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Small and medium-sized enterprises and free trade agreements: The Canadian approach

In recognition of the important role played by small and medium-sized enterprises (SMEs) in Canada’s economy and in trade, Canada’s free trade agreements (FTAs) include provisions to address the specific interests, needs and unique challenges that SMEs may face in doing business in foreign markets.

The Government of Canada is currently applying a two-pronged approach to integrating SMEs into FTAs by:

  1. advancing a stand-alone chapter on SMEs
  2. mainstreaming SME issues by including SME-related provisions throughout the agreements

Dedicated SME chapters

While Canada’s previous FTAs have acknowledged the importance of SMEs to the Canadian economy as key suppliers of products and services and as creators of jobs, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) (entered into force December 30, 2018) was Canada’s first FTA to include a stand-alone chapter on SMEs. Canada has since concluded 2 additional FTAs that include dedicated SME chapters: the modernized Canada-Israel FTA (entered into force September 1, 2019) and the Canada-United States-Mexico Agreement (CUSMA) (entered into force July 1, 2020).

As well, at its first meeting in September 2018, the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) Joint Committee adopted a recommendation on SMEs, which contains similar provisions to a SME chapter. Pursuing a dedicated SME chapter also represents a key priority in Canada’s ongoing FTA negotiations with the Pacific Alliance and Mercosur.

In general, FTAs benefit SMEs by providing preferential access to overseas markets. The inclusion of specific SME provisions in Canada’s agreements, including stand-alone SME chapters, serves to highlight the importance of SMEs to the Canadian economy, promote SMEs’ use of FTAs and acknowledge the unique challenges some SMEs may face in accessing the opportunities created by FTAs.

Objectives of SME chapters in Canada’s free trade agreements

Canada’s SME chapters in FTAs include 4 key objectives:

  1. Reaffirm the importance of incorporating a SME perspective into economic and trade issues
  2. Create a free, publicly accessible website containing information on the agreement that is useful to SMEs
  3. Provide a framework for parties to the agreement to undertake joint activities on issues related to SMEs and trade
    Providing a platform for Canada and its FTA partners to engage in bilateral cooperation activities is central to Canada’s approach to its SME chapters. These activities are aimed at improving the capacity and conditions for SMEs to access and fully benefit from the opportunities created by trade and investment. These activities are designed to be as inclusive as possible and include provisions to involve public- and private-sector stakeholders, such as government agencies, businesses and other civil society organizations.
  4. Establish a dedicated SME committee and other institutional provisions.
    The objective of the trade and SME committee, to be composed of officials from each party to the agreement, is to perform accountability, transparency, advisory, coordination and facilitation functions. The committee ensures transparency by reporting on its activities and outcomes achieved. The committee also performs an advisory function by reviewing the operation of the chapter and providing recommendations to the governments on opportunities to further advance SME-related objectives and outcomes throughout the FTA.

Mainstreaming SME provisions throughout a free trade agreement

A dedicated SME chapter is one of many tools used by Canada to promote awareness of and access to the benefits of trade to SMEs. Outside of a dedicated chapter, Canada believes there are other opportunities to advance SME-related provisions throughout a trade agreement by integrating provisions into other chapters. These can include the following:

Canada continues to look at provisions throughout each FTA to determine how they can take into consideration SME issues.

Canada’s current FTAs: Key resources for SMEs

Comprehensive Economic and Trade Agreement

Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Canada-Israel Free Trade Agreement

Canada-United States-Mexico Agreement

World Trade Organization

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