The North America market is one of the richest in the world. Measured in terms of GDP, it is the equivalent of Western Europe. But with a somewhat smaller population, GDP per capita in North America, Canada, Mexico and the U.S., is around 12 percent higher than in Western Europe. The North American Free Trade Agreement (NAFTA), which came into effect January 1, 1994, sets out the schedule for tariff elimination for members.. As a small country, Canada has always been careful in it’s dealings it’s large neighbor, the U.S., however,
compliance to this agreement threatens our very existence. Canada was unfairly taken advantage of in the singing of this agreement, our identity of a sovereign nation is at risk.
The North American market is also one of the most sophisticated and
It is an excellent base from which to develop and launch new products.
Canadian base, companies can establish a solid market position
America and then reach out to serve global markets. This agreement,
contains many key provisions to facilitate the conduct of business among
three countries, has been a benefit to Canada-U.S.-Mexico trade. The
wide transportation system that binds this market together is efficient
cost-effective. Carriers of all modes are investing in more
sophisticated technology and entering into strategic alliances to improve
crossings are becoming easier.
Canada provides an ideal location for serving the entire North American
Companies based in Canada have preferred access to a market of 380
people, with a combined Gross Domestic Product (GDP) of more than $10
(Canadian dollars). However, our participation in the agreement allows
unobstructed to our market. This poses a serious problem when looking
numbers. Canada is a country of approximately 28,000,000 people and the
country of about 280,000,000. The extra “0” means the U.S. in ten times
then Canada in population size. The implications of this are enormous.
Because of the difference in size it is logical to assume that the
Canadian firm is about ten times smaller then its U.S. counterpart. As
example, Bell Canada (Canada’s major telecommunications company) is
estimated 9 billion dollars. AT&T (U.S. major telecommunications
worth approximately 108 billion. These numbers should speak for them
Although it hasn’t happened yet, AT&T could attempt a competition war on
There are many ways to view North American markets. Initially, they can
viewed as three national markets, with certain differentiating
in terms of tastes, preferences, disposable incomes and spending
Because national accounts are the source of much of the general
domestic markets, this is often how North American markets are
In fact, though, North America is increasingly a collection of regional
that cut across national boundaries. Companies based in east-central
the north-eastern U.S. states as their proximate market area, and
Vancouver, for example, look southward to the U.S. states of Washington,
and California for market opportunities. Although east-west
routes are well developed and national characteristics of markets are
important, there is no escaping the geographic pull of the north-south
Increasingly, North America will be viewed as a single market. The
market opportunities for products and services produced by a
Canadian-based company are
as likely to be in Chicago, Houston, and Mexico City, as in Canadian
Thus, although some general characteristics of the three national
highlighted here, potential investors should also be attuned to the many
border regional markets that constitute the North American market, and
fact that North America is in many ways a single market.
Although many investors see Canada as an excellent base from which to
North American and other global markets, the rich domestic market holds
growth opportunities as well.
Canada’s population, which is increasing at a little over 1 percent
fast approaching 30 million. The two central provinces of Ontario and
account for over 60 percent of the total, but the western provinces of
Columbia and Alberta, with 22 percent, have the highest population
The majority of Canadians live in urban centres located within 100
the U.S. border. This creates a string of regional market clusters along
Canada-U.S. border that can be served from a Canadian location. Even on
own, though, several Canadian cities located close to the Canada-U.S.
large markets. The Toronto metropolitan area has a population of 4
Montreal has more than 3 million, and Vancouver has just under 2
The average family income in Canada is about $54,000. With the sharp
the proportion of working-age women who have entered the labour market
mid-1970s, the typical family tends to have two income-earners. In the
half of the 1990s, growth in personal incomes has been 2-3 percent
rate which has been affected by the recession and smaller increases in
There are regional income differentials, with Ontario,British Columbia,
and Quebec having the highest levels of per capita income. But income
redistribution programs limit the variations between the richer and
of the country.
Canadians spend some $450 billion on consumer goods and services each
amount of discretionary income that is available for purchases of “non-
essential” goods such as electronic products, and services such as
sports and recreation has been increasing. The market for consumer
related to information technologies has been especially buoyant. Between
and 1994, computers and audio/visual electronics enjoyed the fastest
sales. In the service sector, an ageing and increasingly affluent
increasing demand for home maintenance, health services, financial
travel and leisure activities.
Among the trends shaping the Canadian consumer marketplace of the future
increasing ethnic diversity and multiculturalism; continued expansion of
service sector; greater public awareness of environmental issues and
increasing consumer demands for convenience; and a trend toward
segmenting and customising consumer markets.
The United States
There is no other national market for consumer and industrial products
services that is near the size of the U.S. In terms of GDP, Japan comes
with a GDP that is two thirds that of the U.S., which in 1994 stood at
billion. The demand for imports in the U.S., at US $669 billion in 1994,
about double that of Germany, the second largest market for imports.
the U.S. market is a magnet for companies around the world.
What is less appreciated about the U.S. market is that it is all easily
accessible from Canada. There are more than 110 million consumers within
drive of southern Ontario. Montreal, Halifax and Moncton are within a
drive of New York, Boston and Philadelphia. Winnipeg is just 17 hours by
from Chicago and eight hours from Minneapolis. From Vancouver, markets
the Pacific coast of the U.S. can be easily served. It takes about 48
ship by truck from Vancouver to Los Angeles. With increasingly efficient
transportation routes, even the southern U.S. states are considered to
to major Canadian cities.
