Canada and Mexico share a vibrant, multi-faceted relationship that is characterized by deep people-to-people ties, rich cultural connections and growing trade and investment.

Canada: Trade Overview
Canada’s exports of goods and services were $729 billion in 2019, up 2.2% compared to 2018. Goods exports were up 1.7% while service exports grew by 4.4%.
Canadian imports of goods and services increased to $768 billion in 2019, up 1.5% from 2018.
In 2019, the top 3 Canadian goods exports in terms of total value were energy products, motor vehicles and parts, and consumer goods. These 3 sectors together account for almost 47% of Canada’s goods exports.
The ranking of Canada’s top goods imports remained constant over the decade, with consumer goods ranking number one, followed by motor vehicles and parts, and electronic and electrical equipment and parts. These 3 goods imports together made up a little more than 50% of Canada’s goods imports in 2019.
In 2019, Canada’s top trading partners for both goods exports and imports were the United States, the European Union and China.
As with its goods trade, Canada’s services trade is concentrated on the U.S. market, which accounted for just over 50% of Canada’s overall services trade in 2019.
In 2019, Canada’s foreign direct investment (FDI) and Canadian direct investment abroad (CDIA) flows increased from the previous year. In 2019, FDI flows to Canada increased by $11 billion or 19% ($67 billion), and CDIA flows rose by $37 billion or 57% ($102 billion).
Canada is the only G7 country with a trade agreement with all the other G7 countries. Furthermore, Canada has 14 active free trade agreements covering 51 countries, connecting businesses to 1.5 billion consumers and two thirds of the world’s GDP.

Trade and Economic Statistics
After an expected contraction in 2020, it is anticipated to rebound and grow at 5.5% in 2021, a higher rate than the earlier forecast of 4.2% in spring 2020.
Contributing to Canada’s resilient economy is its strong fiscal position going into the COVID-19 pandemic; it enjoyed the lowest net debt-to-GDP ratio in the G7 for the last 15 years. Canada’s strong fiscal position allowed it to respond swiftly and substantially to support those affected by the pandemic, the highest in the G7. After losing 3 million jobs in March and April 2020 due to COVID-19, Canada regained almost two-thirds of these jobs by the end of August 2020.
Ottawa, Toronto, Montreal, Calgary and Vancouver have top tech talent and offer the lowest cost among 50 North American cities. For 2020-2024, Canada is ranked as the best country in the for doing business and the easiest place to start a business in the G20.
Canada had the second largest Foreign Direct Investment stock-to-Gross Domestic Product (GDP) ratio among G20 countries over the period of 2015-2019.
In proportion of GDP, Canada’s support during COVID-19 pandemic is the highest in the G7.
At 26.5% in 2020, Canada's combined federal-provincial statutory corporate income tax rate is one of the lowest in the G7. Since 2000, Canada has reduced taxation on new business investment from 44.1 % in 2000 to now 13.7%. It is the lowest tax treatment in the G7 for new business investment, and below the OECD average.
Canada leads the G20 in R&D spending in higher education as a share of GDP, and it offers one of the most generous R&D tax incentives in the G7.
Canada’s banking system ranks second in the G20 and sixth among 141 countries; it is one of the soundest in the world. Six of the world’s 50 safest banks are in Canada.
Canadians enjoy one of the highest standards of living in the G20, ranks among the top five OECD countries for its living conditions and quality of life, and is the most democratic country in the G20.
COVID-19 Impact on Trade
While declines cannot be fully attributed to COVID-19, by March 2020, overall Canadian goods exports had dropped by 7.9% and goods imports by 8.4%, compared to March 2019.
Canadian goods trade decreased 3.5% in the first quarter of 2020 compared to the same period in 2019, as exports were down 1.2% and imports fell 5.7%.
Energy, Canada’s largest export sector, saw exports increase in the first 2 months of 2020 only to crash in March, mainly from lower exports of crude oil and petroleum gases. On a YoY basis, Canadian energy exports advanced 3.3% in the first quarter of 2020 despite a 21% decline in March.
Industries that rely on international supply chains were also hit especially hard as demonstrated by declines of exports and imports of automotive products (23% and 18%, respectively), machinery (11% and 10%, respectively), and electronics (26% and 13%, respectively). In contrast, Canada’s agriculture exports improved in March 2020 compared to the year prior. Agriculture exports rose 13% led by higher exports of oil seeds (60%) and exports of vegetables (49%).
Canada saw its trade with most of its top 10 trading partners impacted from COVID-19 to some degree. In March 2020, drops in Canadian exports ranged from 3.2% (Japan) to 35% (the United Kingdom) while drops in Canada’s imports ranged from 5.1% (Japan) to 24% (China). While trade with the United States was on average mildly affected with declines of about 6% for both exports and imports, trade with some individual states was strongly affected due to the highly integrated supply chains in some industries.

