U.S. – Canada Trade: Opportunities Through NAFTA and Beyond

1. U.S. – Canada Trade:
Opportunities Through NAFTA and Beyond
Andrew I. Rudman
Office of NAFTA & Inter-American Affairs
International Trade Administration
U.S. DEPARTMENT OF COMMERCE
Northern Networks Trade Conference
Duluth, MN
October 18, 2006

2. TOP 10 U.S. TRADING PARTNERS
2005
211.3
41.8 55.4
34.1 38.6 27.7 22 22.4 10.4
287.9
170.2
243.5
138.1
84.8
43.8
34.8 33.8
33.7
120.0 51.1
$0
$100
$200
$300
$400
$500
$600
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BILLION
DOLLARS
EXPORTS IMPORTS Source: U.S. Bureau of Census

3. U.S. EXPORTS TO NORTH AMERICA
EXCEEDING THOSE TO OTHER REGIONS
2005
Canada
23.4%
Pacific Rim
24.6%
Other
10.1%
EU
20.6%
Mexico
13.3%
Other West Hem
7.9%
Source: U.S. Bureau of Census
NAFTA
36.7%

4. U.S. TRADE IN PERSPECTIVE
2005
NAFTA EU(25) China Japan
331.4
458.1
186.3
308.8
41.8
243.5
55.4
138.1
$0
$100
$200
$300
$400
$500
$600
$700
$800
BILLION
DOLLARS
EXPORTS IMPORTS Source: U.S. Bureau of Census

5. U.S. – NAFTA TOTAL TRADE
1990-2005
Source: U.S. Census Bureau
233.5
240.6
265.0
293.2
343.2
380.6
421.2
477.3
503.3
561.9
657.1
612.3
602.1
627.0
713.0
789.5
0
100
200
300
400
500
600
700
800
BILLION
DOLLARS
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

6.  Most comprehensive Regional Trade Agreement signed by the
United States
 Exports to NAFTA are outpacing rest of world
 NAFTA trade has increased by over $496 billion since 1993 to
$789.5 billion in 2005
 Combined trade is $2.2 billion a day between NAFTA partners,
that’s $1.5 million a minute
 U.S. two-way merchandise trade with Canada and Mexico more
than exceeds U.S. two-way merchandise trade with the European
Union (25) and Japan combined
 U.S. exports to Mexico are greater than U.S. exports to Mercosur
and the Andean region combined.
NAFTA TRADE IN PERSPECTIVE

7. U.S. – CANADA TRADE
100.4
111.2
114.4
128.4
127.2
145.3
134.2
155.9
151.8
168.2
143.9
158.8
166.6
198.7
178.9
230.8
163.4
216.3
160.9
209.1
169.9
221.6
189.9
256.4
211.3
287.9
$0
$50
$100
$150
$200
$250
$300
BILLION
DOLLARS
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
EXPORTS IMPORTS Source: U.S. Bureau of Census

8. CHINA
1.6%
REST OF WORLD
9.0%
GERMANY
0.7%
MEXICO
0.8%
UNITED STATES
83.9%
UNITED
KINGDOM
1.9%
JAPAN
2.1%
UNITED STATES
56.5%
REST OF WORLD
22.6%
MEXICO
3.8%
JAPAN
3.9%
UNITED
KINGDOM
2.7%
GERMANY
2.7%
CHINA
7.8%
CANADA & TRADE
SHARE OF CANADIAN IMPORTS
2005
SHARE OF CANADIAN EXPORTS
2005
Source: World Trade Atlas

9. CANADA & ENERGY
 In 2005, Canada had a reported 178.8 billion barrels of proven oil
reserves, second only to Saudi Arabia.
 However, the bulk of these reserves (over 95%) are oil sands deposits
in Alberta.
 Nevertheless, during January-November 2005, the top supplier in the
world of crude oil to the United States was Canada (1.6 million bbl/d).
 More than 80 percent of U.S. natural gas imports come from Canada,
mainly from the western provinces of Alberta, British Columbia, and
Saskatchewan.
Canada enjoys a vigorous electricity trade with the U.S., and the
electricity networks of the two countries are heavily integrated.
Source: U.S. Department of Energy

10. NAFTA SUCCESSES
 LEVELED THE PLAYING FIELD
 CANADA: Duty-free in 1998
 MEXICO: Virtually duty-free; average Mexican tariff has fallen
from 10% to 2%
 all tariffs to be eliminated by 2008
 STIMULATED TRADE GROWTH
 U.S. exports to NAFTA partners have grown by 133%
 For Canada up 110%
 for Mexico up 188%

