Canada & Trade: A Brief Overview

Canada’s trade is dominated by its relationship with the US, which is now governed by NAFTA, and prior to that under a bilateral trade agreement. Nearly three quarters of Canadian exports and over half of imports into Canada are accounted for by the US. Its export base is also relatively narrow for an industrialised economy. Both these factors make diversification an important objective of trade, and its recent conclusion of a free trade agreement with the EU (CETA) should be seen in this light.

Canada’s average applied MFN tariff rate is around 6%. Its highest tariffs are concentrated in agriculture: the average tariff on Dairy is 238.7%; while cereals attract an average duty of 28.2%, and meat products around 26%.  On the manufacturing side, textiles and clothing (5%), footwear (9%) and transport equipment (5.4%) are sectors that attract duty that substantially exceed average duties for non-agricultural products (2.4%).

Canadian exports to the UK are dominated by minerals and chemical products, with transport and machinery playing a lesser but substantial role. UK exports to Canada are relatively more diversified. Manufactures, notably transport and machinery, play a substantial role in the UK’s exports to Canada. Some of the two-way trade in manufactures reflects the growth of cross-border supply chains. This is notably the case in high value-added activities such as aircrafts, and explains the UK’s exposure, for example, to trade frictions between the US and Canada in this area. Any future trade negotiations between the UK and Canada could build on CETA, including in services sectors such as finance and professional services.