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Chapters

Canada’s FTAs

2.1 – Canada’s major free trade agreements

Canada has three major free trade agreements, all of which are multilateral agreements, which means they have more than two participating countries. These are the Canada-United States-Mexico Agreement (CUSMA), the Canada-EU Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

2.1.1 Canada-United States-Mexico agreement (CUSMA)

Once it is ratified by the legislative bodies of the three participating countries, the Canada-United States-Mexico Agreement (CUSMA) will replace the North American Free Trade Agreement (NAFTA), which has been in place since 1994. Until that ratification occurs, NAFTA remains in effect.

Following on from NAFTA, CUSMA provides a comprehensive set of rules for trade in goods and services, investment, intellectual property and dispute settlement among Canada, the United States and Mexico.

One of NAFTA’s major achievements was the elimination of tariffs on most goods originating in the member nations. A second was the liberalization of regulations affecting matters such as investment and the cross-border trade in services. A third was to provide North American businesses with better access to materials, technologies, investment capital and talent.

Construction worker walks past steel rods on building site.

North American trade highlights

Canada’s trade with the United States and Mexico has expanded substantially because of NAFTA. For example:

75.8%

The United States purchased 75.8% of Canada’s total exports in 2017, for a value of $414.5 billion.

51.3%

Canada imported $288.3 billion worth of U.S. merchandise in 2017, representing 51.3% of all imports to this country.

#1 customer

In 2017, Canada was the top market for 36 of the 50 U.S. states.

10% 

Between 1993 and 2016, exports from Canada into Mexico grew at an average annual rate of 10%. Canada-Mexico trade has increased more than nine-fold since NAFTA came into effect.

$1T

Foreign affiliate sales supported more than $1 trillion in business among the NAFTA countries in 2014. 

$364.1 B

In 2016, U.S.-based Canadian affiliates sold $364.1 billion in goods and services.

NAFTA renegotiations and CUSMA

NAFTA renegotiations began in mid-2017 and concluded on Nov. 30, 2018 when the three countries signed the CUSMA at the G20 Leaders’ Summit in Buenos Aires. The CUSMA outcomes preserve key elements of the trading relationship and incorporate new and updated provisions that seek to address 21st-century trade issues. 

Global Affairs Canada’s official website for the agreement provides a summary of the key updates as well as fact sheets on the changes for each chapter.

2.1.2 Canada-EU comprehensive economic and trade agreement (CETA)

When Canada’s free trade agreement with the European Union came into effect, it unlocked the biggest opportunity for Canadian exporters since NAFTA. The agreement creates enormous trade and investment opportunities for both Canada and the member countries of the EU. Negotiations for the agreement began in spring 2009 and most of the agreement came into effect in September 2017. The exception is the investor-state dispute mechanism, which is being separately negotiated.

The major features of Canada-EU agreement include the following:

Comprehensiveness

The agreement covers trade in goods and services, investment flows and the movement of people. It also provides consistent rules to govern the product standards and the professional certifications required by both Canada and the EU.

Tariff provisions

CETA eliminates 98.4% of tariffs on all non-agricultural Canadian goods entering the EU. After seven years, 98.8% of these goods will be tariff-free. Likewise, Canada has removed 98% of its tariffs on the same goods coming from the EU.

Transition periods

There are transition periods of three to seven years for ships, automotive products and certain agricultural goods in Canada, while poultry and eggs are excluded. Canadian import quotas on EU dairy products will rise, but the tariffs on such imports, above those quotas, will remain.

Services

In the services sector, all parties providing services in the EU and Canada will be treated equally. There will be no import quotas on services or service providers from other CETA nations. Business visitors without work permits will be allowed temporary entry for purposes of investment. In addition, Canadian service companies will not have to maintain a representative office in the EU, or be an EU resident, in order to supply services to EU customers.

Government procurement

Under the agreement, Canadian companies can bid on EU procurement contracts, a three-trillion-euro market. Europeans likewise have access to Canadian government procurement contracts. This will likely increase competition here at home and, in the process, make Canadian companies more competitive overall.

