, amendments and outright opposition. Let them. It is precisely our intention to provoke just such a conversation, to move the negotiations out of the backrooms and into the light. We think there is real power, at a time when our relationship is at a low ebb, in sounding a note of optimism, in saying loudly and proudly that the outlines of a deal can be glimpsed right now despite the machinations of our respective political classes. And if others agree that a comprehensive deal is not only possible but can be described, debated, and perfected, then we will have performed a service that will stand our two great nations in good stead for a generation. 

This document, drawn up by Senior Fellows and other experts brought together by the Macdonald-Laurier Institute, Canada’s leading national public policy institute, and its sister organization in Washington, the Center for North American Prosperity and Security, is in our estimation exactly the outside intervention needed to break the deadlock and confrontation – a framework to bring both sides back to the table with a clear and achievable set of goals. 

Trade – General

First, the bedrock on which this proposal rests is this: trade in goods, services, and investment between the United States and Canada should be barrier and tariff-free subject only to specified and limited exceptions laid out here. Every sector-specific section that follows in this document assumes that this principle will be fully recognized and accepted by both parties to these negotiations. To the extent that the negotiations fall short of this central goal, some or all of the other concessions suggested here will almost certainly be withdrawn.

Second, any and all trade disputes under this agreement are to be dealt with under a bi-national dispute settlement mechanism. Trade remedies (such as emergency tariffs) may only be used after they have been found legally and objectively justifiable by the dispute settlement mechanism.

Third, any action by national, state/provincial or local governments in either country that derogates from the basic principle of national treatment (i.e. American suppliers will be treated on an equal footing with Canadian domestic suppliers under Canadian law and policy and vice versa) shall be a legitimate cause of trade action under the dispute settlement mechanism.

Canada will work to ensure that cooperation across these sectors will not result in a backdoor entry into the American market for products from non-market economies. Demonstrated abuse of Canada’s relationship with the US by a non-market economy would likewise be a legitimate cause of trade action.

Investment – General

Canada is one of the top two investor countries in the United States. The current stock of Canadian direct investment in the United States (FDI, not portfolio investment) at market value is US $1.6 trillion. 

Should a Grand Bargain deal prevail, Canada would undertake to increase direct investment in the United States by US $450 billion over the next five years and by US $1.03 trillion over the next ten years. This would make Canada, on a per capita basis, the largest source in the world of direct foreign investment into the US.

Oil, Gas, Energy, and the Environment*

• Limits on export bans or trade restrictions by both countries.
• Commitments against discriminatory pricing and export taxes.
• Fair access rules for US energy companies operating in Canada.
• Build on the Fedorchak bill to align cross-border energy regulations with a future agreement on shared pipeline safety and monitoring standards.
• Streamlined approval frameworks for cross-border pipelines, with a suggested joint review panel (or process) to accelerate approval of cross-border energy projects.
• Joint infrastructure financing programs.
• Specific language to stop and legally challenge politically motivated project cancellations – for example, no delay or denial of each others’ gas or refined product exports without a national emergency finding.
• Cooperation on electricity transmission interties.
• Shared reliability and cybersecurity standards for the energy sector.

Manufacturing

• There is no justification for exempting autos, steel, and aluminum from the general principle of barrier and tariff-free trade on which this proposal rests. Indeed, our steel and auto industries are both threatened by subsidized foreign competitors, and the United States and Canada need to present a common front to combat this serious issue.
• The parties agree that, as a general principle, Canada’s auto sector should enjoy a share of North American auto manufacturing commensurate with the sales of North American-made cars in Canada. 
• To prevent Canada from becoming a platform through which foreign auto makers seek to enter the US market, Canada agrees to formal consultations on external tariffs on autos and auto parts originating from non-market economies.

Critical Minerals, Metals, Gases, and Rare Earth Elements

• Fast-tracking permitting for mining in the United States and Canada with streamlined permitting processes.
• Continued access for Canadian companies under DPA Title III to apply for DOD funding of exploration of metals necessary for military use AND for the North American Critical Minerals stockpile.
• Critical Minerals Framework between the United States and Canada specifically outlining the banned sale of critical minerals to China, Chinese-owned, or Chinese-controlled companies.

Agriculture

• Both the United States and Canada have erected barriers to free trade in dairy products – Canada through its supply management system and the US by refusing to recognize Canadian dairy products as equivalent to American. In exchange for Canada reducing the stringency of its supply management quota system, the US would grant equivalence to Canadian milk and products. Meanwhile, both countries should open their respective quota systems to ensure reciprocal access.

Border and National Security

• While Canada is a negligible source of physical supply of drugs such as fentanyl, it has not effectively pursued the organized crime (including money laundering) that has enabled this trade. Canada undertakes to reverse this by allocating more resources (money, personnel and legal means) to pursue the relevant elements of organized crime operating within Canada. Moreover, Canada agrees to a formal consultation mechanism that allows regular briefing and coordination between police and other enforcement mechanisms in the two countries, to include provincial and local police forces when appropriate.
• Canada and the US should ensure greater cooperation, training, funding, and resource requests between border and local police forces (to include First Nations and Tribal Police forces operating within a 100-mile radius of the US-Canada border). 
• Engage in a crackdown on smuggling routes for trafficking on both sides of the border.
• The Canadian implementation of an exit-tracking system for temporary visa holders through airline passenger lists and other existing technologies.

Defense*

• Canada’s spending on national defense will reach 3 percent of GDP immediately and over a period of 5 years will rise to reach 5 percent of GDP.  
• Canada will meet all its commitments on NORAD modernization.
• Canada will increase its military presence in the Arctic through physical military bases and other military and logistical assets as appropriate.
• Canada will complete its full purchase of 88 F-35s. It will also participate in the Golden Dome initiative and contribute an agreed share of its costs. 
• Canada’s rearmament effort will prioritize building the capacity needed to meet NATO and NORAD commitments and requirements. Its priorities in military procurement will be: 1) interoperability with allied forces; 2) technical specifications that meet Canada’s specific needs; 3) strengthening Canada’s industrial base; and 4) cost. Within these constraints, the United States will remain a preferred supplier of materiel.
• Canada continues to enjoy its designation for defense procurement under the DPA Title III and the DPSA.

Forestry, Lumber, and Pulp and Paper Products

• The United States will remove countervailing duties and tariffs on Canadian softwood lumber imports in exchange for Canadian crackdowns and enhanced protections against Chinese wood, veneer, processed Chinese wood, pulp, and paper products.

*Editorial note: White papers mapping out the specifics of U.S.-Canada energy and defense policies under the Grand Bargain project will be released in 2026. To explore the broader strategic implications of these upcoming frameworks, visit the Macdonald-Laurier Institute or read the full Grand Bargain Study published by the Center for North American Prosperity and Security.