Using free trade agreements (FTAs) to your advantage can seem complicated at first, but there are many benefits to leveraging them within your export strategy.
Through FTAs, Canadian businesses have gained preferential access to nearly 90% of export markets, or about 1.5 billion potential customers worldwide. Canada is an internationally respected trading nation and the leading G7 country in market access thanks to our 14 free trade agreements. In 2017, small and medium sized enterprises (SMEs) made up just over 40% of the value of Canadian exported goods. SMEs are well‑positioned to take advantage of FTAs and could benefit greatly by expanding into new markets with these agreements in place.
FTA benefits for Canadian businesses:
- Streamline your business ‑ FTAs cut red tape to export products and services abroad.
- Compete abroad ‑ Eliminating or reducing trade barriers allows your business to operate on the same level as local companies. You get preferential market access over competitors from countries without an FTA.
- Access global value chains ‑ FTAs increase the productivity of companies allowing them to competitively source inputs from global value chains.
- Gain an economic advantage ‑ FTAs reduce tariffs imposed on Canadian exports.
Building an FTA export strategy
Now is the perfect time for you to build an FTA export strategy. Canada has a resilient and stable economy and an educated workforce that is poised to drive innovative approaches to doing business abroad. When building your FTA export strategy, it is important to identify and leverage emerging global opportunities by understanding how FTAs benefit you in specific regions.
Two of the most frequently asked export questions that SMEs ask are:
- How do FTAs help small and medium‑sized businesses?
- Are FTA benefits automatic if I export to a country that we have an agreement with?
FTAs help businesses enter new markets and operate more freely by removing or lowering tariff barriers. Many FTAs continue to be modernized to meet changing trade trends. These can cover areas like the environment, intellectual property, e‑commerce, and other business‑related activities. The agreements enable exporting Canadian SMEs to compete on more level playing fields with local businesses and businesses from other countries. You can learn more about specific tariffs for each country by visiting the Canada Tariff Finder.
The most used FTA by Canadian SMEs is CUSMA (formerly called NAFTA)—specifically, Canada–USA–Mexico trade. With over 70% of our exports sold to the USA, it is our most prosperous bilateral relationship. However, it is important that you don’t limit yourself to exporting singularly to the United States. Each of our 14 FTAs offers specific benefits and some countries are better suited for your products and services.
For instance, the Comprehensive Economic and Trade Agreement (CETA) was enacted in 2017 with the European Union (EU) and eliminates tariffs on 98% of EU tariff lines, which is a great FTA for you to consider in your export strategy if you sell goods. CETA includes provisions on temporary entry of business persons, rules to address digital trade barriers, and a chapter on environmental governance. In 2018‑19 CETA helped Canadian businesses increase their exports to EU countries by 6%. It is in your best interest to research all FTAs and their markets to determine where you will have the best competitive edge.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
The Asia-Pacific is now the world’s leading region of economic growth, offering big opportunities for trade and expansion. Canadian businesses can get ahead of the global competition by using the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)—a free trade agreement between Canada and 10 other countries in the Asia-Pacific: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
How to take advantage of FTAs
- Whether you are about to start exporting, or have been exporting for years, we can help you make the most of FTAs especially CPTPP, by providing expert advice and support to help you benefit from preferential access to these markets.
- We may help Canadian businesses grow by connecting them with international opportunities, in particular with fast growing Vietnam and ASEAN markets. Did you know that Vietnam is one of the only 2 markets in Asia (besides China) that still had a notable positive GDP growth in 2020 amid this coronavirus pandemic?
Start building a stronger export strategy today and contact us for a free initial consultation.
(credit: TCS)