Key points:

• • • USMCA at risk 鈥� Rising tariffs, political friction, and the potential 2026 review are creating uncertainty around rules of origin, market access, labor obligations, and dispute鈥憆esolution mechanisms 鈥� areas that are central to legal and tax planning.

    • Economic impact 鈥� Mexico depends on USMCA for exports, investment, and employment; and any disruption would be problematic.

    • Water as a strategic resource 鈥� The conflict over the 1944 Treaty and the new law reflect the critical importance of water usage and water rights in the bilateral agenda.

For almost 25 years before the United State-Mexico-Canada Agreement聽(USMCA), it was the North American Free Trade Agreement (NAFTA) that defined the region鈥檚 economic relationship. Enacted in 1994, NAFTA removed most tariffs, encouraged foreign investment, and integrated supply chains across North America, especially in manufacturing, automotive production, and agriculture. This integration helped transform Mexico into a major export platform and contributed to North America鈥檚 emergence as a competitive economic bloc.

Over time, however, NAFTA drew criticism, particularly in the US, where concerns grew about trade imbalances, worsening labor conditions, and the agreement鈥檚 ability to address modern challenges such as . These political pressures set the stage for renegotiation and ultimately produced the USMCA, a more modern but also more politically sensitive framework.

The current chaotic environment around tariffs and trade suggests that these rules in North America may again be subject to revision. Understanding how tariffs, political dynamics, and resource鈥憆elated tensions interact is essential for organizations and corporations as they try to plan for the legal and tax implications that may arise as the 2026 review approaches.

A year of trade tensions

From the beginnings of Donald Trump鈥檚 second administration in January 2025, , marking the start of a more protectionist trade policy.

In March, some of those tariffs were exempted for products that comply with USMCA provisions. However, in December, President Trump declared that the US would allow the treaty to expire or seek to renegotiate it in 2026, alleging that Canada and Mexico have gained advantages to the detriment of US interests.

Not surprisingly, throughout 2025 and saw President Trump accuse Mexico of failing to comply with the 1944 Water Treaty, a historic agreement that regulates the distribution of water resources from the Bravo, Colorado, and Tijuana rivers. According to the US government, Mexico had not delivered the agreed-upon volumes, generating friction amid a political context already marked by trade disputes.

Mexico argued that prolonged droughts between 2020 and 2025 made compliance with the treaty difficult, affecting water availability in its own agricultural and urban regions. However, President Trump warned that if water flow to the US did not increase, he would impose a 5% tariff on Mexican exports, adding pressure to the bilateral relationship. Finally, after negotiations, an agreement was reached: Mexico must supply the remaining amount before 2030, which represents a significant challenge for the country鈥檚 water management.

In this context, the Mexican government promoted a structural reform to ensure compliance with the treaty and guarantee efficient resource management. On December 11, 2025, the and came into force the following day. This regulation establishes a new legal framework with three fundamental pillars:

• • • comprehensive state responsibility for water management;
    • exclusive powers for Conagua in the allocation, supervision, modification, and revocation of concessions; and
    • prohibition of concession transfers between private parties, preventing speculation and resource hoarding.

The law directly impacts strategic sectors such as agriculture, livestock, industry, and rural communities, as well as domestic services. Beyond its internal scope, this reform is interpreted as a mechanism to guarantee compliance with the Water Treaty, reduce the risk of trade sanctions, and strengthen Mexico鈥檚 position in future international negotiations.

Economic impacts and projections

For Mexico, the USMCA is not merely a trade agreement; it represents a strategic pillar for the country鈥檚 economic stability and sustained growth. Since its entry into the USMCA, Mexico has become a reliable partner in the North American region, guaranteeing its preferential access to two of the largest markets in the world. This advantage has driven foreign direct investment into the country, especially in sectors such as automotive, advanced manufacturing, agribusiness, and emerging technologies.

The importance of USMCA lies in the fact that . Without this legal framework, Mexico would face an adverse scenario because the imposition of significant tariffs would reduce the competitiveness of national products, increase supply chain costs, and directly affect job creation. The automotive sector, for example 鈥� and about 30% of manufacturing GDP in Q3 of 2025 alone and employs more than 1 million people 鈥� would be one of the hardest hit by the loss of these preferential conditions.

In addition, USMCA offers legal certainty for investors. Clear rules on intellectual property, digital trade, and dispute resolution reduce risks and encourage the arrival of foreign capital. Without this treaty, Mexico could experience an outflow of investments to other countries with more stable agreements, which would negatively impact job creation and projected economic growth.

The coming USMCA review

The possible renegotiation of USMCA, scheduled for later this year, generates uncertainty. This review process presents several possible paths for Mexico, each with distinct economic, political, and diplomatic implications. If the USMCA is successfully extended without substantial modifications, Mexico would preserve its preferential access to the US and Canadian markets, maintaining the commercial stability that supports most of its exports. This continuity would reinforce investor confidence, support job creation and stabilize diplomatic relations.

