With or Without USMCA, Canada Can Open Doors for US Companies
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There is great debate in Washington about whether Congress will ratify the United States-Mexico-Canada Agreement (USMCA) before year’s end. I have been in Washington several times over the last few weeks talking to congressional leaders, administration officials, pundits and others. The disparity of the conversations reminded me of Dickens’ famous line: “It was the spring of hope, it was the winter of despair.”
Some talked of glimmers of optimism, while others said the launch of the impeachment inquiry doomed ratification. Still, others said impeachment increased the chances of success since the Democrats needed to be able to show that they could investigate and legislate at the same time.
But whether the USMCA is ratified in 2019 or 2021, the agreement—or something like it—will be ratified by all three countries because the North American trading relationship is just too important.
According to the U.S. Chamber of Commerce (where I serve on the board), almost $4 billion a day in trade crosses our three borders. Trade among the NAFTA countries supports more than 12 million U.S. jobs, as well as millions more in Canada and Mexico.1 The U.S. exports more manufactured goods to Canada and Mexico than it does to its next 11 largest trading partners combined,2 while more than three-quarters of Canada and Mexico’s exports come to the U.S.3, 4
We also make things together. Manufactured goods often cross North American borders several times during production, making it difficult to call any single country the place of origin. Without robust North American trade all three economies would suffer—and suffer hard.
A Prime Opportunity
The question is: How should businesses in the U.S. take advantage of these open trading relationships? Of the more than 30 million businesses in the U.S., only about 1% of them export anything, and most of the businesses that do export send goods to only one country.
Exports account for only 12% of U.S. GDP.5 That contrasts with almost 50% in Germany, about 40% in Mexico and 30% in Canada.6 Ninety-five percent of the world’s consumers, representing about three-quarters of global purchasing power, live outside the U.S.7
So if you’re an American business that’s looking to grow—and I suspect that includes most everyone—you should be thinking about separating yourself from the 99% who are exclusively domestic and joining the 1% that export. And if you are considering exporting, Canada is—without question—the easiest place to start.
Whether under NAFTA or the USMCA, the vast majority of American goods and services cross the U.S.-Canadian border tariff-free. Canada is a country with a strong rule of law tradition. Corruption and crime are extremely low by all metrics. And, of course, proximity—the U.S.-Canada border is the longest international border in the world.
Strategic Planning and Resources
While Canada is the logical choice to begin international expansion efforts, it’s essential to build an exporting strategy, which will help you navigate the key considerations around regulations, market demand, market receptivity and cultural differences (both nationally and on the provincial level).
That’s because, similarities aside, working with Canada means working with a foreign country with its own export procedures and regulations, including:
- Canada Customs documentation, bilingual labeling and packaging requirements.
- Canadian federal and provincial sales tax accounting.
- Certification standards.
- Contract bidding requirements.
- International Traffic in Arms Regulations (ITAR).
There are also different provincial regulations, making it necessary to conduct due diligence on market potential and sales channels in a particular region. Educating yourself on matters unique to your industry is also crucial. Fortunately, there are plenty of resources available to help you get started.
- Export.gov, managed by the Commerce Department’s International Trade Administration, provides tools and intelligence to help businesses research international markets and identify qualified international buyers and distributors.
- The Commerce Department’s Advocacy Center can help you with early stages of your project.
- Your local U.S. Commercial Service office can connect you to offices in Canada to help you establish your presence in Canada and assist you through difficulties you may face.
Ultimately, it’s crucial to work with partners who have experience working with Canada, including your tax adviser, banker and legal counsel. They’ll help you craft a sound strategy, which can put you in a better position to successfully export your goods to Canada.
As we have been told since childhood, every journey begins with a first step. And if you are a U.S. business that wants to grow, you should consider taking that first step across the 49th parallel.
David Jacobson served as the 22nd United States Ambassador to Canada from 2009 to 2013
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David Jacobson
Vice Chair, BMO Financial Group
David Jacobson became Vice Chair of BMO Financial Group in October 2013. In this role he is responsible for driving business across all lines, including Capital Mar…(..)
