Canada’s economy has been shaped by international trade agreements since its founding. Canada, which relies significantly on foreign commerce, has sought alliances and agreements to increase its export markets and boost its economy. These trade agreements have changed Canada’s foreign commerce, corporate practices, and economic performance, both positively and negatively.
Export growth has been a major benefit of international trade agreements for Canada. With almost 75% of its exports to the US, Canada’s economy relies on its southern neighbour for prosperity. The 1989 Canada–United States Free Trade Agreement (CUSFTA) and 1994 NAFTA extended Canada’s export markets outside the US. These agreements lowered taxes and trade restrictions, making exporting simpler and cheaper for Canadian enterprises. Canada’s exports to Mexico and Europe have expanded, giving growers greater options and cash. Canadian firms are more competitive due to their broader consumer base and capacity to diversify their goods and services due to export market growth.
Foreign direct investment has also benefited Canada via international trade accords. Trade agreements have made Canada more appealing to international investors by removing trade obstacles and improving business conditions. Under NAFTA, Canada guarantees foreign investors access to products and services and equitable treatment. These incentives have expanded FDI in Canada, bringing new technology, skills, and jobs. It has also given Canadian firms access to foreign corporations’ cash, experience, and worldwide networks, improving their international competitiveness.
International trade accords have also helped Canada’s domestic sectors. Canada obtained unique exemptions for dairy, poultry, and egg sectors in CUSFTA to shield them from foreign competition. These sectors have survived and thrived due to exclusions from inexpensive imports. However, NAFTA has spurred local sectors to become more efficient and inventive to compete with international manufacturers. Canada has increased local production, reduced its imports and become more self-sufficient.
International trade accords have benefited Canada’s economy but sometimes hurt it. Trade imbalances are a major concern. NAFTA has increased Canada’s trade imbalance with the US to $19 billion by 2020. This trade deficit has cost Canadian manufacturers thousands of jobs as they try to compete with cheaper imports. Under these trade agreements, Canada has gradually switched from exporting completed goods to raw resources and commodities like oil and minerals, which are in greater demand elsewhere. This move has rendered Canada’s economy sensitive to global commodity price volatility, causing economic instability.
Additionally, international trade agreements have had different consequences throughout Canada. Some provinces have benefited from expanding export markets and new investment prospects, while others have struggled to compete and maintain industries. Ontario’s exports have fallen and its US trade imbalance has grown, despite its robust industrial base. This has caused employment losses and industrial closures, causing regional economic inequities.
Overall, international trade agreements have had mixed consequences on Canada’s economy. These accords have increased Canada’s exports and FDI, boosting its economy. These changes have caused trade imbalances, regional economic inequities, and a raw material production shift. To maintain economic development and stability, Canada must weigh the pros and downsides of new trade deals.
