With constant new and evolving geo-political impacts from around the world, trade and globalisation is becoming more and more complex. The Russia-Ukraine War is the third such geo-political shock on the globe in the recent past.
Prior to the onset of Covid-19 , protectionism was already on the rise, however the pandemic saw many countries, including Canada, implement protectionist policies over certain industries. In addition, there were significant disruptions to supply chains. Such disruption made supply chain management more and more critical, resulting in inventory management going from “just in time” to “just in case” and a move to looking at new ways to increase efficiencies and improve supply chains, including turning to sustainability measures to make supply chains more efficient. Similarly, the US-China Trade war saw a huge disruption to global trade, resulting in tariffs imposed affecting supply chain costs. In addition, increasing trends towards protectionism resulted in the tightening immigration policies in the US and the imposing of protectionist policies by other countries. The Russia-Ukraine war caused a second major disruption to supply chain in a short period, resulting in further economic uncertainties and hitting the global economy with rising inflation.
How do these events fit into the long-term outlook for global trade? Is globalisation retreating? Organisations must now look to ensuring that their supply chains can withstand future shocks resulting in a trade off between the efficiency of these supply chains and their resilience. Globalisation and global trade will not go away. However, how companies expand, structure, organise, and manage their supply chains is becoming more critical.
“Canada provides an opportunity for access to global markets given its openness to trade.”
Companies that take a nationalistic approach in the countries they expand to, moving closer to those markets and immersing themselves in those economies, will be the most successful as they will reduce the stress to their supply chains and manage global threats.
Canada as a Gateway to North America and Global Markets
On June 6, 2017, I sat down for a panel discussion to discuss the benefits and implications of the new updated North American Free Trade Act, or CUSMA or USMCA (depending upon if you’re in Canada or the US). This update of the Canada-United States-Mexico Agreement came into force on July 1, 2020, to reflect the changing trade between the new nations. At that time, the word that came to my mind was “Gateway.” Gateway because Canada’s openness to trade and access to markets makes it a gateway to not only North America, the largest free trade zone in the world, but to many significant global markets.
Canada provides an opportunity for access to global markets given its openness to trade and free trade agreements, immigration, access to highly skilled talent, ease of doing business, and stable banking and political system. Its transportation infrastructure includes 24 international airports, 17 seaports, and 117 border crossings to the US. Canada has been ranked highly for its quality of life, and three of its cities included are ranked in the world’s 10 most livable cities: Calgary (4th), Vancouver (5th), and Toronto (8th).1 In addition, its Universal Healthcare system makes health care available to all.
Canada has 15 free trade agreements, providing access to 51 countries and 1.5 billion consumers, including:
- Canada-United States-Mexico Agreement (CUSMA) in force since July 1, 2020, between Canada, U.S., and Mexico.
- Canada-European Union Comprehensive Economic and Trade Agreement (CETA) in force since September 21, 2017, which ensures 98% of pre-existing tariffs are removed if the rules of origin are met.
- Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which is in force since December 30, 2018, among Canada, Australia, Japan, Mexico, New Zealand, Singapore, and Vietnam (not yet in force for Brunei Darussalam, Chile, Malaysia, Peru).
- Canada-United Kingdom Trade Continuity Agreement (Canada-UK TCA) put in force on April 1, 2021, to provide post-Brexit continuity and stability of trade between Canada and the UK.2
By meeting the rules of origin as outlined in the free trade agreements, organisations can take advantage of the tariff-free benefits provided. In our practice we have seen organisations change their production strategy and move their manufacturing into the Canadian market in order take advantage of these agreements.
FDI investment into Canada 2021 was $59,676 million, up from $23,176 million in 20203 and surpassing pre-pandemic levels of $50,149 million in 2019.4 The benefits of access to global markets through these trade agreements has made Canada a popular destination for FDI.
Your global expansion plan: Start with Objectives
When considering global expansion, organisations must always start with objectives. Why do you want to expand and why Canada? Is it a first step to a global footprint? Access to other markets through the advantages of CETA, CUSMA, and other free trade agreements? Are you looking to obtain access to R&D incentives, or Canada’s skilled labour? Who are your investors? Will you be transferring employees to operate the new entity? These objectives will drive the structure of your new entity and how you do business in Canada.
Conclusions
Canada provides many opportunities for organisations to expand their global footprint and access global markets. With its free trade agreements giving tariff-free access when the rules of origin are followed, Canada is a gateway to global markets.
If you’re considering expanding into the Canadian market, please reach out to us for a consultation call.
1 These Are the World’s Top 10 Most Liveable Cities in 2022 (globalcitizen.org)
2 Trade and investment agreements (international.gc.ca)
3 Global foreign direct investment flows over the
4 World Investment Report | UNCTAD, 2022