View Full Profile >There is great debate in Washington about whether Congress will ratify the United States-Mexico-Canada Agreement (USMCA) before year’s end. I have been in Washington several times over the last few weeks talking to congressional leaders, administration officials, pundits and others. The disparity of the conversations reminded me of Dickens’ famous line: “It was the spring of hope, it was the winter of despair.”
Some talked of glimmers of optimism, while others said the launch of the impeachment inquiry doomed ratification. Still, others said impeachment increased the chances of success since the Democrats needed to be able to show that they could investigate and legislate at the same time.
But whether the USMCA is ratified in 2019 or 2021, the agreement—or something like it—will be ratified by all three countries because the North American trading relationship is just too important.
According to the U.S. Chamber of Commerce (where I serve on the board), almost $4 billion a day in trade crosses our three borders. Trade among the NAFTA countries supports more than 12 million U.S. jobs, as well as millions more in Canada and Mexico.1 The U.S. exports more manufactured goods to Canada and Mexico than it does to its next 11 largest trading partners combined,2 while more than three-quarters of Canada and Mexico’s exports come to the U.S.3, 4
We also make things together. Manufactured goods often cross North American borders several times during production, making it difficult to call any single country the place of origin. Without robust North American trade all three economies would suffer—and suffer hard.
A Prime Opportunity
The question is: How should businesses in the U.S. take advantage of these open trading relationships? Of the more than 30 million businesses in the U.S., only about 1% of them export anything, and most of the businesses that do export send goods to only one country.
Exports account for only 12% of U.S. GDP.5 That contrasts with almost 50% in Germany, about 40% in Mexico and 30% in Canada.6 Ninety-five percent of the world’s consumers, representing about three-quarters of global purchasing power, live outside the U.S.7
So if you’re an American business that’s looking to grow—and I suspect that includes most everyone—you should be thinking about separating yourself from the 99% who are exclusively domestic and joining the 1% that export. And if you are considering exporting, Canada is—without question—the easiest place to start.
Whether under NAFTA or the USMCA, the vast majority of American goods and services cross the U.S.-Canadian border tariff-free. Canada is a country with a strong rule of law tradition. Corruption and crime are extremely low by all metrics. And, of course, proximity—the U.S.-Canada border is the longest international border in the world.
Strategic Planning and Resources
While Canada is the logical choice to begin international expansion efforts, it’s essential to build an exporting strategy, which will help you navigate the key considerations around regulations, market demand, market receptivity and cultural differences (both nationally and on the provincial level).
That’s because, similarities aside, working with Canada means working with a foreign country with its own export procedures and regulations, including:
- Canada Customs documentation, bilingual labeling and packaging requirements.
- Canadian federal and provincial sales tax accounting.
- Certification standards.
- Contract bidding requirements.
- International Traffic in Arms Regulations (ITAR).
There are also different provincial regulations, making it necessary to conduct due diligence on market potential and sales channels in a particular region. Educating yourself on matters unique to your industry is also crucial. Fortunately, there are plenty of resources available to help you get started.
- Export.gov, managed by the Commerce Department’s International Trade Administration, provides tools and intelligence to help businesses research international markets and identify qualified international buyers and distributors.
- The Commerce Department’s Advocacy Center can help you with early stages of your project.
- Your local U.S. Commercial Service office can connect you to offices in Canada to help you establish your presence in Canada and assist you through difficulties you may face.
Ultimately, it’s crucial to work with partners who have experience working with Canada, including your tax adviser, banker and legal counsel. They’ll help you craft a sound strategy, which can put you in a better position to successfully export your goods to Canada.
As we have been told since childhood, every journey begins with a first step. And if you are a U.S. business that wants to grow, you should consider taking that first step across the 49th parallel.
David Jacobson served as the 22nd United States Ambassador to Canada from 2009 to 2013
This is part 3
of a
5-part series on
Whether the USMCA is ratified in 2019 or 2021, the agreement should be ratified by all three countries because the North American trading relationship is too important.
PART 1
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PART 2
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PART 4
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For U.S.-based manufacturing companies looking to expand into international markets, Canada represents a logical entry point. From the nature of its …
PART 5
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Our cross border campaign, Expertise in Action, offers tips and insights for U.S.-based companies that are looking to expand their businesses no…
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