However, if no agreement is reached to extend the treaty, this absence of clarity would create uncertainty for businesses operating throughout North America. Investment decisions could be delayed, expansion plans postponed, and operating costs could rise due to increased scrutiny and customs enforcement. Further, diplomatic tensions could begin again, particularly if unilateral measures such as large tariffs are threatened again. In this environment, Mexico would need to adopt a cautious strategy focused on strengthening legal frameworks and offering targeted economic incentives to maintain its own competitiveness.

Another scenario in which the parties fail to reach consensus would activate the formal pathway toward the treaty鈥檚 expiration in 2030. While trade flows would continue in the short term, markets would begin adjusting to the anticipated end of the USMCA. This expectation could trigger a gradual relocation of investments and restructuring of supply chains, particularly in industries heavily integrated with US production networks, such as automotive manufacturing and advanced industrial sectors. Pressure on the peso, slower GDP growth, rising import costs, and early job losses would likely follow; and even if diplomatic efforts emerge to prevent severe disruption, the economic effects for Mexico would become progressively more adverse.

However, the most severe scenario involves one country withdrawing from the USMCA, which would cause the agreement to collapse for all three members. For example, if the US were to withdraw, Mexico would immediately face World Trade Organization tariffs, dramatically increasing export costs for manufactured goods and agricultural products and severely disrupting supply chains.

Clearly, any of these scenarios highlight how critical this year will be for Mexico. While a successful extension of the USMCA would support stability, attract investment, and sustain long鈥憈erm growth, a failure to reach agreements 鈥� or the withdrawal of a partner country 鈥� could reshape Mexico鈥檚 economic landscape for years to come.

You can find more of our here

Important highlights:

• • Technology-enhanced tools needed 鈥� Key recommendations in the fight against these disappearances include establishing a national database for Indigenous disappearances, using facial recognition technology to match missing persons with sex ads, and leveraging data analysis to identify patterns.

  • Disproportionate impact driven by systemic factors 鈥� Though Indigenous peoples are about 5% of Canada鈥檚 population, about half of women and girls trafficked are Indigenous.

  • Geographic patterns and cross鈥慴order links 鈥� Urban hotspots show concentrated disappearances and trafficking activity, with evidence of connections between Canadian and US sex ads.

The crisis of missing and murdered Indigenous women in Canada represents an urgent human rights concern, with Indigenous women disproportionately affected by violence and exploitation. This issue, often obscured by geographical and societal barriers, demands the attention and action of governments and law enforcement.

Research completed by 成人VR视频 in late-July illuminates the alarming intersection between missing and murdered Indigenous women and human trafficking. These insights are captured in a report titled Missing and Stolen: Disappearance and Trafficking of Indigenous Peoples in Canada. Findings in the report shed light on the systemic factors that contribute to these tragedies, and the report offers actionable recommendations to address and prevent further injustices against potential victims in Canada.

Examining disappearances and trafficking activities

Missing and murdered Indigenous women and girls are overrepresented in cases of violence and trafficking, the report shows. Indigenous peoples (First Nations, Inuit, and Metis) comprise roughly 5% of Canada鈥檚 total population; but despite this low figure, the 2014 National Task Force on Sex Trafficking of Women and Girls in Canada found that 51% of women and 50% of girls .

Systemic factors also contribute to the crisis of these victims, including a history of sexual abuse. Other adverse childhood experiences such as are disproportionately prevalent among Indigenous communities in Canada. These previous childhood abuse experiences contribute to the heightened vulnerability to gender-based violence, sexual exploitation, and human trafficking into adulthood.

Further, these systemic issues are compounded by previous experience with the child welfare system, which continues to disrupt Indigenous family structures. Although represent only about 8% of the population under the age of 15, they accounted for nearly as of 2021. Research also shows that many survivors of sexual exploitation and trafficking have prior involvement with the .

Sex ads points to cross-border activity

By analyzing data from reported Indigenous disappearances and sex ads, the study identified urban areas as hotspots in which these issues are most prevalent. Notably, cities such as Vancouver, Edmonton, and the Windsor-Toronto-Ottawa corridor, emerge as key centers of disappearances and trafficking. Edmonton also is a point of interest because of its high Indigenous population but relatively remote nature in comparison to other hotspots.

Additionally, the study highlights the cross-border nature of trafficking, with connections between Canadian sex ads and those in the United States. This tracks with the general population demographics of Canada, in which much of the population lives within driving distance of the US border. However, when examining some of the ads in urban areas along the border, many involved cross-border connections.

Recommended actions

To address the crisis of missing and murdered Indigenous women and human trafficking, several key actions are recommended for government agencies and law enforcement, including:

Consolidate reporting into a central repository 鈥� Establishing a national database for Indigenous disappearances is crucial for improving the speed and effectiveness of investigations.

Use advanced technology and data analysis 鈥� Likewise, using advanced technology to integrate and analyze data on missing and murdered Indigenous women and comparing that with sex ad data using facial recognition technology could help to quickly identify and locate missing individuals featured in sex ads. In addition, technology could be used in identifying potential victims in sex ads by homing in on specific terms that are used in ads, although this is tricky. Indeed, ads may falsely state ethnicity due to prejudices against Indigenous peoples, and some ads mislabel individuals to avoid devaluation or risk. At the same time, some ads used derogatory terms and specific tribal affiliations associated with the demand from sex buyers.

