Terms of Trade
Ideally, most of us wouldn’t need to spend much time thinking about the technical details and systems of global trade. Unfortunately, Canada needs to figure out a trade strategy for a volatile world. To help get everyone up to speed, we built a glossary of important trade terminology — institutions, concepts, policies and more.
The Terms of Trade page is meant to be a living document. If you’re reading about Canada’s international trade strategy and you’re stumped by terminology, email Canadian Shield Institute Editorial Director James McLeod.
We’ll look to add it to the glossary!
Absolute Advantage
An absolute advantage refers to the ability of one country to produce goods or services more efficiently than another country, using fewer resources. This means the country with an absolute advantage can produce a good at a lower cost per unit compared to its trading partner. Due to Canada’s vast deposit of natural resources, it enjoys an absolute advantage in the production of goods that require these resources, such as lumber, petroleum, agricultural products, and renewable energy.
Ad Valorem Tariff
An ad valorem tariff is a type of tax on imported goods that is calculated as a percentage of the goods’ declared value. Typically, ad valorem tariffs are used on imported goods such as vehicles, luxury items, and electronics. In 2025, ad valorem tariffs made media headlines as the Trump administration sought to implement ad valorem tariffs on Canadian products. In retaliation, Canada has implemented a 25% ad valorem tariff on all goods imported from the U.S.
Advanced Rulings
An advanced ruling is used to issue a 10-digit tariff classification number on future imported goods, accompanied by a rationale statement. The purpose of the advanced ruling is to help determine whether the goods qualify for preferential treatment under a free trade agreement or if the goods are subject to a tariff classification under the import control list. Advanced rulings ensure a smooth import process while also providing a binding classification of the goods between the individual who issues the advanced ruling and the Canadian Border Security Agency (CBSA), increasing transaction confidence. The CBSA has the authority to issue an advanced ruling under the Customs Act.
Anti-Circumvention
Anti-circumvention generally refers to a set of measures or laws that aim to prevent the circumvention of trade restrictions imposed on goods being imported into a country. In Canada, circumvention occurs when a trade practice is altered to avoid liability of duties under the Special Import Measures Act. Circumvention occurs when three elements are present:
- A change in trade pattern after the government imposes countervailing duties or after a dumping or subsidy investigation has commenced,
- When a prescribed activity undermines the remedial effects of orders or findings by the Canadian International Trade Tribunal (CITT), and
- The trade pattern change is caused by the application of anti-dumping or countervailing duties.
The Canadian Border Security Agency (CBSA) is responsible for investigating anti-circumvention cases, and if the CBSA concludes that circumvention has occurred, duties will be extended to cover the goods used to circumvent an injury ruling by the CITT.
Anti-Dumping Measures
Anti-dumping measures refer to measures that are allowed under WTO agreements, which governments can take to protect their domestic industry against material injury caused by the dumping of goods by a foreign nation. The General Agreement on Tariffs and Trade (GATT) allows countries to impose anti-dumping duties that would otherwise violate the GATT principles of non-discriminatory and binding tariffs. Canada governs its anti-dumping measures through the Special Import Measures Act (SIMA), which is a reflection of Canada’s commitment to GATT. Under SIMA, dumping refers to when goods are sold to Canadian importers at prices below the selling price in the exporting country, or at unprofitable prices. If the Canadian International Trade Tribunal finds that dumping has occurred and caused injury to a Canadian industry, the Canadian Border Security Agency will enforce anti-dumping or countervailing duties on the imported goods with the goal of offsetting the price advantage caused by dumping or subsidizing.
APEC
The Asia-Pacific Economic Cooperation forum (APEC), is a regional economic forum created in 1989 to promote free trade, investment, and economic cooperation among its members in the Asia-Pacific region. The forum has 21 member nations, and aims to enhance the business operating environment by reducing commercial barriers and cutting red tape. APEC operates as a forum for voluntary, non-binding commitments and open dialogue among its member nations, rather than producing economic treaties with binding obligations. APEC members are important for Canadian trade, and in 2023, included four of Canada’s top five trading partners. In 2023, APEC members accounted for $866.2 billion CAD of foreign direct investment into Canada and roughly 84% of Canadian merchandise trade.
Balance of Payments
The Balance of Payments (BOP) refers to a country’s record of international economic transactions over a specified period. Factors used to calculate the BOP include the trade of goods and services, financial investments, and transfers. The BOP is often used as an indicator of a country’s economic position and financial stability.
