NAFTA

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NAFTA

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 demanding. It is an excellent base from which to develop and launch new products. From a Canadian base, companies can establish a solid market position throughout North America and then reach out to serve global markets. This agreement, which and contains many key provisions to facilitate the conduct of business among the three countries, has been a benefit to Canada-U.S.-Mexico trade. The continent-wide transportation system that binds this market together is efficient and cost-effective. Carriers of all modes are investing in more sophisticated technology and entering into strategic alliances to improve service. Border crossings are becoming easier.

Canada provides an ideal location for serving the entire North American market. Companies based in Canada have preferred access to a market of 380 million people, with a combined Gross Domestic Product (GDP) of more than $10 trillion (Canadian dollars). However, our participation in the agreement allows the U.S. unobstructed to our market. This poses a serious problem when looking at pure numbers. Canada is a country of approximately 28,000,000 people and the U.S. a country of about 280,000,000. The extra '0' means the U.S. in ten times greater then Canada in population size. The implications of this are enormous.

Because of the difference in size it is logical to assume that the average Canadian firm is about ten times smaller then its U.S. counterpart. As an example, Bell Canada (Canada's major telecommunications company) is worth an estimated 9 billion dollars. AT&T (U.S. major telecommunications company) is worth approximately 108 billion. These numbers should speak for them selves. Although it hasn't happened yet, AT&T could attempt a competition war on Bell Canada

There are many ways to view North American markets. Initially, they can be viewed as three national markets, with certain differentiating characteristics in terms of tastes, preferences, disposable incomes and spending patterns. Because national accounts are the source of much of the general information on domestic markets, this is often how North American markets are portrayed.

In fact, though, North America is increasingly a collection of regional markets that cut across national boundaries. Companies based in east-central Canada view the north-eastern U.S. states as their proximate market area, and companies in Vancouver, for example, look southward to the U.S. states of Washington, Oregon and California for market opportunities. Although east-west transportation routes are well developed and national characteristics of markets are still important, there is no escaping the geographic pull of the north-south axis.

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 cities.

Thus, although some general characteristics of the three national markets are highlighted here, potential investors should also be attuned to the many cross-border regional markets that constitute the North American market, and to the...
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