New developments in international trade

The XXI century will present new challenges for Canadian business. Canada’s participation in the Free Trade Agreement with the United States will create new opportunities with its most important business partner. At the same time, the agreement will open the Canadian economy to greater foreign competition. There’s fear that Canada will be relegated to low value added industries, such as primary resources, while losing manufacturing capacity as it migrates to the United States. The potential for a North American economic integration that includes Mexico should open new opportunities for the export of value added and primary products. However Mexico’s lower wage rates could put pressure on Canada’s labor-intensive industries.

The Canada-U.S. Free Trade Agreement, which came into effect on January 1, 1989, is the largest such agreement ever concluded between two countries. The agreement reflects the commitment of both Canada and the United States to the liberalization of trade. Its supporters say the agreement will improve economic efficiency in both countries, thereby increasing our citizens’ well-being and better preparing our economies for global competition. The agreement means that Canadian business is now assured access to the world’s most affluent market and Canada’s most important trading partner.

The Canada-U.S. Free Trade Agreement is phased in over a 10-year period. The agreement’s main objectives are:

1. To eliminate tariff and nontariff barriers to trade in goods and services.

2. To facilitate fair competition in the Free Trade area.

3. To liberalize cross-border investments.

4. To establish the institutional and legal bases for joint administration of the agreement and resolution of disputes.

5. To provide a continuing monitoring and adjustment system to enhance benefits of the agreement.

6. To allow citizens of either country to trade some professional services across the border.

Canada is expected to benefit greatly over the long term, the agreement’s supporters say although short-term adjustments in the economy may be painful. The agreement allows for Canadian firms’ unimpeded access to most areas of the U.S. economy and consumers. This increases Canada’s free trade area by over 250 million consumers.

Canada’s Department of Finance estimates the overall economic benefit to consumers and industry that’s likely to result from the Free Trade Agreement as follows;

— Canada’s real income should increase by 2.5 percent over the long term, representing an increase in real income of $ 450 per year for every Canadian.

— Output should rise in many sectors of the economy. The estimate is for a 10.6 percent increase in manufacturing output, 2.1 percent in the resource sector, and approximately 1 percent in services.

For Western Canadians the agreement is expected to yield gains in the expansion of the petrochemical industry; more open markets for oil, gas, uranium, potash, forest products, fish, and cattle exports; and better access to U.S. manufactured goods. In Central Canada, the agreement is expected to benefit the uranium industry, potash producers, oil industry, beef producers, hydroelectricity, and urban and intercity sectors as well as the aerospace industry.

Ontario, with its already strong trade with the United States, is also expected to post significant gains. Over 90 percent of Ontario’s exports go to the United States. Manufacturers in Ontario are expected to benefit from free access to the U.S. market. The agreement also secures current markets in the United States for products such as coal, steel, electricity, and uranium. Ontario’s financial services sector is also likely to benefit from the agreement.

For Quebec, the hydroelectricity industry should be a big winner as access to the U.S. market is assured, while technical regulations that have hindered pork exports to the United States will be eased allowing greater access to the U.S. market.

For Canada’s Atlantic provinces, the export-dependent fish, forest products, minerals, and energy industries are expected to benefit from secure access to the U.S. markets and from the more equitable dispute-settling mechanism established under the act.

Many Canadians fear the migration of jobs and capital to south of the border. They expect that free trade with the United States will relegate Canadians to low value added primary resources extraction industries. The risk from this perspective is that U.S. and other manufacturers will no longer need to establish plants in Canada. Rather, these manufacturers will find it more efficient to consolidate manufacturing in the United States and ship to Canada from this region. Others fear that Canada will need to weaken its social welfare programs and its universal Medicare program in order to compete with U.S. business. Loss of Canadian cultural identity is another often cited objection to the Free Trade Agreement.

Beyond North America, the integration of the European Community into a market of 320 million consumers accounting for 22 percent of the world’s GNP (compared to 20 percent in the United States) is expected to present new global competition for Canadian firms. As European firms seek to take advantage of this larger market, they’re likely to increase their efficiency while erecting barriers to firms not operating within Europe.

Growth in trade between Canada and the Asia-Pacific region will open new markets for Canadian goods and provide access to new sources of supply. However, Canadian firms will face stiff competition from Japan and some of the newly industrialized countries in this region.

Given exports’ importance to the Canadian economy, various government and nongovernment agencies provide assistance and offer programs to help foster efficient export activities by Canadian firms.

Both the federal and provincial governments attempt to help Canadian companies wishing to sell their products in foreign markets. The Department of External Affairs has a number of geographic divisions, each specializing in a specific area of the world. These divisions assist companies with developing capital projects and export promotions in their areas of interest. The department also helps coordinate export activities of other federal departments and agencies.

Дата добавления: 2015-11-14