Put a face on the data 鈥� It is easy to see how the stories of these women and girls get lost as a data point. This is why it is important to amplify the stories of survivors and build awareness of the problem. Behind each data point is a person and family鈥檚 heartbreak, pain, and loss 鈥� those stories should be emphasized and disseminated.

Prioritize investigative resources in known epicenters and across borders 鈥� Investigations should focus on hotspots in which significant patterns of disappearances and sex trafficking have been identified.

Addressing the crisis of missing and murdered Indigenous women and sex trafficking is of paramount importance. Policymakers, communities, and individuals must unite to support these recommend actions to help ensure that every effort is made to prevent future tragedies and uphold the rights and dignity of Indigenous peoples.

You can find more about the ongoing fight against sex trafficking here

Key insights:

• • The North American economic bloc facing significant challenges 鈥� Due to escalating trade tensions and policy uncertainties, the trading bloc comprised of the US, Canada, and Mexico is currently facing significant challenges that have the potential to undermine economic growth and stability across the region.

  • Customized trading strategies needed 鈥� Given each country鈥檚 unique economic outlook, policymakers will need to work on tailored strategies to address each nation鈥檚 specific issues.

  • Communication & collaboration are key 鈥� The future of North American economic cooperation hinges on sustained dialogue and cooperation among the member countries. For continued and shared economic prosperity in the region, the three nations must work together.

For many years, the North American economic landscape has been defined by robust collaboration among the United States, Canada, and Mexico. Policymakers strategically leveraged the region’s unique geographical advantages and opportunities to foster prosperity, leading to the creation of one of the world’s most powerful trading blocs. After the North American Free Trade Agreement (NAFTA) was supplanted by the United States-Mexico-Canada Agreement (USMCA) in 2020, it became the world’s , with the combined imports among the three nations amounting to .

Despite this success, the bloc鈥檚 partnership is now precarious. Escalating trade tensions now pose considerable challenges not only for the three participating nations but for the global economy as a whole now and in the future.

The United States

The Trump administration activities around tariffsand ensuing policy uncertainty has led to significant concerns among businesses throughout North America. These concerns are expected to , while consumer spending may also decelerate due to higher unemployment and persistent inflation.

In fact, economists foresee weaker growth in the US economy. Even though real US GDP grew 2.8% in 2024, shows that it may decelerate to 1.8% in 2025. According to the IMF, unemployment will stand at 4.2% this year, further signaling a soft labor market.

Tariffs also will result in price increases for consumers on imported goods, likely leading to additional pressure on overall price levels. Indeed, consumer prices rose 2.7% in June compared to the previous year, potentially indicating the beginning effects of Trump鈥檚 tariff policy on inflation.

This likely will contribute to inflation remaining persistent, with estimates 聽throughout 2025 of 3.0%, one percentage point above the Fed鈥檚 2.0% target. At the same time, retaliatory tariffs from other countries are expected to lessen demand for US exports. In addition to trade and policy instability, Trump鈥檚 immigration agenda could continue to impact various sectors of the economy, such as construction and agriculture, where labor supply and demand may be affected.

In this environment, a slowing US economy is likely to lead to reduced tax collection, subsequently decreasing government revenue even further. An increase in government debt is anticipated, with general government gross debt as a percentage of GDP projected to rise to 122.5% in 2025.

As for 2026, real GDP growth is expected to slow further to 1.7%. Economists also project that inflation will continue to ease, reaching 2.5%, while unemployment is likely to remain stable at 4.2%. Although these figures suggest a relatively steady outlook, there are more notable downside risks than upside ones. Persistent, or even worse, increasing trade, policy, and geopolitical uncertainties could undermine economic performance and threaten the country鈥檚 stability.

Canada

In 2024, Canada鈥檚 , with real GDP increasing by 1.5%; however, the country鈥檚 economic outlook for 2025 has weakened. Rising trade tensions with the US have contributed to a deterioration in both business and consumer sentiment, while policy uncertainty has increased. As a result, the growing 1.4%, and the unemployment rate rising to 6.6% in 2025.

Unlike the two other countries in the region, inflation in Canada is expected to ease to its 2% target in 2025. However, the Bank of Canada will likely face a challenging environment in the coming months, as upward pressure from higher import prices due to tariffs and downward pressure from falling demand could infringe upon price stability.

Looking ahead, economists project a modest recovery in macroeconomic conditions for Canada in 2026. With projected real GDP growth of 1.6%, inflation at 2.1%, and unemployment at 6.5%, the economy is expected to demonstrate enhanced resilience.

Further, the Organisation for Economic Co-operation and Development (OECD) made some recommendations for the Canadian economy to help it weather these uncertain times, including seeking diversification of trading partners, strengthening innovation to boost productivity and competition, and increasing government investment in infrastructure.

Mexico

As of the midway point of 2025, Mexico鈥檚 economy is facing a challenging outlook. In 2024, the country’s real GDP grew by 1.5%; however, , with an anticipated contraction of 0.3%. to weakened exports resulting from tariffs, as well as restrained public consumption and investment.

