Recognizing the importance of trade to the Canadian economy, successive governments have negotiated free trade agreements that allow businesses to open new markets around the world. Simply put, trade agreements create a level playing field for companies that can compete with international markets. They open markets for Canadian businesses of all sizes by removing trade barriers such as tariffs, quotas or non-tariff barriers. They create more predictable, fairer and more transparent conditions for companies operating abroad. Multinationals investing in Canada benefit in a variety of ways from Canada`s free trade agreements, including: Trade and trade promotion measures have improved Canada`s productivity performance, particularly in manufacturing, according to Statistics Canada Research. (Baldwin and Yan, 2015). From 1974 to 2010, 35% of exporters accounted for more than 72% of total manufacturing employment and 79% of total manufacturing output. Since 1996, employment and manufacturing output have largely recovered in Canada. This indicates that some of the lost jobs and production have been re-grated into high-end manufacturing.
What is positive is that tariff reductions have increased labour productivity (the amount of production produced per hour worked) by an increased annual rate of 2.1% for the most affected sectors and 0.6% for the manufacturing industry as a whole, Trefler estimates. Tariff reductions have increased “total factor productivity,” a measure that takes both capital and labour into account, an increased annual rate of 1% for the most affected industries and 0.2% for manufacturing as a whole. Trefler`s figures are due to a mix of plant sales (closures, openings, acquisitions) and increasing technical efficiency within the facilities. This is not because the facilities are larger or the market share is transferred to companies with already high productivity. In lower producers, productivity has increased sharply. To ensure that Canadian businesses are well positioned to succeed in this growing region, Global Affairs Canada has begun exploratory discussions for a possible Canada-ASEAN free trade agreement and recently concluded exploratory discussions with China, our second largest trading partner.