How to bring NAFTA into North America’s new economic era

The North American Free Trade Agreement (NAFTA) is one of the most innovative and ambitious international trade initiatives of our time. By grouping the Canadian, American and Mexican markets, NAFTA became one of the largest free trade zones in the world with a concentration of nearly 500 million consumers. [1].

NAFTA has had an extremely positive impact on our economy. Since its adoption in 1994, trade between Quebec and the United States has more than doubled. Trade between Quebec and Mexico has followed suit and was six times higher in 2015 than in 1993. [2]. These mutually profitable ties go beyond business: they have brought jobs, increased standards of living, and boosted prosperity for entrepreneurs across North America.

In view of NAFTA’s upcoming renegotiations, the Chamber submitted its recommendations to the Government of Canada as part of its public consultations on this key issue. Our basic message for the negotiations is clear: we are asking the government to reinforce and modernize the agreement. Above all, NAFTA must be reformed to put new energy into this beneficial economic partnership.

Here are three key points from the Chamber’s submission:

1. Maintain open and unrestricted access to the American market

The United States is Quebec's top international customer, and nearly three quarters of our exports go there. Reducing NAFTA's tariff barriers would give our exporters privileged access to the world’s largest economy while letting our import businesses access goods and services at a lower cost. As many strategic sectors of the city depend on this preferential access, it is imperative that we maintain an easy flow of goods and services throughout the NAFTA zone.

2. Adapt NAFTA to the digital economy and e-commerce

When the agreement was adopted, the Internet was in its infancy and e-commerce was the stuff of science fiction. The situation is very different now, but the agreement has not been adapted to this new economic environment in which online business and e-commerce are growing at an incredible pace. We are therefore stressing the need to include new measures in NAFTA to reduce restrictions on e-commerce. Secondly, the Government of Canada must adopt an effective solution to collect taxes on products and services bought and sold online. The chosen solution must solve this issue in order to preserve our retail business sector.

3. Facilitate talent mobility within North America

Innovative industries concentrated in the city need access to specialized talent to stay at the cutting edge. Our companies have to deal with a smaller labour pool and a highly competitive business environment. This is why it is important for NAFTA to make it easier for business people and intra-company transferees to move within the North American economic territory. Major obstacles to the mobility of temporary workers have persisted in the NAFTA zone. These barriers undermine trade, particularly in the services sector. We must therefore reform the rules governing the entry of temporary business visitors and expand the list of admissible professions under the agreement.

Adapting NAFTA to the 21st century economy is a priority for the Chamber. Technological innovations have had a profound impact on the business environment and given rise to new cutting-edge sectors. The agreement needs to be modernized to create a stable and predictable business environment—an essential condition to help our companies develop strategies, invest and grow. Read our submission (in French only) and learn more about the Canadian interests we need to focus on for NAFTA’S renegotiations, which will start on August 16 in Washington.

Read our submission

Summary of recommendations

Recommendation 1: Review the rules of origin and adapt the regional content requirements for each activity sector.

Recommendation 2: Modernize procedures for the rules of origin to reduce companies’ administrative burden.

Recommendation 3: As part of NAFTA, ensure reciprocity in public markets by integrating a permanent exemption to Buy American policies for Canada.

Recommendation 4 (dependent on Recommendation 3): Expand the scope of public markets by including provinces and states, cities and Crown corporations in NAFTA.

Recommendation 5: Increase the protection of intellectual property rights set out in NAFTA.

Recommendation 6: Continue protecting direct foreign investment and reinforcing mechanisms to settle disputes.

Recommendation 7: Maintain the NAFTA cultural exemption to protect the production and broadcasting of local content.

Recommendation 8: Reduce barriers to the movement of electronic goods and services.

Recommendation 9: Adopt an effective way to collect sales tax on electronic transactions conducted in Canada.

Recommendation 10: Facilitate the mobility of business people and temporary workers within the North American territory by expanding the list of eligible professions under NAFTA.

Recommendation 11: Incorporate the softwood lumber sector into NAFTA to ensure that our exporters have stable access to the American market.

[1] GOVERNMENT OF CANADA (2017), North American Free Trade Agreement (NAFTA) – Fast Facts, [Online:].

[2] Ibid.

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