Canada has been, is, and will be, a trading nation. Rules are critical. International trade rules are codified through treaties. The efficacy of a treaty relies on the good faith of the parties to abide by the rules. This post focuses on the trade treaties that Canada is using to set the rules.

Throughout its history Canada has signed bilateral trade treaties with the United States, benefited from the Imperial Preference trade policies of the British Empire that transformed into the Commonwealth. After the Second World War Canada took a leadership role negotiating the world multilateral General Agreement on Tariffs and Trade (GATT) which eventually was restructured into the World Trade Organization.

As of this writing, Canada has signed 59 foreign investment promotion and protection agreements (FIPAs) of which 30 agreements remain in force. FIPAs ensure foreign investors are treated just like domestic and other third-party foreign investors. FIPAs prevent governments from seizing investments without providing prompt and adequate compensation. They ensure investors are free to bring their capital and returns home if they wish to do so.

Canada has signed 25 bilateral free trade agreements of which 12 remain in force. Canada’s FTAs cover substantially all trade between parties to the agreement. Many of Canada’s FTAs also go beyond “traditional” trade issues to cover areas such as services, intellectual property and investment. Some countries use the term economic partnership agreement (EPA) instead of FTA. The two terms, EPA and FTA, mean the same thing.

Canada has signed 10 multilateral FTAs of which 4 remain inforce today. Multilateral agreements include the recently re-negotiated (and soon to be renegotiated) Canada-United States-Mexico Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Canada – European Free Trade Association (EFTA) including Iceland, Liechtenstein, Norway and Switzerland, and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). This last agreement will come into full effect when all EU Member States have completed the ratification process. Until then provisional application of CETA will continue and remain accessible to Canadian and EU business alike.

Different mechanisms to establish different rules for different countries given specific circumstances. For example global merchandise trade can be broken down by stage of fabrication (i) raw materials (e.g. wheat), (ii) intermediate goods (e.g. steel) and (iii) final goods (e.g. cars). The majority of international trade is between companies one company produces a good that is an input for the buyer, and the buyer uses the product from the first company to make the final product that is sold to the final consumer. About one half of international trade is for intermediate goods and almost a third is the final product. The balance is raw materials such as oil and natural gas.

The financial objective is to produce the product at its lowest cost. The logistics have producing each individual component of the final product produced its lowest cost. This involves a complex global search for the companies in the supply chain with access to the communication and transportation infrastructure to support delivery of the product to the location where the final product will be assembled. This is the challenge of the market. And it is a challenge that is met by the modern socio-economy to a level unimaginable a century ago.

Noticeably missing from Canada’s trade framework are agreements with African countries. Africa is expected by some to be the next market large enough (population growth and youth) to stimulate a global economic boom. An in-depth discussion of the impact of African countries on the global economy is beyond the scope of this post other then to note that Canada may not be investing in this future outcome.