The IMF鈥檚 forecasts also suggest that private consumption may be supported by moderate unemployment (3.8%) and declining inflation (3.5%) in 2025. Still, while unemployment is anticipated to remain at relatively low levels, this figure represents an increase from last year鈥檚 level. Also, while investment is aided by lower interest rates it is expected to recover only gradually amid persistent concerns that include geopolitical tensions and domestic uncertainty from policy changes and reforms.

Further out, a recovery for the Mexican economy is anticipated in 2026, with real GDP projected to grow by 1.4% after the previous year鈥檚 contraction. The labor market is forecasted to hold stable, with the unemployment rate standing at 3.8% in the same period. However, inflation is likely to persist at 3.2%, remaining above its target level.

The OECD has outlined several recommendations for Mexico as well, including improving property tax collection and digitalizing tax administration to grow government revenue. Conducting cost-benefit analyses could improve the efficiency of public spending; and creating regulations that encourage private investment in renewable energy could allow the country to leverage its natural resources and gain competitive advantage.

The future of the North America trading bloc

The economic performance of North America in 2025 is increasingly clouded by rising policy uncertainty and commercial tensions between the three member countries. is projected to slow to 1.6% in 2025 鈥� a percentage point lower than in 2024 鈥� as each country contends with unique challenges and the broader consequences of escalating trade disputes.

The imposition of new tariffs by the Trump administration has reverberated across the North American region, straining longstanding trade relationships and introducing additional volatility for businesses and individuals. These developments risk undermining the progress achieved under trade agreements such as NAFTA and its successor, the USMCA, which were designed to foster regional integration and collective growth. With the coming renegotiation of the USMCA in July 2026, the future of North American economic cooperation hangs in the balance.

By 2026, for the entire North American region. However, this outlook is contingent upon the resolution of the ongoing tariff disputes and successful renegotiation of the USMCA. Achieving agreements that address the United States鈥� trade deficit with each respective country remains a key priority for President Trump, as does advancing other significant agenda items, such as enhancing collaboration on immigration 鈥� particularly along the US/Mexican border 鈥� and increasing efforts to combat drug cartels in Mexico.

While it is very hard to predict what will happen in the coming months (let alone the next year) for North America, what is certain is that sustained dialogue and cooperation among the three countries will be essential to preserving the benefits of regional integration, restoring investor confidence, and promoting shared prosperity in the months and years ahead.

For more on the current trading environment, check out the 成人VR视频 Institute鈥檚聽2025 Tariff Survey here

In addition, government action around making companies accountable for improving human rights has been increasing over the last decade with laws passed in and and with separate legislation undertaken in and . Now, Canada enters the arena 鈥� with its , commonly referred to as the Modern Slavery Act (MSA) 鈥� which came into force on January 1.

The MSA implements Canada鈥檚 international commitment to reduce the use of forced labor and child labor in foreign and domestic supply chains by increasing the transparency around these areas for certain organizations. To do this, the MSA imposes public reporting obligations on a broad range of entities, including government institutions, domestic companies, and many foreign companies that do business or own assets in Canada. These reporting obligations include filing annual public reports on measures taken by covered entities to identify, address, and prevent both forced labor and child labor in their supply chains.

How to comply

The first step that affected organizations need to take in order to comply with Canada鈥檚 MSA law is to determine what, if any, reporting requirements to which an organization may be subject. The law requires government institutions and entities that meet certain criteria to meet these reporting requirements.

The next step is determining if an organization must submit an annual report. For government institutions, organizational leaders should determine if the institution produces, purchases, or distributes goods in Canada or elsewhere. For other entities, it is important to determine if the entity produces, sells, or distributes goods in Canada or elsewhere; imports into Canada goods that are produced outside Canada; or controls an entity that engages in any of these activities.

New reporting obligations include filing annual public reports on measures taken by covered entities to identify, address, and prevent both forced labor and child labor in their supply chains.

Additional actions to ensure compliance are focused on understanding what needs to be reported and ensuring that the report created for compliance is complete. For government institutions, their compliance professionals should detail the steps taken during the previous financial year to prevent and reduce the risk that the use of forced labor or child labor was used at any step of the process of goods produced, purchased, or distributed by the institution. For other entities, compliance professionals should outline the measures implemented in the past fiscal year to mitigate and diminish the risk of employing forced or child labor at any step of the production of goods in Canada or elsewhere or of goods imported into Canada by the entity.

The final step involves ensuring the annual report is approved according to the law鈥檚 requirements. If a report covers a single entity, compliance professionals need to ensure it is approved by the entity’s governing body. If an organization chooses to file a joint report on behalf of several entities 鈥� for example, a parent company can file one report on behalf of all its subsidiaries that are subject to the reporting requirements 鈥� then compliance professionals need to ensure that the report is approved by either the governing body of each entity included in the report or the governing body of the parent company that controls each entity included in the report.

Recommended actions for organizational readiness

Creating a cross-functional team with representatives from procurement, legal, finance, and internal audit is a critical action to ensure compliance. Because compliance with the law involves third-party suppliers and intermediaries, a due diligence risk assessment also is necessary to identify and report on the areas of risk.

