Manitoba's Strategic Advantages: The North American Free Trade Agreement

Market Access from Canada

The 1994 North American Free Trade Agreement (NAFTA), together with its 1989 predecessor, the Canada-U.S. Free Trade Agreement, have eliminated most barriers to trade within Canada, the U.S. and Mexico, easing the cross-border flow of goods, services, capital and technology. NAFTA formed the world's largest free trade area and has resulted in economic growth and rising standards of living for all three partner countries.

NAFTA has opened up vast new business opportunities, not only for companies located within one of the three partner countries, but also for foreign firms interested in the huge North American market. As a result, international investors now can access the entire North American market from a Canadian location.

The North American Market

The North American market is one of the richest in the world. Companies based in Canada have preferred access to a market of 565 million people, with a combined GDP of over US $20.3 trillion.

There are especially important regional market clusters along the Canada-U.S. border that can be well served from a Canadian location. Winnipeg is just 17 hours by road from Chicago and 8 hours from Minneapolis. With increasingly efficient transportation routes, even the southern American states are considered to be close to major Canadian cities.

Key features of NAFTA include:

  • tariff elimination on trade between Canada the U.S. and Mexico;
  • provision of a standard of "national treatment" for foreign investors in other signatory countries;
  • ensured secure market access;
  • improved the dispute settlement mechanism;
  • increased access to government procurement opportunities, for companies located in member countries;
  • improved cross-border movement of business people and professionals among the signatory countries; and
  • stronger protection of intellectual property rights.

NAFTA Tariff Elimination

Under the North American Free Trade Agreement (NAFTA), tariffs on virtually all originating goods traded between Canada and Mexico were eliminated in 2008, with the exception of Canadian agricultural goods in the dairy, poultry, egg and sugar sectors (which are exempt from tariff elimination).

Tariffs on qualifying goods traded between Canada and the United States became duty free on January 1, 1998, in accordance with the Canada-United States Free Trade Agreement, which was carried forward under NAFTA for goods traded between Canada and the United States.

National Treatment

NAFTA provides for national treatment of the goods and services of the three partner nations and the prohibition of trade-distorting performance requirements. Canada, the U.S. and Mexico must treat each other’s goods, services, and investors as they treat their own. Once goods, services or investments from one country enter the other, they cannot be discriminated against on the basis of origin.

Significantly, NAFTA coverage also extends to investments made by any company incorporated in a NAFTA country, regardless of its country of origin. Because of this, foreign investors can locate in Canada with the assurance that they will have secure access to markets in the U.S. and Mexico. Moreover, NAFTA also has provisions for accession by other countries.

Other implications of NAFTA’s national treatment provisions include increased access to U.S. and Mexican government procurement opportunities for Canadian-based companies, and improved cross-border movement of business people and professionals among the signatory countries.

Secure Market Access

NAFTA ensures secure access for Canadian-based exporters to both the U.S. and Mexico. Clearer North American content rules reduce the risk of unilateral interpretations by customs officials. In cases where North American content is an issue, exporters or producers can choose between two formulas and select the one which is most beneficial.

Improved Dispute Settlement

NAFTA provides clear rules for dealing with the settlement of disputes. If disputes arise between companies and NAFTA governments, to which acceptable solutions cannot be negotiated, they may be settled through international arbitration. The dispute settlement process is transparent and enforceable, so the interests of exporters and business investors can be effectively defended.

Improved Intellectual Property Rights Protection

NAFTA includes comprehensive protection of intellectual property including patents, trademarks, copyrights and trade secrets. Enhanced protection for holders of intellectual property encourages the development and commercialization of innovative goods and services in the NAFTA nations.

For details of NAFTA, including its full text, please visit the website of Foreign Affairs and International Trade Canada.

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