Access to inputs and expertise

Canadian companies have access to EU materials, technology, intermediate inputs and skilled labour. Our exporters can take advantage of these resources to make their supply chains more competitive.

Investment protection

On the investment side, an EU country cannot require a Canadian investor to export or use a certain percentage of local content. Likewise, Canada cannot impose such restrictions on EU companies investing here. A simpler regulatory environment, improved treatment of intellectual property and well-defined dispute processes should encourage investment by Canadian firms that want to join EU supply chains.

CETA and the U.K.

Embroiled in Brexit talks, Britain is slated to leave the 28-country European Union in 2019. How the U.K. will relate to the EU after its departure will depend on the results of the exit negotiations and how much can be preserved of the existing trade relationship. While the British parliament has repeatedly voted to reject the exit deal negotiated between the EU and British Prime Minister Theresa May, until an agreement passes, however, Britain will remain a full EU member and CETA’s rules will continue to govern Canada-U.K. trade.

To keep up with the latest trade developments in the U.K. and 100 other countries around the world, be sure to visit the EDC Country Risk Quarterly.

You can learn more about CETA and read the full text of the agreement at the CETA homepage on the Global Affairs Canada website.

2.1.3 Comprehensive and progressive agreement for trans-pacific partnership (CPTPP)

Canada is one of the 11 Pacific-Rim nations party to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The other 10 are: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. 

Canada ratified the agreement in fall 2018, becoming one of the first six countries to do so. On Dec. 30, 2018, the agreement came into effect for those first six nations: Canada, Australia, Japan, Mexico, New Zealand and Singapore. The agreement entered into force for Vietnam on Jan. 14, 2019.

Once it comes fully into force, CPTPP will be one of the largest free trade agreements in the world. For Canada, the agreement rivals CETA in terms of the total size of the export opportunity. The agreement encompasses 495 million people with a combined GDP of $13.5 trillion, or 13.5% of global GDP.

CPTPP will give Canadian exporters improved market access to important Asian markets such as Malaysia, Vietnam and Japan, the world’s third largest economy. Canada’s participation in CPTPP also means that we are currently the only G7 nation with a free trade agreement with all other G7 members. The agreement is expected to boost Canada's GDP by $4.2 billion. 

The major features of the agreement are the following:

Comprehensiveness

Like CETA, the agreement covers trade in goods and services, investment flows and the movement of people. It also provides consistent rules to govern the product standards and the professional certifications required by both Canada and other CPTPP nations.

Fresh, ripe tomatoes on the vine.

Tariff provisions

Once the agreement is fully implemented, 99% of tariff lines among parties to the agreement will be duty free. Tariffs on other goods will be eliminated gradually over phase-out periods, which vary by country.

Upon full implementation, Canada will have duty-free access to CPTPP countries for:

Technical barriers to trade

The agreement encourages the use of internationally accepted standards and acknowledges their role in supporting greater regulatory alignment and in reducing unnecessary barriers to trade. For example, it provides national treatment for conformity assessment bodies between the CPTPP parties to help eliminate duplicate testing requirements.

The agreement also helps ensure that market access gains for Canadian agriculture and agri-food, fish and seafood, and forestry exports are not undermined by unnecessary or unjustified sanitary and phytosanitary-related trade restrictions.

Services

As with CETA, CPTPP will greatly expand international opportunities for Canadian service providers. Canada will gain new market access to CPTPP countries in areas including (but not limited to):

  • professional services (e.g. legal, engineering and architectural) and transport services from all 10 parties
  • research and development services from Australia, Chile, Japan, Malaysia, New Zealand, Singapore and Vietnam
  • environmental services from Australia, Brunei, Japan, Malaysia, Mexico, New Zealand, Peru and Vietnam.

Government procurement

As part of the CPTPP government procurement chapter, Canadian businesses will gain expanded access to government procurement opportunities (including from sub-central governments) from existing partners (Chile, Japan, New Zealand, Peru and Singapore), and new opportunities in Australia, Brunei, Malaysia and Vietnam. In fact, this is the first time that Malaysia and Vietnam have taken on international government procurement commitments.