Updating or creating an organization’s policies 鈥� such as its human rights policies, corporate codes of conduct, and supplier codes of conduct and procedures 鈥� are critical to outlining roles and responsibilities for ongoing compliance. The procedures should include how to investigate any concerns that are identified.

Additional essential measures should include:

• • • Training all employees on the issues of forced labor and child labor and ensure that training for the board of directors and those employees with oversight or responsibility for supply chain logistics specifically covers the MSA and its reporting requirements.
    • Reviewing and revising supply chain contracts to proactively examine and adapt the organization’s supply chain contracts to ensure they include prohibitions on the use of forced labor and child labor and require compliance with the organization’s relevant policies and procedures.
    • Ongoing assessment of effectiveness by developing and implementing key performance indicators to measure and assess year-over-year effectiveness in ensuring that forced labor and child labor are not being used in the organization’s business and supply chains.

Demand by shareholders and other stakeholders for corporate certification that no human rights abuses occur within an organization鈥檚 operations and supply chain is only growing. The compliance functions within institutions and organizations should be making efforts now to clean up supply chains 鈥� government legislative action on this issue will only increase over the next several years.

For more on MSA reporting obligations for affected organizations, [subscription required] provides suggested best practices and steps that organizations should consider to ensure they meet these obligations.

To examine this further, the 成人VR视频 Institute and the Canadian Bar Association have released the inaugural State of the Canadian Law Firm Market and Canadian Government Lawyers Benchmark reports. These two reports 鈥� offered in English and French 鈥� provide critical insights into how law firms and government lawyers in Canada assess and measure their success, goals, risks, and challenges in today鈥檚 legal landscape.

The 2024 State of the Canadian Law Firm Market shows that Canadian lawyers generally view their law firms as successful, indicating a strong acknowledgement of the professionalism, dedication, innovation, and resilience of law firms in Canada given the multitude of changes of the past several years. Indeed, rather than holding firms back, those very characteristics that helped law firms weather the past few years will continue to be a factor as firms move forward into a still-uncertain legal environment.

As the report shows, Canadian law firms have seen a strong post-pandemic recovery, albeit one that has been accompanied by rising competition for talent, among other challenges.

Further, in one critical finding, the report describes how law firms鈥� definitions of success do not always align with how they are measuring or planning for such success, presenting both opportunities and challenges for today鈥檚 law firm leadership.

You can access the 鈥�2024 State of the Canadian Law Firm Market鈥� and .

The 2024 Canadian Government Lawyers Benchmark Report describes how lawyers within the Canadian government generally view their organizations as successful but not without many challenges that will have to be confronted in the future. While government lawyers say that steps have been taken to address many of the challenges related to the shifts in ways of working that have arisen over the past few years, they point out that other, perhaps more pervasive problems remain.

The very characteristics that helped law firms and government lawyers weather the past few years will continue to be a factor as they move forward into a still-uncertain legal environment.

Indeed, confronting these challenges will be the work of the next few years as government lawyers try to balance completing their work, meeting their budgets, and protecting their work/life balance and own mental health 鈥� all as technological advancements like generative artificial intelligence (Gen AI) might well dramatically change how legal work is done within the government (and elsewhere).

This report also shows that pandemic-related disruptions dramatically changed how and where government legal work is conducted, how colleagues interact with each other, and much more. Even as the challenges of the pandemic continue to recede, government agencies are still having to adjust, seeking the proper balance of return-to-office strategies with remote and hybrid working arrangements.

You can access the 鈥�2024 Canadian Government Lawyers Benchmark Report鈥� and .

But now, as newer and more complex regulations are flooding the market, and critical challenges 鈥� such as environmental, social & governance (ESG) issues or cybersecurity concerns 鈥� that had largely been hidden by more pressing matters beforehand emerge as major challenges, the corporate law departments of many Canadian companies are taking action. Many have shifted their mindset and their approach to managing how their needed legal work gets done and what they鈥檙e willing to pay for it.

To examine this more carefully, the 成人VR视频 Institute has published the 2023 Canadian Legal Market Update, which highlights the results of a survey of corporate law department leaders in Canada that sought to gain their perspective on key issues such as growth strategies, client relationship development, strategic investments, and performance management. (The report was taken from the results of 272 interviews with Canada-based respondents within the corporate in-house legal community in various legal roles within their companies, which were conducted among multiple different industries. These interviews were conducted throughout 2022.)

Our survey shows that many Canadian corporate law departments have shifted their mindset and their approach to managing how their needed legal work gets done and what they鈥檙e willing to pay for it.

Not surprisingly, this year鈥檚 report identified certain key developments that are now reshaping many aspects of the Canadian legal market, including:

An aggressive focus on risk 鈥� Since 2020, the percentage of Canadian corporate law departments talking about more aggressively preventing and mitigating risk for their companies has nearly doubled, the survey shows.

Hiring and retaining talent has become paramount 鈥� Talent in the legal industry became a flash point in 2021 鈥� not only in Canada but everywhere 鈥� and more Canadian corporate law departments have made investing in talent a top strategic priority for 2023.

