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

Andrew I. RudmanOffice of NAFTA & Inter-American Affairs

International Trade AdministrationU.S. DEPARTMENT OF COMMERCE

Northern Networks Trade ConferenceDuluth, MN

October 18, 2006

TOP 10 U.S. TRADING PARTNERS2005

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

84.843.8 34.8 33.8

33.7

120.0 51.1

$0

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EXPORTS IMPORTS Source: U.S. Bureau of Census

U.S. EXPORTS TO NORTH AMERICAEXCEEDING THOSE TO OTHER REGIONS

2005

Canada23.4%

Pacific Rim24.6%

Other10.1%

EU20.6%

Mexico13.3%

Other West Hem7.9%

Source: U.S. Bureau of Census

NAFTA 36.7%

U.S. TRADE IN PERSPECTIVE2005

NAFTA EU(25) China Japan

331.4

458.1

186.3

308.8

41.8

243.5

55.4

138.1

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EXPORTS IMPORTS Source: U.S. Bureau of Census

U.S. – NAFTA TOTAL TRADE1990-2005

Source: U.S. Census Bureau

233.5240.6

265.0293.2

343.2380.6

421.2

477.3503.3

561.9

657.1612.3

602.1

627.0

713.0

789.5

0

100

200

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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

U.S. – CANADA TRADE

100.4

111.2

114.4

128.4

127.2

145.3134.2

155.9151.8

168.2

143.9158.8

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

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1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

EXPORTS IMPORTS Source: U.S. Bureau of Census

CHINA1.6%

REST OF WORLD9.0%

GERMANY0.7%

MEXICO0.8%

UNITED STATES83.9%

UNITED KINGDOM

1.9%

JAPAN2.1%

UNITED STATES56.5%

REST OF WORLD22.6%

MEXICO3.8%

JAPAN3.9%

UNITED KINGDOM

2.7%

GERMANY2.7%

CHINA7.8%

CANADA & TRADE

SHARE OF CANADIAN IMPORTS2005

SHARE OF CANADIAN EXPORTS2005

Source: World Trade Atlas

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

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%

MINNESOTA & TRADE

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.

SHARE OF MINNESOTA’S MERCHANDISE EXPORTS , 2005

28 PERCENT WENT TO NAFTA

NAFTA28.1%

IRELAND9.3%

JAPAN6.0%

REST OF WORLD51.6%

CHINA5.0%

Source: U.S. Bureau of Census

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

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

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)

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

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

2006 Initiatives

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

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

Next Steps

NACC priorities to Ministers

SPP Ministers Meeting early 2007

Working groups to continue existing projects and identify new deliverables

• 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?Why Canada First?

Understanding CanadaUnderstanding CanadaYour key to making a loonie or a toonie north of the borderYour 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

80% of Canada’s 80% of Canada’s PopulationPopulation

Culture

Metric system

Labeling

Taxes

A relatively small and dispersed Canadian population

Understanding the Understanding the DifferencesDifferences

Best Prospects for U.S. Exports to Canada (2006)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 Equipment

(SPT)

Canadian Market Entry StrategiesCanadian Market Entry Strategies

APPOINT AGENT

APPOINT DISTRIBUTOR

FORM STRATEGIC ALLIANCES ESTABLISH BRANCH OFFICE IN CANADA

ITA Can Help

Commercial Service Canada Commercial Service Canada Products and ServicesProducts and Services

• Gold Key Service

• Market Research

• International Partner Search

• Single Company Promotion (SCP)

• Platinum Key Service

• Trade Missions, DealMakers

• Business Service Provider (BSP)

Upcoming Trade Schedule 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

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.

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

ITA COMPLIANCE ACTIONWhat 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

USEFUL LINKS

• COMMERCE NAFTA SITE – www.mac.doc.gov/nafta/index.htmwww.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/www.trade.gov/td/tic/

• NORTH AMERICAN DEVELOPMENT BANK - www.nadbank.orgwww.nadbank.org

• NORTH AMERICAN COMMISSION FOR ENVIRONMENTAL COOPERATION – www.cec.orgwww.cec.org

• UNITED STATES TRADE REPRESENTATIVE –www.ustr.govwww.ustr.gov

• EXPORT INFORMATION – www.export.gov

• MARKET ACCESS OR COMPLIANCE PROBLEMS – MARKET ACCESS OR COMPLIANCE PROBLEMS – www.tcc.mac.doc.gov www.tcc.mac.doc.gov

Contact Information

Phone: 202-482-6452 Fax: 202-482-5865

Andrew_Rudman@ita.doc.gov NAFTA Website: www.mac.doc.gov/nafta/compliance