11. MINNESOTA & TRADE

12. MINNESOTA & TRADE
NAFTA: Exports from Minnesota to Canada & Mexico reached $4.1
billion in 2005, an increase of 101% since 1993 when exports were $2.1
billion.
NAFTA: Over 28% of Minnesota’s exports go to the NAFTA region.
CANADA: Canada is Minnesota’s #1 export market 24.4 percent of
its exports go to Canada. In 2005 it exported $3.6 billion.
CAFTA-DR: Exports from Minnesota reached $81.4 million in 2005.
U.S. Peru TPA: Exports from Minnesota reached $19.8 million in
2005.
U.S.-Colombia TPA: Exports from Minnesota reached $38.9 million.

13. SHARE OF MINNESOTA’S MERCHANDISE EXPORTS , 2005
28 PERCENT WENT TO NAFTA
NAFTA
28.1%
IRELAND
9.3%
JAPAN
6.0%
REST OF WORLD
51.6%
CHINA
5.0%
Source: U.S. Bureau of Census

15. The SPP- What Is It?
 The Goal: ensure North America-
 Best and safest place to live, work and do business
 Maintains NORTH AMERICAN ADVANTAGE in era of global
sourcing
 Builds on the NAFTA, P4P, and border initiatives to:
 Better protect citizens from man-made and natural threats
 Promote safe and efficient movement of people and goods
 The SPP consists of an economic and a security component
 Based on the principle that our common prosperity depends on
our mutual security
 Expands economic opportunities by reducing barriers and making
our businesses more competitive in the global marketplace

16. The SPP- What Is It?
 The SPP is meant to:
 Cut red tape, lower costs for manufacturers by
eliminating unnecessary barriers
 Enhance our mutual efforts to:
 improve our quality of life,
 protect our environment,
 improve food safety and consumer choice,
 combat infectious diseases, and
 develop responses to cross-border man-made/natural
disasters

17. Economic (‘Prosperity’) Component
Working Groups
 Manufactured Goods (DOC)
 Lower production costs for North American manufacturers by
eliminating unnecessary regulatory barriers, ensuring
compatibility of regulations and by eliminating redundant testing
requirements
 Provide consumers with cheaper, safer, and more diversified
and innovative products
 The Other Nine:
 E-Commerce and ICT (DOC)
 Energy (DOE)
 Movement of Goods (USTR)
 Transportation (DOT)
 Food and Agriculture (USDA)
 Business Facilitation (DOS)
 Financial Services (Treas.)
 Environment (DOS)
 Health (HHS)

18. Security Component Working Groups
(DHS)
 Secure North America from External Threats
 Traveler and Cargo Security, and Bio-protection
 Prevent and Respond to Threats within North America
 Aviation and maritime security, law enforcement,
intelligence cooperation, and protection, prevention
and response
 Further Streamline the Secure Movement of Low-Risk
Traffic across our Shared Borders
 Develop and implement strategies to combat threats,
such as terrorism, organized crime, migrant
smuggling and trafficking

19. Some Accomplishments to Date
 Uniform in-advance electronic exchange of cargo manifest
data (maritime, railroad and motor carriers)
 50% Reduction of Detroit/Windsor waits
 Consumer Product Safety Agreements
 Food Safety Coordinating Task Force
 Harmonizing risk assessment mechanisms, and
establishing protocols to detect fraud and smuggling
 Ongoing R.O.O. liberalization- $30 bln in goods affected
 NASTC Strategy (steel)
 US-Canada PulseNet MOU
 Creation of avian/pandemic influenza coordinating body
 Mexico adoption of low-sulfur fuel standard

20. 2006 Initiatives
 Five SPP ‘Cancun’ priorities:
 Smart, secure borders
 Energy security
 Emergency management
 Avian and Pandemic Influenza
 North American Competitiveness Council

21. North American Competitiveness Council
(NACC)
 Membership- 10 private sector representatives from each country
 U.S. Secretariat- Council of the Americas and U.S. Chamber of
Commerce
 Organization varies in each country
 Purpose: provide recommendations on N. American competitiveness that
could be addressed through the SPP
 Value of high-level private sector input
 Recommendations AND solutions to SPP Ministers

22. Next Steps
 NACC priorities to Ministers
 SPP Ministers Meeting early 2007
 Working groups to continue existing
projects and identify new deliverables

23. • Highly developed transportation
infrastructure
• Sophisticated
telecommunications
infrastructure integrated with
the U.S.
• Stable, mature financial markets
• No restrictions on the movement
of funds into or out of the
country
• Efficient Marketing Channels
• Common language
• Culture
• Canadians are very familiar with
U.S. products and services
• Geographic proximity
• Congruent time zone
• High standard of living
• Supportive Government
• Roaring Canadian Dollar
•US$ 1.00 = C$ 1.1357
Why Canada First?