In 1994, the population of the U.S. reached 261.5 million. This is
across four large regional markets: the Northeast has 19.9 percent of
the Midwest 23.6 percent, the West 21.7 percent, and the largest, the
The GDP of each of these regions is larger than individual countries of
Europe, with the single exception of Germany. As a share of total U.S.
Northeast, Midwest and West each has roughly 23 percent. The South’s
around 31 percent.
In 1994, per capita GDP in the U.S. was US $25,820, second to Japan
among the G7
countries. Median household income was about US $32,200, with
households having a significantly higher US $45,041. Generally speaking,
consumer markets in the U.S. are similar to those in Canada, and
spending patterns do not vary considerably. For companies offering
consumer products and
services, these similarities provide an opportunity to test products in
Canadian market before making an entry into the U.S.
If a foreign company is considering an investment in North America to,
other things, tap the rich U.S. market, a Canadian location is eminently
attractive. When cost-effective access to the U.S. market is combined
range of other business advantages — generally lower corporate tax
most advantageous investment tax credits for R&D activity, and a quality
that is recognised as one of the best in the world — the foreign
the best of all worlds.
In contrast to the advanced economies of Canada and the U.S., Mexico is
emerging market. Mexico’s GDP per capita is 15 percent that of the U.S.
percent of Canada’s, and in terms of income levels and income
Mexico resembles a developing country. On the other hand, with a
about 92 million, most of which is young, a growing middle class of
Mexicans, and programs of political and economic reform, there is a
Mexico that is inviting.
With dynamism comes volatility, and Mexico is no stranger to this. The
the peso that began at the end of 1994 and continued through the first
of 1995 created a financial crisis that has led to a significant decline
economic activity and real incomes. But the economy is recovering and
confidence is being restored.
In the coming years, there will probably be more vacillations as the
goes through periods of rapid growth and then slows to keep inflation
control. Throughout these cycles, Mexico will undoubtedly be relying
international trade and investment as engines of growth. In 1994, total
was the equivalent of almost 40 percent of the country’s GDP. Mexico
a significant import market in the years ahead. A potential foreign
North America should therefore consider the advantages of locating in
and supplying the Mexican market from a Canadian location.
In approaching the Mexican market, companies should be aware of its
There are large disparities in incomes, regional markets vary
there is demand for basic infrastructural needs as well as more
consumer and industrial products.
The largest regional markets are those of metropolitan Mexico City, with
population of almost 20 million; Guadalajara, the capital of the
state of Jalisco; and Monterrey, the capital of the north-eastern state
Leon. Mexico City is the country’s economic, financial and industrial
With upper and middle-income groups numbering in the vicinity of five to
million, it offers the largest consumer market in the country.
a population of around 3.5 million, is an important commercial and
centre. Monterrey, of roughly the same size as Guadalajara, is one of
the country’s most important industrial centres, with 53 percent of
Mexico’s top 500
Despite Mexico’s current economic difficulties, there are many business
opportunities in the Mexican market. Perhaps most enticing, though, is
Since the end of World War II, Canada-U.S. trade grew steadily into the
bilateral trading relationship in the world. One of the more significant
developments in the history of the two countries’ trading relationship
1965 with the signing of the Canada-U.S. Auto Pact, which governed
trade in automobiles and parts. Largely as the result of this agreement,
in this sector has remained a central part of the two countries’ overall
The Free Trade Agreement
The Canada-U.S. Free Trade Agreement (FTA) took economic co-operation
the two countries to a new level. Effective January 1, 1989, under the
the FTA, tariffs on goods manufactured in Canada and the U.S. would be
eliminated over a ten-year period, provided the goods met
requirements. Many of the tariffs would be eliminated before the end of
year time frame, and the initial phase-out schedule for products could
be accelerated if the two sides agreed.
The FTA also provided Canadian products with “national treatment” on
to U.S. government departments and gave equal access to potential
tendering and bidding information. A number of other sectoral and
issues were included in the Agreement to facilitate trade, identify
and clarify other aspects of the trading relationship.
In addition to the trade-creating provisions of the FTA, Canada and the
have been working on the harmonisation of standards, testing and
Prior to signing the FTA, most of Canada-U.S. trade was duty-free under
rules. Nevertheless, the FTA had a dramatic effect on the volume of
trade. Between 1988 and 1993, trade between the two countries increased
percent, to $257 billion, with a strong 46 percent growth in Canadian
the U.S. These gains were registered despite an economic recession in
of this period. Specific sectors, such as office, telecommunications and
precision equipment; chemical products; pharmaceuticals; and textiles
particularly strong growth in trade.
The North American Free Trade Agreement (NAFTA)
Effective January 1, 1994, the NAFTA improved the FTA and added Mexico
free trade zone. By this time, Canada-U.S. trade was overwhelmingly
Under NAFTA, a tariff-reduction schedule was worked out for trade with
whereby tariffs would be reduced over a ten-year period from the
date. Most of Mexico’s non-tariff barriers, such as import licences,
be eliminated during this period.
The key provisions of the NAFTA are:
Elimination of Tariffs: Tariffs on Canadian exports to Mexico will be
over 10 years. Mexico has provided immediate duty-free access for many
of Canada’s key export interests.
National Treatment: Canada, the U.S. and Mexico treat each others’
goods, services, and investors as they treat their own. International
investments in Canada are covered by the NAFTA if they use Canada as a
base” to make investments in the U.S. or Mexico.