Overview of the NAFTA

NAFTA: A Foundation for Canada’s Future Prosperity

The North American Free Trade Agreement (NAFTA) has generated economic growth and rising standards of living for the people of all three member countries since 1994. By strengthening the rules and procedures governing trade and investment throughout the continent, NAFTA has proved to be a solid foundation for building Canada’s future prosperity.

Canada's merchandise trade with its NAFTA partners has increased 122% since 1993, reaching $598.7 billion in 2005. Canadian merchandise exports to the United States grew at a compounded annual rate of 6.0% between 1994 and 2005. With regard to Mexico, bilateral trade in 2005 reached $18 billion, a 296% increase from pre-NAFTA levels (1993). Our NAFTA partners account for 84.7% of Canada's total merchandise exports.

Trade in services has also increased under NAFTA. Canada's trade in services with the United States and Mexico grew at an average annual compounded rate of 5.4% to reach $82.7 billion in 2004, up from $46.4 billion in 1994. Our trade in services with the United States reached $81.2 billion in 2005, up from $42.3 billion in 1993. Two-way trade in services between Canada and Mexico has grown at an annual compounded rate of 9.0%, to reach over $1.6 billion in 2004. Approximately 57% of Canada's services exports go to our NAFTA partners.

NAFTA has also had a positive impact on investment. Since 1994, the annual stock of foreign direct investment in Canada has averaged $279.1 billion. In 2005, total FDI in Canada reached $415.6 billion, of which more than 64% came from our NAFTA partners. FDI in Canada from the United States increased to $266.5 billion in 2005. Canadian direct investment in its NAFTA partners also grew, reaching $213.7 billion in the United States and $3.14 billion in Mexico.

In turn, the enhanced economic activity and production in the region have contributed to the creation of more and better paying jobs for Canadians. Close to 3.1 million net new jobs have been created in Canada since 1994, representing an increase of 126.6% over pre-NAFTA employment levels.

For Canadians, it is important that trade and investment liberalization proceed hand in hand with efforts to protect the environment and improve working conditions. Under NAFTA, our three countries have been able to introduce the successful approach of parallel environmental and labour cooperation agreements.

The economic collaboration promoted by NAFTA has spurred better environmental performance across the region. Through the North American Agreement on Environmental Cooperation, the three partners agreed to promote the effective enforcement of environmental laws. Through the North American Agreement on Labour Cooperation, the three partners agreed to work together to protect, enhance and enforce basic workers’ rights.

Canada and its NAFTA partners will continue to work together to reduce the costs of trading within the region and to improve the competitiveness of North America.