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. Designed to foster increased trade and investment among the partners, the NAFTA envisages an ambitious schedule for tariff elimination and reduction of non-tariff barriers, as well as comprehensive provisions on the conduct of business in the free trade area. These include disciplines on the regulation of investment, services, intellectual property, competition and the temporary entry of business persons. As of 1 January 1998 virtually all Canada-US trade become tariff-free. Some tariffs remain in place for certain products in Canada’s supply-managed sectors (e.g. dairy and poultry) as well as sugar, dairy, peanuts and cotton in the United States.
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Since the NAFTA entered into force, the Canadian economy has grown by an annual average of 3.8 per cent, keeping Canada in the lead among the g-7 countries. This healthy growth has translated into the creation of close to 2.1 million jobs, representing an increase of 16 per cent over pre-NAFTA employment levels. Since the establishment of the NAFTA on 1 January 1994, total trade and investment between Canada. Mexico and the United States have steadily increased each year. Canada’ s merchandise trade with the United States reached US$ 588.7 billion in 2000.Two-way merchandise trade between Canada and Mexico has doubled since 1994 and reached US$ 14.1 billion in 2000.In terms of Canada’s total merchandise exports,86.6 per cent go the NFATA partners.
The NAFTA provides for virtually all tariffs to be eliminated on trade in originating goods between Canada and Mexico by 1 January 2003.A third round of “Accelerated” tariff reductions was implemented in January 2001.Mexican tariff were eliminated on certain pharmaceuticals, chemicals and batteries, representing close to US$ 207 million in bilateral trade. As of January 2001, Mexican tariffs on Canadian products range between 0 and 4 per cent, with a few higher tariffs remaining on certain agricultural products subject to tariff-rate quotas (mainly corn, barley and dry edible beans) and on diary and poultry products.
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Under the NAFTA, Canadian producers are better able to realize their full potential operating in a larger, more integrated and efficient North American economy. Canadian manufacturers are able to access tariff free, highest-quality intermediate goods from across North America in the production of final goods for export. Consumers benefit from this heightened competition and integrated market place with better prices, greater choice of products and higher-quality goods and services.
Improved access to NAFTA markets, together the existence of clear rules on trade and investment, has increased Canada’s attractiveness to foreign and domestic investors. Total foreign direct investment into Canada reached US$ 292 billion in 2000, more than 64 per cent of which comes from NAFTA partners. Foreign direct investment into Canada from the United States increased to US$ 186 billion in 2000, while investment from Mexico reached USS$ 132 million. Canadian direct investment in the NAFTA countries Has also increased, reaching US$ 154 billion into the United States in 2000,a 127 per cent increase over the 1993 level, and US$ 3.2 billion into Mexico, more than six times the pre-NAFTA level.