24. Understanding Canada
Your key to making a loonie or a toonie north of the border
• Realize the significance of the U.S.-Canada trading relationship
• In 2005, two-way trade amounted to US $479 billion - up 12% from
2004 and is larger than the sum of 15 European Union countries
• Look at regional differences in Canada
• Canada and the U.S. are similar in many ways, but understanding
what makes Canada different and unique is important for U.S. exporters
• Look to the U.S. Commercial Service for assistance in understanding
the Canadian market and selling your products or services in Canada

25. 80% of Canada’s Population

26. Culture
Metric
system
Labeling
Taxes
A relatively small and dispersed
Canadian population
Understanding the
Differences

27. Best Prospects for U.S. Exports to Canada (2006)
Sector
• Automotive Parts & Services (APS)
• Electronic Power Systems (EPS)
• Building Products (BLD)
• Plastic Materials/Resins (PMR)
• Oil/Gas Field Machinery (OGM)
• Computers/Peripherals (CPT)
• Computer Software (CSF)
• Telecommunications Equipment (TEL)
• Medical Equipment (MED)
• Agricultural Machinery and Equipment
(AGM)
• Water Resources Equipment/Services
(WRE)
• Security/Safety Equipment (SEC)
• Sporting Goods/ Recreational

28. Canadian Market Entry Strategies
 APPOINT AGENT
 APPOINT DISTRIBUTOR
 FORM STRATEGIC ALLIANCES
 ESTABLISH BRANCH OFFICE IN CANADA

29. ITA Can Help

30. Commercial Service Canada
Products and Services
• Gold Key Service
• Market Research
• International Partner Search
• Single Company Promotion (SCP)
• Platinum Key Service
• Trade Missions, DealMakers
• Business Service Provider (BSP)

31. Upcoming Trade Schedule
Trade Events scheduled from 2006 – 2008 include:
• Industrial/Maritime Security Event
• Canadian Solid Waste & Recycling Expo
• Meet the Buyers Seminar
• Plastics Executive Service Trade Mission
• Smart Building Seminar
For a complete listing of all trade events occurring from
2006 – 2008, please refer to our website.
http://www.buyusa.gov/canada/en

32. Why Monitor and Enforce Trade Agreements?
 Trade Agreements increase market access for U.S. exporters.
 Important to all stakeholders that existing trade agreements
are being enforced.
 Create confidence and support for future trade opening
agreements.

33. What Kinds of Barriers do
Firms Face?
 Tariff and Customs Barriers
 Rules of Origin, Certificates of Origin
 Import Licensing
 Standards, Testing, Labeling, or Certification
 Lack of Intellectual Property Rights Protection
 Government Procurement Contracts

34. ITA COMPLIANCE ACTION
What we do?
 Identify unfair treatment
 Form Compliance Team
 COUNTRY, INDUSTRY, AND AGREEMENT SPECIALISTS, GENERAL
COUNSEL, FOREIGN POST, OTHER – NIST, PTO
 Apply FTA/WTO Analysis
 Craft Action Plan to Resolve Issue

35. USEFUL LINKS
• COMMERCE NAFTA SITE – www.mac.doc.gov/nafta/index.htm
• SECURITY & PROSPERITY PARTNERSHIP – www.spp.gov
• US & FCS (Minnesota) - www.buyusa.gov/minnesota/
• US & FCS (Canada) – www.buyusa.gov/canada/en
• TRADE STATISTICS BY STATE – tse.export.gov
• TRADE INFORMATION CENTER – www.trade.gov/td/tic/
• NORTH AMERICAN DEVELOPMENT BANK - www.nadbank.org
• NORTH AMERICAN COMMISSION FOR ENVIRONMENTAL
COOPERATION – www.cec.org
• UNITED STATES TRADE REPRESENTATIVE –www.ustr.gov
• EXPORT INFORMATION – www.export.gov
• MARKET ACCESS OR COMPLIANCE PROBLEMS –
www.tcc.mac.doc.gov

36. Contact Information
 Phone: 202-482-6452
 Fax: 202-482-5865
 Andrew_Rudman@ita.doc.gov
 NAFTA Website:
 www.mac.doc.gov/nafta/compliance