How does international trade affect employment and job creation in canada

North American free trade agreement (NAFTA) – Resources

This page serves as a toolkit for Canadians interested in learning more about the North American Free Trade Agreement (NAFTA) and the modernization of the Agreement.

Frequently asked questions

Select the question below to learn more about NAFTA:

  • What is the North American Free Trade Agreement (NAFTA)?

    NAFTA is a free trade agreement between the United States, Mexico, and Canada, that came into effect on January 1, 1994.

    NAFTA was built on the success of the earlier Canada-U.S. Free Trade Agreement (CUSFTA) that came into effect in 1989 and complements World Trade Organization (WTO) agreements by making deeper commitments in some key areas.

    With the coming into force of NAFTA, the world’s largest free trade area was formed. The agreement has helped grow the size of and increase the standard of living for the middle class in all three countries.

    Under NAFTA, tariffs on all covered goods traded between Canada and Mexico were eliminated in 2008. Tariffs on covered goods traded between Canada and the United States became duty free on January 1, 1998, in accordance with the CUSFTA which was carried forward under NAFTA.

  • What have been the benefits of NAFTA for Canada?

    Since 1994, NAFTA has generated economic growth and rising standards of living for the middle class of all three member countries. By strengthening the rules and procedures governing trade and investment throughout the continent, NAFTA has proven to be a solid foundation for building Canada’s future prosperity.

    NAFTA has had an overwhelmingly positive effect on the Canadian economy. It has opened up new export opportunities, acted as a stimulus to build internationally competitive businesses, and helped attract significant foreign investment.

    NAFTA has been a success by serving as a basis to grow both trilateral and bilateral North American relationships. This integration helps maximize our capabilities and make our economies more innovative and competitive.

    Under NAFTA, total trilateral merchandise trade, as measured by the total of each country’s imports from its other two NAFTA partners, increased more than three-fold since 1993.

    Cooperation through NAFTA has created a North America where Canadian, American and Mexican companies do more than sell things to each other, now, our companies make things together.

  • Why is Canada consulting on a renegotiation of NAFTA?

    Engaging with Canadians, especially with women, Indigenous peoples and youth, will be an important factor in informing the Government of Canada’s positions and proposals in the potential renegotiation and modernization of NAFTA.

    The purpose of these consultations is to identify key interests and concerns of Canadians with respect to NAFTA.

  • How will Canadians be updated on the progress of consultations?

    The Government of Canada plans to provide periodic updates and summaries of the consultations, including stakeholders consulted, where consultations took place, and what topics were discussed during the consultations.

  • How long will the consultations last?

    Once the Canada Gazette notice is issued on June 3, 2017, the Government will accept written submissions until July 18, 2017.

    However, NAFTA consultations are an ongoing process that will be carried over throughout the negotiations.

    Following the Canada Gazette process, other consultation mechanisms will be announced.

Factsheet: NAFTA

NAFTA’s track record is one of economic growth and middle class job creation, both here in Canada and across North America. It also paved the way for unprecedented economic integration between partners, creating a platform where companies from Canada, the U.S. and Mexico make things together rather than simply sell to each other.

Highlights

  • North America is home to over 480 million people.
  • The U.S. and Mexico are respectively Canada’s first and third largest merchandise trading partners in the world.
  • Canada is respectively the second- and fourth- largest merchandise trading partner of the United States and Mexico.
  • In 2016, trilateral trade reached nearly USD$ 1 trillion – more than a three-fold increase since 1993.

NAFTA

  • NAFTA came into effect on January 1, 1994.
  • NAFTA has 22 chapters, divided in eight parts, and 10 annexes (including chapter-specific annexes).
  • There are also two side agreements:
    • The North American Agreement on Labour Cooperation (NAALC)
    • The North American Agreement on Environmental Cooperation (NAAEC)

Canada – United States

  • 400,000 people and over $2.4 billion worth of goods and services cross the Canada–U.S. border daily.
  • 1.9 million Canadian jobs are related to Canada exports to the U.S.
  • Canada is the largest merchandise export market for the U.S. and one of the three largest country merchandise export markets for 48 U.S. states.
  • Almost 9 million jobs in the U.S. depend on trade and investment with Canada.
  • In 2016, the U.S. exported nearly US$266 billion of merchandise to Canada.

Canada – Mexico

  • Since 1993, Mexico-Canada merchandise trade grew nine-fold, while services trade has increased six-fold.

Background information

NAFTA came into effect on January 1, 1994, creating the largest free trade region in the world at that time, generating economic growth and helping to raise the standard of living for the people of all three member countries. By strengthening the rules and procedures governing trade and investment, NAFTA has proven to be a solid foundation for building Canada’s prosperity and has set a valuable example of the benefits of trade liberalization for the rest of the world.

