Exporting to the United States – A Team Canada Inc Publication

1.6 Barriers to the U.S. market

Exporters should be aware of the impediments to trade presented by non-tariff barriers, security issues and "buy American" policies.

Generally, barriers to trade are described as tariff or non-tariff barriers. A tariff is a tax applied to merchandise imports and, less frequently, on exports. The tax may be levied either on an ad valorem basis (a fixed percentage of the value of an imported product) or on a specific basis (a fixed levy per unit of imported product). Following a final tariff reduction between Canada and Mexico, which took effect on January 1, 2003, virtually all trade in the NAFTA region has flowed tariff-free.

Non-tariff barriers (NTBs) are government measures or policies, other than tariffs, that restrict or distort international trade. As tariffs are lowered or eliminated, for example by a free trade agreement, it becomes more important to address non-tariff measures that can be used to frustrate trade. Examples of NTBs include import quotas, discriminatory government procurement practices and discriminatory measures to protect intellectual property. A further class of non-tariff barrier is that of technical barriers to trade (TBTs), such as government requirements for unnecessary duplicate testing and certification of an imported product.

It's important to find out as early as possible if there are any barriers that will affect your exports. If a barrier does exist, you should determine how it may affect your access to your U.S. market, your pricing of your product or service, and your costs of doing business in the United States.

Canada is committed to identifying unfair barriers to Canadian exports and to working with our trading partners to eliminate those barriers. Almost all our exports and imports cross the Canada-US border without incident, a remarkable achievement for a trading relationship worth over a billion dollars a day. Our two countries, however, do maintain key differences in economic policy, and respond in different ways to world economic conditions and the global free trade agenda. In cases where we have not been able to resolve our differences through consultation, we have relied on WTO and NAFTA dispute settlement procedures. Canada believes very strongly in a rules-based trading system with clear procedures for solving disputes.

A second major barrier to the smooth flow of U.S.-Canada trade is that of security. The 2001 terrorist attacks in the United States caused greatly increased concern about U.S. domestic security, and this has significantly affected how exports from Canada and around the world enter the U.S. Security measures continue to evolve and may complicate your export business, for example by slowing traffic across the border or by requiring more preparation and documentation. We'll examine U.S. security requirements and how to comply with them starting in Section 9.1, "U.S. Border Security".

"Buy American" policies can also present barriers to Canadian exporters. As an example, one of the largest markets in the U.S. is the public-sector procurement market. This includes the federal-level General Services Administration (GSA) and Department of Defence (DoD), as well as state procurement agencies. These organizations are mandated to "buy American" whenever possible.

To help Canadian firms compete with American companies in this market, the Canadian Commercial Corporation offers two business solutions. CCC's DoD Prime Contractor Solution gives exporters privileged access to the United States Department of Defense. The Canada-U.S. Defense Production Sharing Arrangement allows Canadian exporters to compete on an equal footing with U.S. companies for sales in defence markets. CCC is uniquely positioned to help you access opportunities in this complex arena, giving you unequalled access to one of the largest procurement markets in the world.