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Trade Agreements 101: Accessing the world from Canada

This explainer covers the major trade agreements that companies can leverage if located in Waterloo.

Trade agreements provide a significant advantage to businesses looking to expand their reach and profits.

Canada is #1 in trade connections to G7 countries. That means we have a stronger trade network than Japan, the United States and the entire European Union. It’s no surprise that businesses located in Canada have a competitive trade advantage in virtually every sector.

In total, Canada has trade agreements with more than 40 countries, representing 1.6 billion customers and more than 60% of the global economy.

Our trade agreements provide businesses the ability to engage in global trade with fewer barriers to entry, reduced cost and improved labour movement. What does each agreement include? It’s complicated, but we’ve worked out the basics below.

Here are the largest trade deals and what they mean for businesses located in Canada:

Comprehensive Economic Trade Agreement (CETA)

Established in 2017, the Comprehensive Economic and Trade Agreement is Canada’s trade deal with the European Union (EU). The EU’s 27 member countries represent a market of 450 million consumers and the world’s second largest economy.

Under CETA, 98% of EU tariff lines are duty-free for Canadian goods and services, enabling your business to reach a large market without relinquishing your profit. Companies in Canada can also bid on opportunities at all levels of the EU government procurement markets, estimated to be worth $3.3 trillion per annum.

Canadian businesses also benefit from the removal of regulatory and technical barriers with CETA as the agreement reduces processing times at the border, making the movement of goods between countries quicker and easier.

Furthermore, CETA provides an advantage in labour mobility as the agreement makes it easier for certain skilled professionals to work temporarily in the EU and allows business visitors to enter Canada without work permits for investment purposes.

CETA provides great opportunities for export, particularly in the areas of high-tech manufacturing (i.e., electric components, instrumentation and navigational equipment), building materials (i.e., lumber and paper products), agriculture (i.e., seafood), industrial machinery & parts and metal products, chemicals & plastics.

United States-Mexico-Canada Agreement (USMCA)

Finalized in 2020, the United States-Mexico-Canada Agreement – referred to as CUSMA in Canada and T-MEC in Mexico – follows in the long tradition of free trade between Canada, Mexico and the United States.

USMCA replaced the North American Free Trade Agreement (NAFTA) and, as of 2020, represented a GDP of $24.2 trillion USD. As the United States is Canada’s largest trade partner, USMCA represents a particularly valuable opportunity to Canadian exporters.

USMCA largely maintains the tariff-free trade afforded to member countries in NAFTA and provides Canadian-based companies additional competitive advantages, including:

  • Canadian SMEs face fewer regulatory barriers to entry to member countries with certificates of origin that can be submitted electronically 
  • Digital trade and financial services are part of the new USMCA affording electronically transmitted products (e.g., ebooks, music) advantages, such as a relief from customs duties 
  • Canadian businesses in the automotive sector also have greater opportunities and protection from wage-competition within USMCA countries as a minimum wage of $16/hour for workers in the industry has been instituted; additionally, 75% of a vehicle must be manufactured in North America to be tariff-free

Beyond maintaining tariff-free trade and the above listed perks, USMCA also provides stability to businesses in Canada within the North American trading bloc. USMCA maintains a dispute resolution system and member countries have agreed to review the treaty every six years to ensure its relevance and protection, ensuring that Canadian goods and services are afforded the best trade opportunities in North America.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership is Canada’s free trade agreement with 10 other countries in Asia-Pacific – Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The treaty was signed by all the CPTPP countries on March 8, 2018, and into effect between Canada, Australia, Japan, Mexico, New Zealand and Singapore on December 30, 2018; Canada and Vietnam on January 14, 2019; and Canada and Peru on September 19, 2021. CPTPP will enter into force for Brunei, Chile and Malaysia 60 days after they complete ratification.

CPTPP is an especially lucrative opportunity for Canadian businesses as Asia-Pacific is the world’s leading region of economic growth with 500 million consumers and, in full force, represents 13.5% of global GDP.

CPTPP provides Canadian businesses a competitive trade advantage by eliminating barriers for 99% of current Canadian exports to CPTPP countries. Canadian businesses will also be treated as domestic suppliers when they bid on government procurement opportunities in other CPTPP member countries.

By removing trade barriers such as border-crossing delays in CPTPP member countries, Canadian businesses can also enjoy the advantage of getting their product to market in CPTPP countries quickly. Furthermore, CPTPP also makes it easier for certain highly-skilled professionals – for example, engineers and senior managers – to work temporarily in Asia-Pacific with CPTPP’s temporary entry conditions.

CPTPP may be particularly interesting to businesses in the dairy, pork, beef and aerospace sectors. CPTPP provides a predictable and transparent trading environment for Canadian agri-food products, enabling greater trade in these sectors. CPTPP also gives Canadian aerospace businesses access to the growing aerospace sectors in Singapore and Vietnam.

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To learn more about the advantages these trade agreements can deliver for your company, contact the Waterloo EDC team.