Requiring business savvy from their legal providers 鈥� While the attributes that Canadian corporate law departments look for in their external legal providers are similar to those sought by other corporate law departments around the world, business savvy 鈥� how well a law firm understands the client company鈥檚 goals and can offer advice that is practical and proactive in nature 鈥� is an attribute upon which Canadian corporate law departments place even more emphasis.

Indeed, the report offers some crucial insight into the minds of Canadian law department leaders, providing other parties 鈥� such as their external law firms 鈥� with a road map on what exactly these clients are looking for in their outside counsel.

鈥淚 like law firms that are practical, give me timely advice, and give me very commercial advice,鈥� said one corporate law department leader in Canada. 鈥淪o, if a law firm gives me a 20-minute rendition of the law and all the risks and everything, but doesn鈥檛 really give me a good answer, I鈥檓 not really interested in them. If you give me really practical advice that鈥檚 commercial that鈥檚 timely 鈥� that鈥檚 why I like you.鈥�

All legal organizations in Canada should take note, as this report shows the attitudes, priorities, and mindset among Canadian companies鈥� law departments are shifting toward more aggressive risk mitigation, managing critical talent issues, and seeking more valued outside counsel.

You can download a full copy of the 成人VR视频 Institute鈥檚 2023 Canadian Legal Market Update here, by filling out the form below:

Factors leading associates to leave their firms

The research found that 64% of associates at law firms in Canada indicated that they are likely or somewhat likely to move firms. Some 39% of respondents were associates under the age of 30; and 34% were between ages 31 and 40. This indicates that law firms have some work to do to retain younger lawyers (those under 40 years of age).

Further, when it came to identifying which factors drove employees to consider leaving their current firm, associates named these five factors, in order of importance:

• • • • latest compensation amount
      • lack of career progression
      • overall compensation system
      • feeling under appreciated
      • lack of genuine regard for employee鈥檚 well-being

What is interesting is that three of these five factors 鈥� the lack of career progression, feeling underappreciated, and lack of regard for well-being 鈥� are all pretty easy to address. Managers, supervisors of work, and those delivering associates鈥� performance reviews all have the best opportunity to fix these areas by simply saying Thank you more often. This simple step will help increase associates鈥� feeling of being appreciated.

In addition, sitting down with each lawyer, either monthly or quarterly, and asking the following questions will help Canadian law firms address the feedback associates are giving on the lack of career progression and a lack of regard for their well-being.

• • • • What are your goals?
      • What areas of the firm are you interesting in exploring?
      • What can we do to help you build a career here at the firm?
      • How are you doing? What support do you need?

Drivers of stay decisions at law firms

The research also offered insights on the key factors that kept associates at their current Canadian law firms, thereby increasing firm retention. These factors include:

• • • • higher compensation, which was cited by 44% of respondents
      • increasing hires to reduce individual workload (26%)
      • reducing billable hour targets (24%)
      • offering alternatives career paths to partnership (21%)
      • demonstrating the importance of employee well-being (21%)

The bottom two factors also are relatively easy to address without impacting the economics of the firm significantly. By expanding career paths and signaling increased priority on associates鈥� well-being, law firm leaders can improve the likelihood that the firm will retain its associates under 40.

Colleagues and type of work seen as key 鈥渟tay鈥� factors

What younger Canadian lawyers liked most about their firms, according to the research, was the people with whom they worked, the quality and type of work they鈥檙e given, and the culture of the work environment. These areas align pretty well with the data which shows that associates under 40 have the highest levels of job satisfaction among their peers.

Overall, the majority of associates under 40 at Canadian law firms were highly satisfied with the firm鈥檚 reputation in the marketplace; but, unfortunately, there was a huge drop-off in associate satisfaction when it came to the firm鈥檚 direction and strategy, local management, and current leadership.

When it came to the individual factors, flexibility in terms of where and when works gets done had the highest percentage of associate satisfaction. However, there were some notable distinctions between those associates under 30 years of age, and associates between 31 and 40.

For example, the research shows that law firms in Canada clearly have work to do in terms of offering satisfying career progression options for associates between the ages of 31-40, as there was a 14-percentage-point differential between associates under 30 (at 45%), and those aged 31-40 (at 31%) saying they were satisfied with their career progression.

For the under-30 population, law firms also need to do a better job at demonstrating respect and fairness with a 14-percentage-point differential between those associates under-30 (at 42%) and associates in the 31-40 age range (at 56%) saying they felt treated with respect and fairness.

Recommendations for action

Taking in all of the data, Canadian law firms should see the opportunity they have to double-down on what associates appreciate most about the firm and to seek to alleviate the gaps in areas where there is less than ideal satisfaction. Here are some suggestions:

Reputation & culture 鈥� Firms should continue to emphasize their reputation in the marketplace and their culture of flexibility. These are the two strongest firm and individual factors that under-40 lawyers said they appreciate about their current firm.

Incentivize quality feedback 鈥� Reward efforts by managers, supervisors of work, and those delivering performance evaluations who sit down individually with associates on a regular basis to better understand each associate鈥檚 goals, ask what support is needed, and what actions the firm can take to help the lawyer build a satisfying career at the firm.