Given that the Agreement is over 23 years old, there are many clarifications and technical improvements that could be made in all trade areas covered by NAFTA, such as labour, the environment, or culture, for example. NAFTA would also benefit from the inclusion of new trade areas, such as electronic commerce, that are not currently covered, to ensure the agreement is aligned with today’s economic realities. 

Under NAFTA, total trilateral merchandise trade, as measured by the total of each country’s imports from its other two NAFTA partners, reached nearly USD$ 1 trillion, representing more than a three-fold increase since 1993. Some 77.8 percent of Canada’s total merchandise exports were destined to our NAFTA partners in 2016. Total merchandise trade between Canada and the United States more than doubled since 1993, and grew nine-fold between Canada and Mexico.

Canada is the largest merchandise export market for the U.S. and one of the three largest country merchandise export markets for 48 U.S. states. In 2016, the U.S. exported nearly US$266 billion of merchandise to Canada, and for the same year, the United States was the number one destination for Canadian merchandise exports, and was Canada’s largest supplier of merchandise imports. Almost 9 million jobs in the U.S. depend on trade and investment with Canada, while 1.9 million Canadian jobs are related to Canada exports to the U.S. Canada is the main foreign supplier of energy to United States, and was the fifth largest cumulative source of foreign direct investment (FDI) into the United States.

Canada’s trade and investment relationship with Mexico has seen strong growth since the entry into force of NAFTA. Furthermore, Canada receives approximately 20,000 agricultural workers annually under the Seasonal Agricultural Workers Program, often cited as a model for international labour-mobility arrangements. Mexico’s demographic and economic prospects point toward an even greater growth in commercial exchanges.

The enhanced economic activity and production in the region have contributed to the creation of jobs for Canadians with one in six jobs in Canada related to exports. With the addition of more than 5 million net new jobs since 1993, Canada’s unemployment rate has decreased from 11.4 percent (1993) to 7.0 percent (2015).

NAFTA’s provisions ensure greater certainty and stability for investment decisions and have contributed to enhancing Canada’s attractiveness for foreign investors while providing more opportunities for Canadians to invest in NAFTA partners’ economies. Under NAFTA’s investment-friendly environment, Canada and the U.S. developed one of the world’s largest investment relationships, while the Canada-Mexico relationship increased dramatically since the Agreement entered into force.

North America is home to over 480 million people, and over one quarter of the world’s economic output. Our integration helps maximize our capabilities, making our economies more innovative and competitive, creating a North America where Canadian, American and Mexican companies do more than sell things to each other – now, our companies increasingly make things together.

NAFTA has benefited North American businesses through increased export opportunities resulting from lower tariffs, predictable rules, and reductions in technical barriers to trade. Along with increasing exports and imports, firms have become more specialized and thus more competitive, allowing for them to make things together for customers within and beyond the NAFTA region.

North American Agreement on Labour Cooperation

The North American Agreement on Labour Cooperation (NAALC) came into effect in January 1994. It is one of two parallel accords to NAFTA. The Agreement is administered by the Commission for Labour Cooperation, which consists of a Council of Ministers and a tri-national Secretariat, based in Washington D.C. Currently four provinces (Quebec, Alberta, Manitoba and Prince Edwards Island) are signatories to the NAALC through an Intergovernmental Agreement.

The Commission works in close cooperation with the National Administrative Offices (NAOs) established in each country to implement the Agreement and serve as the national point of contact. In Canada, the Office for Inter-American Labour Cooperation within the Labour Branch of Employment and Social Development Canada acts as the Canadian NAO. The Canadian NAO also provides for the submission and receipt of public communications (complaints) on labour law matters arising in the territory of another Party and serves as the official review agency in Canada.

North American Agreement on Environmental Cooperation

The second parallel accord is the North American Agreement on Environmental Cooperation (NAAEC), which established the Commission for Environmental Cooperation (CEC) in 1994. The CEC is mandated to enhance regional environmental cooperation, reduce potential trade and environmental conflicts and promote the effective enforcement of environmental law. It also facilitates cooperation and public participation in efforts to foster conservation, protection and enhancement of the North American environment. It consists of three principal components: the Council (Environment Ministers), the Joint Public Advisory Committee (JPAC) and Secretariat, headquartered in Montreal.  It has an annual budget of US$9 million, with Canada, Mexico and U.S. contributing US$3 million per year, and is governed by consensus (not majority).

For more information on the Canada-U.S. and Canada-Mexico relationship, including statistics, please visit the following:

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Date Modified: 2021-03-04

Written by Jane