Canada-Mexico: A Dynamic Relationship
Canadian trade and investment with Mexico is steadily growing, with over $44 billion in two-way merchandise trade in 2019.
Mexico remains Canada’s third largest merchandise trading partner.
Mexico is Canada’s third-largest source of merchandise imports ($36.9B in 2019), and its fifth most important merchandise export destination ($7.3B in 2019).
Canadian Direct Investment in Mexico was $22.5B in 2018, which is Canada’s 10th largest direct investment destination.
Over 1.7 million Canadians traveling to Mexico in 2018 for both business and pleasure.
In addition, a significant number of Canadians, particularly retirees, have purchased property in Mexico and spend extended periods of time there.
There are two major trade agreements that have created stronger economic ties between Canada and Mexico. The Canada-United States-Mexico Agreement (CUSMA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) provide Canada and Mexico with preferential access to each other’s markets.
Canada’s priority sectors in Mexico: aerospace, agriculture, creative industries, education, information and communications technologies, infrastructure, life sciences, mining, oil and gas, and sustainable technologies.
Canadian propane exports to Mexico increased from zero in 2014 to 583 million litres in 2017. Between 2016 and 2017, the value of propane exports to Mexico increased almost eight times.
In 2018, 93% of Canadian aerospace manufacturing firms were exporters and Mexico was one its top exporting markets.
More than 60% of mining projects listed on the Mexican Government’s website are by Canadian companies.
In 2018, 5% of Canada’s globally traded processed agri-food and beverages (including seafood) were shipped to Mexico.
Top Canadian imports into Mexico include fresh hams, shoulders and cuts, fresh boneless beef, canola oil, malt and frozen French fries, totaling a value of CA$522.4 million.

CUSMA: A Future of Opportunity
Since the implementation of NAFTA in 1994, trade and investment between Canada and Mexico have blossomed. Between 1993 and 2019, total merchandise trade between Canada and Mexico grew almost 10-fold. Overall, total trilateral merchandise trade had risen to reach nearly US$1.1 trillion in 2019.
The Canada-United States-Mexico Agreement (CUSMA) streamlines the certification of origin documentation process. The new agreement does away with the NAFTA prescribed certificate of origin form and replaces it with nine data elements that accompany the shipment. This information, captured on an invoice or any other document, can be completed, signed, and submitted electronically.
The deal provides a predictable framework to support North American energy trade through the continued zero-tariff treatment of exports, locking in Mexico’s reforms, facilitating the movement of hydrocarbons by pipeline, and updates certification requirements for oil and gas.
It includes a chapter on Macroeconomic Policies and Exchange Rate Matters, with commitments on currency issues. It addresses unfair currency practices by requiring high-standard commitments to refrain from competitive devaluations and targeting exchange rates, increasing transparency and accountability.
The CUSMA’s Environment chapter establishes enforceable environmental obligations to combat trafficking in wildlife, timber, and fish; to strengthen law enforcement networks to stem such trafficking; and to address pressing environmental issues such as air quality and marine litter.
Chapter 27 on Anticorruption establishes standards that prohibit a public official from participating in bribes; protects accusers that report to competent authorities; and incentives companies to adopt compliance programs in order to combat corruption in their structures.
The modernized Intellectual Property chapter provides effective protection and enforcement of IP rights critical to driving innovation and creating economic growth. The new Digital Trade Chapter ensures the free flow of digital products and includes strict data protection measures. It also facilitates and promotes the growth of e-commerce in the region.
Additionally, the updated Financial Services chapter includes commitments to liberalize financial services markets and facilitate a level playing field for U.S. financial institutions and cross-border trade in financial services. The Labor chapter ensures Mexico’s commitment to its Labor Reform that promotes worker representation through the effective recognition of the right to collective bargaining.
Finally, the CUSMA includes a chapter that promotes cooperation between the Parties to increase trade and investment opportunities for SMEs.

Moving Forward
Nexus is ready to help your company to do business with Canada and make your operations in North America more agile. Our team of experts designs integral supply chain solutions that are able to export and import your products to and from Canada in the most timely, cost-efficient, and secure way through any one of Mexico’s and the US’s air and sea ports of entry.
Furthermore, Nexus consultants are the ideal partners for Canadian companies in Mexico - whether you are seeking to improve your operations, expand existing operations, or are interested in establishing a presence for the first time.
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Sources: Government of Canada, Office of the Chief Economist, Canada Energy Regulator Government of Canada, Innovation, Science, and Economic Development Canada, Mexican Government, USTR, National Law Review