Open up career paths 鈥� Work on expanding options for career paths beyond the simple path to partnership by explaining and emphasizing the path to Of Counsel or reduced hours or part time work. Firms can also support associates who may want to explore other interests or start another business outside of the legal industry. For example, if an associate expresses the desire to work in-house, the firm could help the associate find a job with a client, benefiting all parties.

These investments of time and energy will help Canadian law firms boost their retention of younger lawyers and reduce the costs of attrition. Indeed, at the current rate of six figures per associate, multiplied by the current rates of attrition experienced by many law firms in Canada, the cost of clarifying career paths, treating people with respect, or offering a simple Thank you or Well done seems pretty miniscule by comparison.

Now, in Canada and the rest of the world, those attributes are actually declining as defining characteristics for those law firms most-favored by clients. Instead, clients and buyers of legal services 鈥� in Canada and elsewhere 鈥� are placing a much greater emphasis on the value of practical business advice and the broader strength of lawyers.

Indeed, in the latest Canada Law Firm Brand Index, Canadian clients cited both of those attributes, along with localized legal knowledge across multiple jurisdictions, as the main characteristics they are seeking most in their outside counsel.

This shift is hardly surprising. As companies push forward and hope to get back to a more normal state following the massive upheaval of the global pandemic, business risk itself is being redefined. That means that corporate clients are seeking outside counsel that hold a wider perspective and specific strengths that can help clients navigate the still-turbulent waters in 2022 and in the future. Further, clients in Canada and elsewhere are looking for those outside law firms that can demonstrate a solid track record of quality results, efficient delivery, and future-looking commercial solutions, the Index showed.

Elizabeth Duffy, Senior Director of Global Client Services at 成人VR视频, said their research shows that clients in Canada and around the world were prioritizing specialist expertise over historical relationships or reputation. 鈥淚n 2021, as businesses emerged from the crisis, legal service buying patterns are focusing on forward-facing factors like understanding the client鈥檚 business and knowledge of their sector,鈥� Duffy explains.

In the minds of many clients, their outside law firms should be leveraging all their skills towards solving not just today鈥檚 legal challenges, but those that clients may not yet have anticipated. Indeed, clients are depending on their legal partners to identify and solve these yet-unseen problems. Those outside law firms 鈥� the ones that are truly proactive in their advice and innovative in their delivery 鈥� will continue to find themselves most favored by Canada-based corporate clients, the Index shows.

You can watch Jennifer Dezso, Director of Client Relations at 成人VR视频, breakdown not just the Canadian legal market, but also the markets in the US, UK, Mainland Europe, and the Asia-Pacific region.

As part of this realignment of the risk mindset, Canadian legal buyers 鈥� like those in many parts of the world 鈥� have indicated that they are prepared to increase their legal spending in 2022. In fact, more than 42% of GCs at companies in Canada who were surveyed said their organization plans to increase its overall legal spend this year. That increase in spend, however, comes with a higher bar for their outside counsel to meet in terms of innovative collaboration and specialized business-focused knowledge.

Redefining risk

This year鈥檚 Canada Law Firm Brand Index clearly reflected this redefinition of risk, even as the Index itself remained relatively stable. The top 4 spots remained the same from the previous year, even as the individual scores among the top group grew closer.

The Index shows that Blake, Cassels & Graydon (Blakes) remains the Canadian market leader for the seventh consecutive year. In fact, Blakes鈥� staying power deftly illustrates this shift in risk assessment as the firm has cemented its position at the top by building on its deep relationships with its clients and demonstrating a clear understanding of clients鈥� businesses.

The rest of the top 4 鈥� McCarthy T茅trault at number 2; Osler, Hoskin & Harcourt (3); and Norton Rose Fulbright (4) 鈥� each leveraged separate brand differentiators to secure their spot in this market. And three other law firms 鈥� Torys, Borden Ladner Gervais, and Bennett Jones 鈥� showed that there is still room to climb the Canadian law firm rankings as they all finished strong in the Index, each individually pursuing a strategy that combined a valuable understanding of clients鈥� businesses with deep legal expertise. Clearly, as the Index shows, these two factors are the most powerful combination that clients are seeking as they navigate new legal risks.

成人VR视频鈥� Regional Law Firm Brand Index 2022 illustrated how those law firms in Canada and around the world that saw the most growth in this year鈥檚 Index were the ones that were able to establish themselves in the minds of clients in areas of brand awareness and client favorability. The Regional Index covers the legal markets in five separate countries or regions 鈥� the United States, the United Kingdom, Mainland Europe, Canada, and the Asia-Pacific region. Each Index is based on data compiled in 2021 from 成人VR视频 Sharplegal study.

Conclusion

In today鈥檚 post-crisis environment, as the worst of the pandemic seems behind us, corporate clients are not going back to the traditional ways of assessing their outside legal counsel. Instead, clients and legal service buyers in Canada and elsewhere are seeking legal partners that can demonstrate a deeper focus on factors that will best position those clients to take advantage of coming opportunities and best face future challenges.

You can download the Canada Law Firm Brand Index here:

The strategic priorities these corporate law departments were describing revolved around two core areas as spend was growing: becoming more effective and more efficient. Of course, given the impact of the Covid-19 outbreak and the fallout the pandemic has had on the global economy, it would be easy to assume that the strategic priorities of 2019 are no longer relevant.