The agreement does not automatically apply to all government procurement. Coverage varies according to the market access schedules of each party. 

You can visit the Comprehensive and Progressive Agreement for Trans-Pacific Partnership homepage on the Global Affairs Canada website to read the full text of the agreement as well as the individual side letters with each country.

2.2 – Other Canadian free trade agreements

As well as CUSMA, CETA and CPTPP, Canada has 11 other in-force free trade agreements that cover 14 countries.

2.2.1 Canada-Chile Free Trade Agreement

The Canada-Chile Free Trade Agreement came into force in 1997. It covers both goods and services as well as investments. A 2017 update addresses sanitary and phytosanitary measures, government procurement, technical barriers to trade and investment rules. Bilateral merchandise trade between Chile and Canada has more than tripled since the agreement came into force, growing to $2.9 billion in 2017.

Canada’s major exports to Chile in 2017 included:

  • Machinery
  • Fats and oils
  • Cereals
  • Pharmaceutical products
  • Mineral fuels and oils

 

2.2.2 Canada-Colombia free trade agreement

The Canada-Colombia Free Trade Agreement came into force in 2011. It reduces or eliminates tariffs on most of Canada’s exports to Colombia and ensures equitable treatment for Canadian investment in the country. It covers sectors such as agricultural commodities, paper products, heavy equipment, mining, oil exploration, printing and education. In 2017, bilateral trade in goods between Canada and Columbia totalled $1.7 billion.

Canada’s major exports to Colombia in 2017 included:

  • Cereals (wheat)
  • Vehicles
  • Machinery
  • Vegetables (pulses)
  • Paper
  • Fertilizers

2.2.3 Canada-Costa Rica free trade agreement

This free trade agreement came into force in 2002 and concentrates on trade in goods. It does not cover areas such as cross-border trade in services, financial services, investment and government procurement. Negotiations are in progress to eliminate agricultural and industrial tariffs, increase market access and broaden the agreement to other areas.

Canada’s major exports to Costa Rica in 2017 included:

  • Grain products
  • Machinery
  • Electrical machinery
  • Vegetables

2.2.4 Canada-European free trade association (EFTA) free trade agreement

This is an agreement between Canada and the EFTA countries of Iceland, Liechtenstein, Norway and Switzerland. It came into force in 2009. The agreement covers only goods and concentrates on eliminating tariffs. So far at least, it does not apply to services, investment or intellectual property.

Canada’s top 2017 exports to…

Switzerland

  • Vehicles and equipment
  • Precious metals and stones
  • Machinery
  • Chemical products

Iceland

  • Animal products
  • Vehicles and equipment
  • Machinery
  • Paper and paper products

Norway

  • Base metals
  • Machinery
  • Vehicles and equipment
  • Vegetable products

 

2.2.5 Canada-Honduras free trade agreement

In force as of 2014, the agreement covers market access for goods, cross-border trade in services, investment and government procurement. Many Canadian agricultural goods now enter Honduras tariff-free, including beef, pork, potato and grain products, vegetable oils and some processed foods. Tariffs on other Canadian exports, such as chemicals, plastics, pulp and paper, wood, industrial machinery, fish and seafood are being phased out.

Canada’s major exports to Honduras in 2017 included:

  • Fertilizer
  • Paper products
  • Machinery

2.2.6 Canada-Israel free trade agreement

The initial agreement came into force in 1997 and was updated in 2003. It is a goods-only agreement with no investor provisions. It eliminates tariffs on all industrial products manufactured in Canada and Israel, and on a selection of agricultural and fisheries products. Since coming into force, two-way merchandise trade between Canada and Israel has tripled, reaching $1.7 billion in 2017. 

