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Canada and the North American Free Trade Agreement (NAFTA)


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In January 1994, Canada, the United States and Mexico launched the North American Free Trade Agreement (NAFTA) and formed the world’s largest free trade area. The Agreement has brought economic growth and rising standards of living for people in all three countries. In addition, NAFTA has established a strong foundation for future growth and has set a valuable example of the benefits of trade liberalization.

A Foundation for Canada’s Future Prosperity

The North American Free Trade Agreement (NAFTA) has brought economic growth and rising standards of living for the people of all three member countries since 1994. As well, by strengthening the rules and procedures governing trade and investment throughout the continent, NAFTA has proved to be a solid foundation for building Canada’s future prosperity.

NAFTA has enabled both Canada and Mexico to increase their exports to the United States: Canadian manufacturers now send more than half their production to the U.S., while Mexico’s share of the U.S. import market has almost doubled from 6.9% in pre-NAFTA 1993 to 11.6% in 2002.

Manufacturers in all three countries are better able to realize their full potential by operating in a larger, more integrated and efficient North American economy. In 2002, Canada was the most important destination for merchandise exports from 39 of the 50 U.S. states.

Following a final tariff reduction between Canada and Mexico, which took effect on January 1, 2003, virtually all trade in the NAFTA region has flowed tariff-free.

Canada is a successful trading nation: our exports account for over 40% of total gross domestic product—a higher proportion than for any other G7 country. An estimated one in four jobs in Canada is linked to our success in global markets.

NAFTA has played a significant role in that achievement. Today, 86.6% of total merchandise exports go to our NAFTA partners. And close to 2.3 million jobs have been created in Canada since 1994, representing an increase of 17.5% over pre-NAFTA employment levels.

NAFTA is clearly a key to Canada’s continued economic success. But the best is yet to come.

For Canadians, it is important that trade and investment liberalization proceed hand in hand with efforts to protect the environment and improve working conditions. Under NAFTA, our three countries have been able to introduce the highly successful approach of parallel environmental and labour cooperation agreements.

The Advantages

Canada is America’s Number One Trading Partner — By a Long Shot

  • Canada is America’s largest trading partner. The United States does more business with Canada than with all the countries of the European Union combined!
  • Access to 420 million consumers and a combined GDP of more than US$11.8 trillion
  • Two-way goods-and-services trade between Canada and the United States was valued at almost half a trillion U.S. dollars in 2003, or nearly US$1.2 billion a day

Can Canada Be Closer to the U.S. than… the U.S.?

  • Many Canadian production hubs are actually closer to target U.S. markets than American production sites.
  • Most large Canadian cities are within an hour-and-a-half drive of the United States and many are much closer. Several, such as Vancouver, Windsor, and Montreal, are only minutes away.
  • Production locations in Quebec and the industrial heartland of southwestern Ontario are often closer to the huge American markets around New York, Boston, and Chicago than popular American production hubs like Atlanta, GA., and Raleigh, N.C.

Smart Borders

  • Fast and efficient trucking, railways, ocean shipping and air services link the two countries. To accommodate the growth in trade and commerce , Canada and the United States have signed a pact to work together to create a Smart Border.
  • The Declaration outlined a 30-Point Action Plan, which provides for ongoing collaboration in identifying and addressing security risks, while efficiently expediting the legitimate flow of people and goods across the Canada-U.S. border.
  • FAST lanes for pre-approved low-risk commercial traffic opened at Windsor-Detroit, Sarnia-Port Huron, and Fort Erie-Buffalo.
  • Automated permit ports, transponder identification systems and joint processing centres are being tested and deployed.
  • Today, border wait times average less than 10 minutes, one of the most efficient systems in the world.

More information on NAFTA and the agreement.