As the U.S.’s neighbors in North America, Canada and Mexico are the logical first stops for Wisconsin companies that are new to exporting. These countries share geographic proximity, cultural ties, and a long history of doing business together. Customers in these markets have an elevated level of trust in U.S.-made products, and the high volume of trading among these countries means potential partners in these markets are likely to be well versed in managing any logistical and regulatory issues that may arise. The North American Free Trade Agreement (NAFTA) that went into force in 1994 eliminated most duties on Wisconsin’s exports into Canada and Mexico. On July 1, 2020, the U.S.-Mexico-Canada Trade Agreement (USMCA) took effect, with new rules affecting the trade of cars and auto parts, new policies on labor and environmental standards, intellectual property protections, digital trade provisions, and rules of origin. The agreement facilitates freer movement of digital products and services and increases access for several categories of dairy products into the Canadian market. The new agreement also has more stringent local content requirements with respect to core automotive parts and textile products. In addition, the agreement will help clarify cross-border e-commerce transactions, providing Wisconsin businesses with opportunities to sell to Canadian customers via their e-commerce platforms.
No two countries are as tightly integrated as the U.S. and Canada. They share the world’s longest international border, and their bilateral relationship is one of the world’s closest and most extensive. More than 30 U.S. states, including Wisconsin, count Canada as their largest export market. Wisconsin sells more goods to Canada than to its next five largest foreign markets combined. Canada and the U.S. traded more than $1 trillion in bilateral trade in goods and services in 2021, with Canada being the largest U.S. trading partner in goods and services. Canada-U.S. trade is built on longstanding binational supply chains, whereby roughly 79% of Canadian goods exports to the U.S. are incorporated into U.S. supply chains. Proximity, ease of doing business, a common business culture, and rule of law contribute to the already significant bilateral trade base and will ensure that U.S.- and Wisconsin-made goods and services will be well received in this market in the years ahead.
Canada’s stable economic performance, mature and sophisticated market, strong acceptance of and familiarity with U.S. products, similar customer base, and solid integrated supply chain offer excellent business opportunities for Wisconsin exporters with innovative product and service solutions. Many Wisconsin companies focus their attention on Ontario and Quebec, as those provinces accounted for nearly 60% of Canada’s GDP in 2021; however, western Canada has a strong agriculture sector and growing information and communications technology, clean technology, artificial intelligence, and data sciences sectors that also provide opportunities for Wisconsin companies. Canada has also committed to net zero carbon emissions by 2050, with significant reduction targets by 2030. Opportunities in energy efficiency, carbon capture, EV charging stations, and battery technologies focused on both industrial and consumer markets present a significant opportunity for Wisconsin companies.
As Canada emerges from the COVID-19 pandemic, its economy is expected to continue to grow at a modest rate. Canada continues to be Wisconsin’s largest export market, with $7.5 billion in goods exported and a bilateral trade value of approximately $13.0 billion in 2021. Wisconsin’s close geographic proximity and similar business culture make Canada a good first step to successful exporting.
With a population of almost 130 million, rich cultural history and diversity, and abundant natural resources, Mexico is among the 16 largest economies in the world and the second-largest economy in Latin America. The country has strong macroeconomic institutions and it is open to trade. Mexico is Wisconsin’s second-largest export market, after Canada.
Mexico’s proximity to the U.S. makes it a logical market for Wisconsin exporters. It is the 11th most populous country in the world and is also a relatively young country, with a median age of 27. Building on the benefits of geographic proximity, the U.S.-Mexico-Canada trade agreement gives U.S. exporters an advantage with the reduction of tariffs and the streamlining of other trade barriers such as border processing and licensing requirements for U.S. products coming into Mexico, many products assembled in Mexico are made from U.S. parts, even imports from Mexico often benefit U.S. companies that originally produced the component part.
Wisconsin exports to Mexico have increased dramatically over the last decade, and they now account for more than one-tenth of total Wisconsin exports. Export growth for the current year is also looking strong, with Wisconsin’s exports to Mexico increasing by 16% for the first six months of 2022 compared to the same period the year before. Although Wisconsin still imports more from Mexico than it exports to Mexico, for 2021 the import and export values were nearly equal.
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The views or opinions expressed here are solely those of the author(s) and do not reflect those of WEDC. WEDC is not responsible for the contents nor does WEDC guarantee the accuracy, completeness, timeliness or reliability of this information.