In May 2018, the two countries announced the signing of a modernized Canada-Israel Free Trade Agreement. The revised agreement includes new and updated chapters on labour, the environment, trade and gender, and small and medium-sized enterprises (SMEs), as well as provisions on corporate social responsibility. It also includes further tariff reductions and eliminations for Canadian agricultural and agri-food products, and better access for service suppliers.

Canada’s major exports to Israel in 2017 included:

  • Industrial machinery
  • Aircraft and parts
  • Electrical equipment
  • Precious stones
  • Scientific and precision instruments

2.2.7 Canada-Jordan free trade agreement

In force in 2012, the agreement covers trade in goods and eliminates tariffs on most Canadian exports to Jordan, including forest products, machinery, construction equipment, and agricultural and agri-food products. There is also a separate FIPA, signed at the same time, that covers investor protections.

Canada’s major exports to Jordan in 2017 included:

  • Vehicles
  • Pulses
  • Electric machinery
  • Wood
  • Scientific instruments
  • Paper

2.2.8 Canada-Korea free trade agreement

This is Canada’s first free trade agreement in the Asia-Pacific region. It came into force in 2015 and provides Canadian exporters with preferential access to the world’s 11th-largest economy and the fourth-largest in Asia. South Korea is also a gateway to regional and global value chains. Between this agreement and CPTPP, Canadian companies are now well positioned to become increasingly competitive in the Asia-Pacific area.

In the first two years of implementation, Canada saw increased exports across several sectors, especially in agri-foods, fish and seafood, forestry products and industrial goods. Canada’s exports to Korea increased to $6.5 billion in 2017, up from $6.0 billion in 2014.

Canada’s major exports to South Korea in 2017 included:

  • Mineral products
  • Base metals
  • Machinery
  • Animal products
  • Wood products

Canada hemp foods scores in South Korea

Robert Rae was in the right place at the right time when there was a spike in South Korean demand for hulled hemp seeds. But Rae’s ability to take advantage of the business opportunity was due to his background in logistics management and the strong relationships he had built with partners in his value chain.

Rae established Canada Hemp Foods (CHF) in 2006 in Gibsons, B.C. With the Netherlands in his sights, he purchased 450 kgs of hemp seed to export, but quickly discovered the tariffs and import restrictions were so onerous that it would be difficult to succeed in the European market.

In 2013, he connected with a Seoul-based buyer who imported a shipment of hemp seed and sold it online. Two years later, CHF participated in the Seoul Food Show. In October 2015, Rae received an order from a South Korean company for a 20-foot container of hemp seed. “We scrambled and got a processor we were working with to put it together. We put the hemp seed in 2,000-pound bags, loaded them into a container, did all the certifications, inspections and manufacturer’s declarations, and we shipped in November 2015.”

2.2.9 Canada-Panama free trade agreement

This free trade agreement came into force in 2013 and is supported by agreements on labour co-operation and the environment. Together with its supplemental agreements, it covers market access for goods, cross-border trade in services, telecommunications, investment, financial services and government procurement.

Canada’s major exports to Panama in 2016 included:

  • Aircraft
  • Machinery
  • Pharmaceutical products
  • Agricultural food products

2.2.10 Canada-Peru free trade agreement

In force since 2008, this agreement is supported by accords on environmental and labour co-operation. It eliminates tariffs on 95% of current Canadian exports to Peru.

Peru is also a party to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership with Canada but has yet to ratify it.

Canada’s major exports to Peru in 2017 included:

  • Vegetable products
  • Machinery and electrical products
  • Chemical products
  • Paper products 
  • Base metals
  • Specialized instruments

2.2.11 Canada-Ukraine free trade agreement

This agreement came into force in 2017. It eliminates tariffs on a wide range of goods and also addresses a range of non-tariff barriers.

Ukraine offers opportunities for Canadian exporters in agriculture and agri-food, manufactured goods, agricultural machinery, aerospace components, plastics and cosmetics.

Canada’s major exports to Ukraine in 2017 included:

  • Mineral fuel oils
  • Fish and seafood
  • Machinery
  • Chemical products
  • Vehicles

 

Canada’s free trade agreements

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Date modified: 2018-12-28