The Financial Benefits of Canada-US Trade

Beaver furs, salmon, and lumber were traded to European purchasers in the 1600s, marking the beginning of Canada's history as a trading nation. Nevertheless, just the last 25 years have seen the implementation of all 15 of Canada's existing free trade agreements (FTAs). We speak with trade experts about the value of using free trade agreements (FTAs) to break into some of the biggest markets on the planet, the main advantages they offer to Canadian exporters, and starting resources.

What exactly are free trade agreements, then?

When trade is free and business can move freely across borders, nations prosper and flourish more quickly. Trade agreements specify in detail the regulations that will control international trade and eliminate or lower tariffs on products and services produced in one nation and sold in another.

Imagine attempting to expand a company in a nation with unclear laws, regulations, and tax laws. According to Mairead Lavery, president and CEO of Export Development Canada (EDC), "free trade agreements (FTAs) help Canadian businesses plan their expansion with more certainty by providing clarity on trade rules that have been agreed upon in advance."

According to Lavery, "exporting is a significant strategy for growth and FTAs provide Canadian companies preferential access to more than 50 countries and 1.5 billion consumers."

Further details regarding the advantages

Reduced tariffs are undoubtedly a big advantage of free trade agreements, but obtaining preferential access to international markets is much more advantageous.

"Free trade agreements (FTAs) facilitate the sale of Canadian goods to international customers, including foreign governments. Additionally, they contain favorable regulations that can streamline their establishment of activities outside of Canada, according to Dina Santos, the senior trade commissioner and general consul of Canada in Boston.

Nathan Nelson, director of international strategy

FTAs "can reduce border-crossing delays to member countries, which gets Canadian exporters’ products to market more quickly," according to Santos. "They offer Canadian businesses better predictability, protection, and transparency in foreign markets," he continues. "This takes some of the guesswork out of exporting."

If that's not enough, trade agreements also aid in lowering the administrative burden associated with international trade, promoting commitments to more general objectives like safeguarding human rights and the environment, and increasing the predictability of regulatory requirements.

and innovation at EDC and a veteran of more than 17 years in international business, says, "An FTA is obviously important for tariff reduction, which makes the Canadian exports more competitive. But it also provides predictability and transparency around some of the risks that the exporter may encounter such as potential litigation, classification, and rules of origin."

In essence, it lessens the possibility of unidentified, potentially transformative elements that might make or break a long-term judgment about which nation they ought to select, according to Nelson.

Ng acknowledges that we still have economic problems, but she is optimistic that Canada's trade agreements will contribute to our development and well-being.

"Canadian businesses will encounter challenges in the future. Russia's invasion of Ukraine created more uncertainty, driving up already high inflation and straining supply chains even more. Canada's extensive network of free trade agreements (FTAs), which accounts for 61% of the global gross domestic product (GDP), is a crucial instrument for assisting the country's economic recovery.

Three "hard truths" regarding trade with Canada

In order to sustain high living standards, Canada's "open" economy depends on cross-border flows of investment, trade, and data. Canadians must manufacture and sell goods and services to customers in other nations in order to make ends meet in a highly competitive global marketplace. These exports provide the money needed to pay for the wide range of imports that improve household well-being in Canada and open up new markets for our companies to expand into. They also enable our businesses to run more smoothly.

Canada exported $161 billion in services and $779 billion in products to other nations in 2022, for a total of $940 billion. The services category covers a broad range of commercial services, such as financial, scientific, technical, professional, and digital services, in addition to transportation services and international tourism (i.e., visits from visitors from outside Canada who come to spend money).

A significant portion of Canada's exports, almost 75% of them are bound for a single market: the United States, whose GDP has grown over time to approximately US$25 trillion. Our main imports come from the United States, too, mostly from Canada.

The first "hard truth" regarding Canada's commerce is the importance of the American market to the country's economic success. Steve Globerman recently examined this issue in a paper. Canada's economic ties to the United States are essentially unchanged from the 1990s, notwithstanding sporadic attempts over the past 50 years to diversify trade and commercial ties. The recently disclosed "Indo-Pacific" policy by the Trudeau administration offers little grounds for optimism that the situation will improve. The close proximity, shared language and business culture, as well as the influence of broad and exceptionally strong personal and commercial links, all contribute to Canada's trade's American-centric nature. It follows that Canadian administrations should keep the United States at the forefront of their efforts to recruit investment and promote commerce.