However, as we鈥檝e spoken to general counsel throughout the crisis, this is not necessarily the case. Slowly, we are seeing the legal industry shift from immediate crisis management toward short-term planning under what an evolving 鈥渘ew normal鈥� legal landscape might look like.

The new 聽uses data from the 成人VR视频 2019 Legal Tracker LDO Index and Acritas Sharplegal US, to identify main takeaways from the recently released 聽report. Among these findings are how these and other strategic priorities have been identified and which are among them are the most important, according to the corporate law department officials surveyed.

Check out the new聽 here.

Some other takeaways explain how corporate law departments in Canada cite Client Service as a main driver of how the select favored law firms. Indeed, corporate clients in the Canadian region cite Service & Relationships much more than other regions around the globe. The infographic also displays the overall budget and median team size by market segment, providing a clearer picture of the demographic composition of the corporate law departments surveyed.

Finally, the infographic provides examples of the top metrics that are currently being utilized within corporate law departments. Metrics sit at the center of this concept of combining effectiveness and efficiency, and are extremely valuable in accomplishing those goals.

On April 24, the Trump administration notified Congress that the U.S.-Mexico-Canada Agreement (USMCA) would take effect on July 1. That鈥檚 21 months after the three countries reached an agreement in principle on the replacement for the North American Free Trade Agreement (NAFTA), which was enacted in 1994.

Entities including the Canadian Chamber of Commerce, Canadian dairy industry, automakers, and the U.S. Senate Finance Committee recommended postponing implementation of the pact due to the global COVID-19 pandemic and the fact that companies are laser-focused on maintaining and managing their supply chains and production capacities during this crisis.

U.S. Trade Representative Robert Lighthizer, however, countered that 鈥渢he crisis and recovery from the COVID-19 pandemic demonstrates that now, more than ever, the United States should strive to increase manufacturing capacity and investment in North America.

鈥淭he USMCA鈥檚 entry into force is a landmark achievement in that effort,鈥� Lighthizer continued, contending that under President Trump鈥檚 leadership, the Office of the United States Trade Representative will 鈥渃ontinue working to ensure a smooth implementation of the USMCA so that American workers and businesses can enjoy the benefits of the new agreement.鈥�

Whether or not the time is right, the USMCA, it appears, is upon us.

What鈥檚 new?

The renewed agreement between the United States, Mexico, and Canada may indeed bolster the economy in North America given that it adapts the disciplines of NAFTA to the current needs of the 21^st century economy. In the mid-1990s, NAFTA established trade liberalization commitments and set new rules for market-opening provisions that gradually eliminated nearly all tariff and most non-tariff barriers.

For more on this subject, join us for a one-hour webinar,聽, at 2 pm EDT on June 4.

Now, USMCA鈥檚 implantation arguably will increase the confidence of companies and investors. Comprising 34 chapters and 12 side letters, the agreement retains most of NAFTA鈥檚 market-opening measures as well as new provisions to make commerce more inclusive by facilitating the participation of entrepreneurial and small- to medium-sized enterprises (SME). The USMCA also makes notable changes to auto rules of origin, dispute settlement provisions, government procurement, investment, and intellectual property rights protection while bolstering employee protections and measures to combat corruption. The USMCA also includes commitments to administer customs procedures in ways that will facilitate trade or the transit of goods while supporting compliance with domestic laws and regulations.

Compared with NAFTA, the new agreement incorporates tools for:

• • • boosting the development and an efficient use of energy resources;
    • promoting digital commerce;
    • facilitating the trade of financial services;
    • encouraging the competitiveness of telecommunications;
    • fortifying the protection of intellectual property;
    • retaining dispute settlement mechanisms; and
    • bringing in a revision mechanism.

The more notable updates are listed in the following chart.

As evidence this is an innovative accordance, USMCA also includes:

• • • more stringent rules of origin for goods including chemicals, automotive products, televisions, optical fiber, glass, and steel;
    • reinforcement of protections in the transmission of data, free flow of information, and free access to public data;
    • patent protection for new innovations such as pharmaceutical products, chemical processes, business technologies, and computer software;
    • copyrights providing creators of artistic and literary works with the exclusive right to authorize or prohibit others from reproducing, communicating, or distributing their works;
    • dispute settlement mechanisms for labor and environmental conflicts;
    • recognition of the SME sector as a reinforcement for the global value chains; and
    • anticorruption practices to prevent corruption with established obligations for public and private sector.

In conclusion, the USMCA contains provisions needed by all three countries, because the North American commercial environment has changed dramatically since NAFTA was enacted a quarter-century ago. The new agreement solves many of the deficiencies and mistakes in NAFTA and will bring the U.S., Mexico, and Canada together as a global competitive force.

And to reiterate: It not only benefits commercial enterprises. Provisions protecting workers will establish new labor standards including a process for inspections of factories and facilities to confirm they are meeting their obligations.

This is a big step in ensuring fair treatment of the people who make trade and economic prosperity happen. And it also may serve as a model for other nations as they revise and modernize their trade agreements.