Canada Should Focus on NAFTA and Mexico

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By Laura Dawson, Financial Post Jun 15, 2015

Mexico’s growth prospects make it the best option for Canada’s emerging-market expansion and investment plans

If Canada’s interest in the North American Free Trade Agreement was in deepening regional trade integration between our economy and the U.S. and Mexico, then we could say it certainly succeeded — at least for about five years.

By 1999, however, Canada’s NAFTA trade had peaked, and it has since only declined as a share of its trade with the rest of the world: from 79 to 66 per cent. Truly free trade with the U.S. has proved elusive — the number of professions granted labour-mobility concessions under NAFTA has gone virtually unchanged for 20 years — and trade irritants continue to rankle on both sides of the Canada-U.S. border (think: country-of-origin labelling and “Buy America” rules). That has left Canada looking to strike more free-trade deals in new, farther-flung markets, as a way of diversifying its export markets.

A medium-sized economy like Canada cannot be competitive everywhere. Our greatest advantage lies at home, in North America, where we can advance our role in the regional supply chain. Putting our greatest focus on North America means intensifying our trading relationship with Mexico. Fortunately for us, it happens to be one of the most promising emerging markets in the world. The clear option for Canada is to put its greatest focus on North America.

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