Canada’s Involvement in NAFTA


The North America free trade agreement abbreviated as NAFTA was between Canada, the United States of America and Mexico in the year nineteen ninety-four. Before this agreement, Canada which was a small economy compared to the United States of America was actively involved in trade with Europe especially the United Kingdom. On realizing this trend that Canada had actively natured, the United States of America, approached Canada through an initiative called the general agreement on tariffs and trade which was aimed at initiating a United States and Canada free trade agreement. These agreements kick-started in the year 1986 and the agreement which was debated over was reached in the year 1987 in the month of October and become a major electoral issue in Canada in the year 1988. When the conservatives won the election in the tear 1989 the agreement comes into effect.

Consequently, the United States of America and the republic of Mexico showed their intention to trail an investment and trade liberalization understanding, and as a result Canada was asked to become part of the negotiations. As a result of this series of negotiations a deal was brokered in early nineteen ninety-four, this agreement was given the name, North American Free Trade Agreement (NAFTA). The birth of this agreement led to the creation of a big free trade zone with a capacity of around three hundred and seventy million people from the three countries which were members of the agreement. The North America free trade agreement rendered useless the earlier formed United States of America and Canada free trade agreement of the year 1987.

The North America Free Trade Agreement

The North America trade agreement which was then formed contained certain attributes which were not similar to a customs union whereby the member states of this agreement were supposed to maintain same duties and regulations as pertaining to the nonmember countries. This agreement also made it possible for the member countries having a common market which also allowed the free movement of factors of production such as labor and capital. Since the formation of this agreement up to now the trade area has reached a gross domestic product of approximately eleven point four billion United States dollars. This figure above makes this trade area the greatest trade area in the entire world, even greater than the lately formed European Union.

Factors such as the strengthened regulations and trade and investment protocol in the free trade area make the realization of a very wealthy trade zone. According to the IMF the NAFTA trade partners doubled from the time it comes into effect up to the year two thousand and two and the trade with its partners stands at approximately 1million dollars per minute. Canadian export to the North American free-trade agreement partners has grown by about 8.9% and the export to the United States of America has grown by approximately 47%, the export from Canada to Mexico on the other hand has grown to approximately 1.7 billion United States dollars by the year 2003. United States of America exports to Mexico and Canada rose to about 147.8 billion United States dollars. Export from Mexico to the United States of America on the other hand rose to a mark of about 235% by the year 2003 and Mexico to Canada’s export rose to a mark of 205% by the same year. The Canadian contribution to the United States of America was at eighteen percent while the Mexican contribution was enhanced from six point eight percent in the year nineteen ninety-three to eleven point seven in the year two thousand and three. At the moment NAFTA member countries constitute about twenty percent of the global exports and about twenty-six percent of the global imports.

In the year 2000, NAFTA was shown to have strong control on the inflow of trade and investments from the other nations and regions of the globe. And at the moment twenty-three point nine percent of the global investments are located in the trade area.

Positive Effects of NAFTA on Canada

The liberalization development as a result of the North America trade agreement has greatly stretched Canadian exports to the United States of America and between the year nineteen ninety and nineteen ninety five alone the exports had grown t an annual rate of 13% nearly twice the amount of export from Canada to the rest of the word. Of greater impact to the Canadian economy were those goods and services exported which had United States of America tariffs had been reduced drastically.

Another economic boost Canada received from this agreement is that Exports that originated from non-resource goods have increased to twice as fast as the rate of increase e in exports from resource-based goods, this mostly included technology-oriented goods for example communications equipment, office-based facilities and goods, weight & measurement instruments and some machinery. Some of the goods such as chemicals exports grew rapidly too. The result of this has been that Canada has become dependant on the United States of America for exportation of its array of goods and services.

Although the Canadian exports to Mexico are very dismal it is however predicted that through this agreement, Canada might in the near future export services to Mexico and also lay numerous investments in Mexico which will be of great significance to the growth of the Canadian economy. However of significant importance are the Imports from Mexico which are more important for Canada than the exports from Canada to Mexico at this moment. The imports from Mexico to Canada are imports of electrical goods and some food products.

Negative Effects of NAFTA on Canada

Canada did not get all the government procurement process liberalization. Approximately 92% of the United States of America’s government procurement is not accessible to Canadian investments. On the other hand, the United States of America did not secure intellectual property added into the Canada-United states agreement. No real developments have been made in determining the threshold limits in the application of the anti-dumping regulations. Canada and the United States had committed themselves to do more on this issue and nothing has ever come from this as far as the free trade agreement is concerned. Nevertheless, in the general agreements in tariffs and trade in the Uruguay round, stricter regulations were formulated as pertaining to dumping.

Canada felt that it had been negatively affected by the agreement since the United States was not showing a committed concern to the come to the negotiating table with Canada to discuss the requirements of the subsidies which should be applicable regarding the countervailing duty and antidumping laws. A row resolution means was established so that the bi-national panels could analyze the United States and Canadian findings of the dumping or subsidy to make sure that each nation’s regulations were rolled out correctly. Following this everything started working out properly despite cases such as the Durham wheat and softwood lumber which the United States has contravened the free trade agreements and limited the Canadian exports of these products unlike in Canada where the agreements are effectively followed to the later. This shows that the United States has started taking advantage of the Canada and Mexico since in the United States the other legislations supersedes the free trade agreement laws hence compromising the agreement.

Canadian system on overseas direct investment was liberalized in order to enable few restraints on several United States of America firms that could want to launch themselves in Canada. As a result, in view of the agreement, more Canadian companies have been engulfed by United States investors, and a lot of Canadian direct assets and investments have found their way into the United States of America, to an extent whereby the united states of America seems to be on the gaining side.

Some Canadians are concerned about the possibilities of the active involvement of Canada in the free trade agreement could with time wear away Canadian trade & industry and political control. Some school of thought had it that just as it occurred in Europe where the European Common Market in approximately thirty years shifted from being a restricted customs union to an amazing now a prospective complete economic amalgamation beneath the control of Germany, and hence they believe that over a period of time Canada could go through such a setup and have the united states of America which has dominion in the free trade agreement get to an extent where Europe had been taken by Germany.


The achievement of NAFTA in rising wealth in its countries by creating better trading and industrial investments environment has been of many benefits to Canada despite the more small magnitude of underlying negativities it has to Canada. Canada is also able now to nature and goes for any other emerging markets.

Since the year nineteen ninety-four Canada has successfully finalized free trade agreements with Costa Rica, Chile, and the republic of Israel and it is on the course of negotiation with four other countries found in central America and also with the free Trade Association of Europe. The Canadian government has also given into coming up with the discussions geared towards a two-sided free trade agreement with Caribbean nations.


Henderson Ailsa., Regional political cultures in Canada. Toronto, Canada: University of Toronto Press, 2004.

Guy, John James. People, Politics and Government: A Canadian Perspective. Toronto: Pearson Education press, 2001.

Daniel T. Griswold, NAFTA at 10: An Economic and Foreign Policy Success. Canada: Cato Institute publication, 2003.

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