Business Climate

North American Free Trade Agreement (NAFTA) | Low-Risk Business Environment

The growth and performance of businesses in the Toronto region is the result of competitive business costs, extensive information and telecommunications infrastructure, ready access to U.S. markets and relatively low levels of economic and political risk.

Access to the NAFTA market and northeastern USA

Through NAFTA, Canada provides long-term assured access to the North American market – 400 million people with a combined GDP of US $11.4 trillion.

Canada and the U.S. have the world’s largest trade partnership, with two-way trade amounting to CDN $645 billion – an average of over $1.2 million dollars a minute in trade. The U.S. trades more with Canada than with any other country.

Canada and the U.S. have one of the world’s largest direct investment partnerships.

Foreign Direct Investment by Region – 2003

The Greater Toronto Area and Trade

Toronto area businesses have one of the best access entry points to other major North American metropolitan areas. The region is within a 500-mile radius (one day’s drive or 1 hour flight) of 135 million people. Direct air service between major cities in Canada and the U.S. has nearly doubled in the past 6 years.

Production locations in the industrial heartland of southwestern Ontario and the GTA are often closer to huge American markets around New York, Boston and Chicago than are popular America production hubs like Atlanta and Raleigh. This proximity to the U.S. facilitates the provision of near shore services for many American clients.

The GTA’s close proximity to three major U.S. border crossings is a key factor to its major economic clusters including the GTA’s automotive sector, the largest in Canada and second largest in North America.

In December 2002, Canada and the United States signed a pact to better coordinate border crossings and to create a “smart border” focusing on new technologies and infrastructure to improve the movement of goods and services. With increased spending to further streamline border access to rich U.S. markets, commercial border crossings were averaging less than ten minutes in 2003/2004.

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Low-Risk Business Environment

The Greater Toronto Area is on the rise. Real GDP growth for the City of Toronto reached 5.3% in 2004 and is expected to grow at a rate of 3.6% a year over the next four years.

The 5.3% growth is in large part due to the surprising strength in manufacturing. Despite a strong Canadian dollar, manufacturing is expected to grow by 5.6 percent, a significant improvement over a 3.4% decline in 2003.

The Toronto region continues to be the national hub for new immigrants into Canada and is one of the major contributors to Toronto’s economic strength relative to other Canadian cities.

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Business environment ranking

“Economist Intelligence Unit Ranks Canada as the Best Place to do Business”
Canada will be the best country in the world in which to conduct business over the 2003-2007 forecast period, according to the latest business environment rankings from the Economist Intelligence Unit.

Canada scores well across the entire range of business environment categories (10 in all).
The country achieves very high scores for the quality of its infrastructure, open regime for foreign trade and capital, and favorable market opportunities. Canada stands to benefit from improvements to its tax regime and its political environment.

The fall in North America's score causes the decline in the U.S. rank — from first in 1998–2002 to fifth for 2003–2007. This is the result of the United States' increased exposure to geopolitical risk, major imbalances in the economy, and weakening public finances.

Inflation

Canada’s targeted inflation rate is locked between 1% to 3% and has been extended until 2006. With low inflation over the past decade, Canada is considered among low inflation countries.

Averaging 2.2% over the past five years, the Canadian inflation has been lower than the U.S.

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