**Toronto**: Canada is strengthening its economic partnerships with the EU through the Comprehensive Economic and Trade Agreement, which is reshaping air cargo transport and trade dynamics amid rising tensions with the US, prompting a reevaluation of traditional supply chains and logistics.
Canada has recently embarked on a significant shift in its economic partnerships, notably strengthening its ties with the European Union (EU) while still maintaining its longstanding relationship with the United States. This transition marks a substantial change in the North American trade landscape.
A key factor driving this enhancement of cargo growth is the Comprehensive Economic and Trade Agreement (CETA), which has played a crucial role since its implementation in 2017. The agreement has abolished tariffs on over 98% of goods exchanged between Canada and EU member states, thereby considerably improving market access for both parties.
The positive effects of CETA are evident in the increase in bilateral trade, particularly in air cargo transport of goods such as pharmaceuticals, perishables, and precision machinery components. A report by Reuters highlights the notable growth in Canadian exports to the EU, underscoring the beneficial impact of the agreement. Through CETA, Canadian exporters benefit from expedited access to the EU’s extensive consumer market, which is reshaping Canada’s long-term economic strategy.
This pivot towards the EU is also attributed to escalating economic and political tensions with the US. The Trump administration’s implementation of tariffs in 2018, levying 25% on Canadian steel and 10% on aluminium, sparked retaliatory duties from Canada. The uncertainty surrounding the renegotiation of NAFTA into the United States-Mexico-Canada Agreement (USMCA) further exacerbated these concerns. To mitigate reliance on a trade partner prone to unpredictable policy changes, Canada identified the EU as a more stable option.
Since the CETA’s activation, the Canadian air cargo sector has expanded its routes to Europe to meet the growing demand for air freight in pharmaceuticals, technology, and e-commerce. By fostering closer ties with the EU, Canada seeks to ensure more stable trade flows, giving businesses the confidence to invest in essential infrastructure and long-term planning.
Canada’s evolving economic relationship with the EU is poised to have significant implications for North American trade dynamics. Firms in Canada are increasingly exploring export opportunities within Europe, which could lead to a recalibration of supply chains away from traditional US partners and the development of new logistics hubs and transport routes.
Should Canada continue to prioritise its trade with the EU, the US may encounter a more fragmented North American supply chain alongside potential shifts in air cargo routes and volumes. This dynamic could prompt the US to reassess its trade policies with Canada and the EU, aiming to maintain its competitive stance in the air cargo sector.
According to Canadian Foreign Affairs Minister Melanie Jolie, this realignment in trade relationships could ultimately benefit Canada, opening prospects for both new trade agreements and revisions of existing ones. Such changes have the potential to significantly influence the transatlantic flow of goods.
While Canada and the US remain deeply interconnected trading allies, their diverging priorities are presently transforming the air cargo landscape. For instance, Canada’s initiatives towards stronger environmental policies, such as the Clean Fuel Regulations, contrast with US efforts aimed at bolstering domestic manufacturing through the Inflation Reduction Act. This divergence may create frictions within supply chains.
Moreover, the rise of “Buy American” provisions stands to limit Canadian suppliers’ access to lucrative US contracts, exerting further pressure on air cargo operators to adapt to these changing conditions. Consequently, stakeholders are compelled to reassess their transport routes, invest in sustainable aviation solutions, and navigate the evolving customs frameworks, such as the Canada Border Services Agency’s new CARM system, to ensure the continued efficiency of cross-border airfreight.
Given the potential disruption to established air cargo routes resulting from Canada’s European focus, negotiations may be necessary to reassess certain trade agreements and maintain US access to Canadian markets. Such adjustments will require a flexible approach, likely leading the US to pursue renewed cooperation with Canada centred on mutual benefits in trade.
Source: Noah Wire Services
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