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Canada’s largest trading partner is the U.S. However, Canada must focus on expanding trade with other nations to ensure continued prosperity. Over sixty percent of Canada’s GDP is linked to exports. One in five jobs in Canada is linked to exports; Canada is a nation that needs to trade.
What is NAFTA?
These staggering statistics are due to one factor – the North American Free Trade Agreement (NAFTA). NAFTA is a free trade deal between Canada, Mexico, and the U.S. The deal was created in 1994 and allowed the three countries to form one of the world’s largest free trade zones.
The deal has worked wonders for all countries involved. Trade has been bumped up by 265 percent in the last two decades. As well, investment among the NAFTA members has gone up sixfold. These are staggering numbers.
The interesting item one notices when diving deep into the numbers of trade between NAFTA members is the untapped market between two NAFTA partners. While the U.S. trades heavily with Canada and Mexico – Canada and Mexico do not do as much business together. This is partially due to geographic proximity between the U.S. and the other nations. Canada and Mexico simply don’t share a border. However, there are other mechanisms at play. Still, Mexico is a major trade partner of Canada. Two-way trade between the countries was around $32 billion in 2013.
Problems Trading with Mexico
Issues surrounding trade with Mexico stem from a few issues outside of no common border. Many Canadians do not know much about Mexico, aside from the violent crimes seen on the news. Neither country has invested many resources into research between the nations. Cross-cultural awareness and language capacities make trade difficult. Few person-to-person relationships between citizens of the two nations also create barriers of trust.
Ideas on Trade Improvement
To improve trade options with Mexico, there are many items Canada can focus on. The first one would be visa restrictions for Mexicans. Mexicans still face somewhat harsh visa restrictions in Canada. By reworking the visa restrictions for low-risk Mexicans, the country would ensure further economic relationships.
By working with the U.S. and Mexico to introduce trilateral regulatory harmonization, many Canadian business people believe any inefficiencies, delays, and discrepancies between the NAFTA partners could be fully eliminated. However, this can only happen if Canada and Mexico can foster better trading relations.
Mexico is a MUST
Trade relationships must continually be worked on and improved. This is true with Canada’s vital relationship with the U.S. as well. However, there is a growing thought that a strategic alignment with Mexico as a fundamental trade partner could greatly benefit Canada – along with all members of NAFTA. The move could create a more competitive continent and allow all involved to prosper.