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Canadian exports remain strong under CUSMA

On July 1, 2020, the Canada–United States–Mexico Agreement (CUSMA) entered into force, replacing the North American Free Trade Agreement (NAFTA) that has supported a stable and competitive North American market since 1994. The CUSMA preserves key elements of NAFTA, incorporates new provisions to address modern trade issues, facilitates trade and improves stability for businesses.

The implementation of CUSMA coincided with the COVID‑19 pandemic that swept across the world in 2020. Canada’s trilateral trade with the United States (US) and Mexico totalled $683.7 billion in 2020, down by 14.1% from its level in 2019, when it reached $796.1 billion. Canada’s exports to the U.S. contracted by 14.7% in 2020, declining from $423.9 billion in 2019 to $361.5 billion in 2020. Similarly, Canada’s exports to Mexico amounted to $6.5 billion in 2020, which was 16.8% lower than its level in 2019, when it reached $7.8 billion.

Despite the pandemic, Canada managed to regain its footing in exports to the U.S. and Mexico in the second half of 2020. Canada’s exports to the U.S. grew 10.9% in the second half compared to the first half of 2020. In addition, Canada’s exports to Mexico also increased 29.8% over the same period. These growths in exports are significant as in total Canada’s exports to the U.S. and Mexico in the second half of 2020 was 11.7% higher than its level in the second half of 2019, while Canada’s exports to the rest of the world (excluding CUSMA and China) fell by nearly 50% over the same period.

Utilization rates represent the proportion of trade eligible for free trade agreement preferences that actually claimed such preferences. They remained steady since the implementation of the CUSMA as recent data shows that about 68.6% in value of Canadian goods exports to the U.S. eligible for CUSMA preferences actually claimed the preferences in the second half of 2020, compared to 66.6% in the first half of 2020. Over the same period, 79.4% in value of American goods exports to Canada claimed the CUSMA preferences in 2020, compared to 84.7% in the first half of 2020. As for Mexico, 75.4% of Mexican goods exports to Canada claimed the CUSMA preferences, an increase from 70.2% in the first half of 2020.

Figure 1: Change in Canada's exports to CUSMA and the rest of the world (ROW, excluding CUSMA and China)
between the second half of 2019 and the second half of 2020
Canada’s Exports
To CUSMA (United States & Mexico):11.7%
To ROW (excluding CUSMA & China):-49.8%

Data: Instituto Nacional de Estadística y Geografía, U.S. Department of Commerce
Source: Office of the Chief Economist, Global Affairs Canada

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