Trade Deals Come With Rules: What Canada Can and Cannot Do

Canada’s involvement in international trade agreements carries both benefits and limitations for federal economic policy, meaning Ottawa must balance national interests with treaty obligations to multiple partners. Free trade agreements eliminate or reduce tariffs and open markets, but they also constrain how Canada can structure certain industrial and economic policies.

Under agreements such as the Comprehensive Economic and Trade Agreement (CETA) with the European Union, Canada and EU member states have provisionally removed about 98 % of tariffs on goods — greatly expanding market access for exporters in both directions. Likewise, the Canada–Korea Free Trade Agreement eliminated most tariffs on goods traded between the two countries, encouraging bilateral commerce. Such pacts give Canadian businesses preferential access to foreign markets but limit how Ottawa can later re-impose tariffs without negotiating changes.

Beyond tariffs, trade deals include rules on non-tariff barriers, intellectual property rights, investment protections and dispute settlement procedures that Canada agrees to adhere to. In return for market access under treaties like CETA or the Canada–Korea agreement, Ottawa cannot unilaterally enact measures that discriminate against goods or services from partner countries without risking legal challenges under the pact.

At the same time, Canada retains sovereign authority over domestic policies not covered by these treaties. Ottawa can still set internal regulations on things like environmental standards, safety rules and public procurement, provided those measures are non-discriminatory and comply with the most-favoured-nation and national treatment provisions common to trade agreements. These rules aim to prevent protectionism while allowing governments to pursue public interest goals.

Trade agreements also operate alongside global institutions like the World Trade Organization (WTO), which establishes broad principles governing international trade. Under the WTO’s Most-Favoured-Nation (MFN) rule, Canada must treat all members equally for tariff rates unless preferential treatment is provided under a specific free trade agreement.

In practice, this means Canada can pursue free-trade deals with diverse partners — such as existing pacts with Panama, Costa Rica or others — but cannot use such agreements selectively to unfairly disadvantage others outside those treaties. >> These limitations remind exporters, policymakers and the public that while trade agreements create opportunities, they also require Canada to abide by agreed-upon rules and dispute procedures.