Planning to export? Free Trade Agreements (FTAs) can open doors of opportunities for you. They make flow of goods and services across international borders smooth and easy.
What is the purpose of FTA’s?
The chief goal of FTA’s is to make life easier for you, the exporter or importer, by removing barriers to international trade. While the primary focus is on eliminating tariffs, it also impacts non-tariff barriers, for example, quotas, intellectual property, competition policy etc.
Why should you care about it?
It not only creates more opportunities for your products and services but also creates a level playing field with your competitors. For example, if you plan to get a foothold in the Asia –Pacific market, you can benefit from the Canada – South Korea Free Trade Agreement (CKFTA), which came into effect on January 1, 2015. If you are a sea food exporter, CKFTA has eliminated tariffs on lobster (frozen) and Pacific and Atlantic salmon (fresh/chilled/smoked) from a rate of 20 percent. Earlier, Canadian fish and seafood exporters faced tariff highs up to 47 percent. Nearly 70 percent of fish and seafood product tariff lines will be duty free within five years and all remaining duties will be eliminated within 12 years. Several BC exports including forestry, natural resources, fishing, agriculture and manufacturing will benefit from the CKFTA.
Canada has several Free Trade Agreements in force and negotiations are going on for many others. Below are two examples of how FTA’s have changed the exporting landscape.
NAFTA: The North American Free Trade Agreement (NAFTA) between Canada, United States and Mexico, which came into effect on January 1, 1994, created the world’s biggest free trade block. Its objectives included:
- elimination of barriers to trade in goods and services,
- promotion of fair competition,
- creation of suitable opportunities for investment, and
- establishment of systems and procedures to settle trade disputes.
By eliminating trade barriers, NAFTA boosted trade and economic growth. So, while in 1993, the trilateral trade was US $288 billion, in 2014 the total merchandise trade went up to US $1.12 trillion.
If you are exporting to the US and want to qualify for the preferential tariff treatment under NAFTA, you will need to submit a certificate of origin. Click here to see if your products qualify for the preferential tariff treatment.
CETA: The Canada–European Union Comprehensive Economic and Trade Agreement (CETA), awaiting approvals, will open doors of opportunities to Canadian entrepreneurs. According to Export Development Canada “CETA will provide Canada access to the world’s largest market with more than 500 million people in 28 countries, with a combined GDP of $20 trillion.”
EU is a great market for imports. “EU’s annual imports ($2.3 trillion) are worth more than Canada’s total gross domestic product (GDP), which stood at $1.9 trillion in 2013.”
How will it impact your business? Once CETA is applied, Canadian businesses can look forward to several benefits including:
access to new markets,
- reducing the cost of doing business with EU because of streamlined procedures,
- opportunity to bid on EU Government contracts ,
- finding it easier to invest in EU, and
- avoiding unnecessary regulatory requirements.
How to use FTAs
If you have decided to export to a specific region, check if Canada has an FTA with that country. Here are a few questions that you should explore:
- Does the tariff removal impact your specific product or service?
- Has the FTA addressed non- tariff barriers such as quotas etc?
- Does it allow access to their Government’s procurement program?
- Is the movement of business professionals easier?
- Does it simplify origin procedures?
- What rules have been designed to protect intellectual property, copyrights etc.?
- What processes have been set up for dispute resolution?
FTAs are very comprehensive and can be complex to understand. It is important to use professional advice to navigate through these rules. There are several resources to help, once you decide to expand and grow your business into the international market.
Export Development Canada
Canadian Trade Commissioner Service
Global Affairs Canada
Canada Border Services Agency
FTA’s should not be the only reason for you to decide on a market. You have to research your market to decide if there is a demand for what you are selling and then decide on your market entry strategy. Having an Export Plan is critical; it’s like a roadmap for your international business.
Some of the important questions you should answer include:
- Who is your target market? For example, if you plan to export to EU, which country is your target market?
- What is your market entry strategy? Are you going to work with an agent or a distributor? ( Stay tuned for an article on this subject)
- What primary product or service are you planning to sell in the international market? Has it been adapted as per the local market dynamics?
- What is your time line for venturing into international markets?
- Who are the key people in your organisation who will lead the export venture? Who is your contact/partner in the local market?
Moving into new markets is expensive. You have to manage your risks. You can start exporting this year with these resources:
1. CanExport Can Help
The Government of Canada has announced CanExport, a program that provides direct financial assistance to businesses wanting to export to new markets. You may qualify for funding to cover 50% of your eligible expenses as you develop new markets. Eligible expenses may include travel to target markets, participation in trade fairs and missions and market research. Learn more
2. Access New Markets with WEC Financing
If you’re ready to grow, a Women’s Enterprise Centre business loan could provide the funding you need to expand into new markets. Learn more
3. Save the Date for the Upcoming Export Opportunity
Go for the Greens
Florida, September 21-24, 2016
Contact Kath Britton, Senior Business Advisor, to join the BC delegation or to find out how we can support you as you explore international trade.