Balance of Trade
A Balance of Trade, also known as a trade balance or net exports, is an economic measure that calculates the difference between the value of exports and imports from another country. A positive trade balance is referred to as a trade surplus, which means the value of exports is larger than the value of imports. A negative trade balance is referred to as a trade deficit, which means the value of exports is smaller than the value of imports.
Bilateral Trade
Bilateral trade refers to the trade of goods and services between two countries, typically regulated by a bilateral trade agreement or treaty. Bilateral trade agreements outline specific terms and conditions of trade, such as tariffs and quotas. These trade agreements are designed to give specific countries preferential access to each other’s markets, with the goal of economic growth. Canada currently has 15 free trade agreements, 13 of which are bilateral trade agreements.
Binding (Tariff Binding)
Tariff binding is a legally enforceable commitment made by a member country of the World Trade Organization. It refers to a commitment not to increase a tariff beyond an agreed-upon level. Once the maximum tariff level is agreed upon, the rate is ‘bound’, and a country cannot raise the tariff level without compensating the affected members. Tariff-binding negotiations take place when a country joins the WTO or during trade rounds.
BRICS
BRICS originated as an acronym for the five original members of an informal economic coalition of countries: Brazil, Russia, India, China, and South Africa. The organization is focused on reducing Western influence over international institutions such as the World Bank and UN Security Council. BRICS has 20 members in total, including partner countries, who account for 44% of global GDP and 56% of the global population. Some primary goals of the BRICS coalition are to reduce dependence on the U.S. dollar, create new financial institutions, and increase representation within global organizations.
Belt and Road Initiative
The Belt and Road Initiative (BRI) is a comprehensive strategy by the Chinese government to build extensive land and marine infrastructure projects with the goal of placing China at the center of international trade. The initiative aims to expand six trade corridors to support Chinese economic goals by developing ports, railways, highways, pipelines, and fibre optic networks. While Canadian companies’ involvement in the BRI projects is currently minimal, the Canadian China Business Council has highlighted opportunities for Canadian companies to contribute their well-suited expertise to BRI projects.
Cairns Group
The Cairns Group is a coalition of 20 agricultural exporting countries that advocates for the liberalization of global trade in agricultural products during the Uruguay Round. Reforms stated in the Cairns Group’s vision statement encompass three key areas of liberalization:
- the removal of export subsidies and clear rules to prevent circumvention,
- increased market access through reductions in tariffs and the removal of non-tariff barriers, and
- the removal of domestic subsidies.
Canada was among the 14 countries that founded the Cairns Group in 1986, and remains a member to date.
CCCT
The Commonwealth Caribbean Countries Tariff (CCCT) is a tariff relief program established in 1986, which provides duty-free market access to Commonwealth countries and British territories in the Caribbean region.
CETA
The Comprehensive Economic and Trade Agreement is a bilateral free trade agreement established between Canada and the European Union. It is one of the most expansive international trade deals Canada has signed, eliminating tariffs and trade barriers across virtually all sectors.
CFTA
The Canadian Free Trade Agreement (CFTA) is an agreement signed by all provinces, territories, and the federal government. The main goal of CFTA is to promote free trade and reduce barriers to the movement of goods, services, people, and investment throughout Canada. CFTA requires commitment to a set of governing rules to help achieve an open economy with stable and efficient markets. The deliberation of CFTA legislation started in 2014, when negotiations began to modernize the Agreement on Internal Trade (AIT), CFTA’s predecessor. In comparison to AIT, CFTA legislation broadened and automatically applied to all sectors of the economy, and aligned better with international trade obligations. In recent attempts to spur growth in interprovincial trade, on June 30th, 2025, the federal government removed all federal exemptions from the CFTA, in line with Canada’s new One Canadian Economy Act.
Controlled Goods Program (CGP)
The Controlled Goods Program (CGP) is a domestic industrial security program with the purpose of safeguarding controlled goods, which are goods (including technology) that can be used for military applications. The objective of the CGP is to prevent unauthorized access to controlled goods and strengthen Canada’s control over defence trade. Established in 2001 under the Defence Production Act (DPA), the CGP is the accompanying governing body of rules and regulations administered by the Department of Public Works and Government Services. The CGP requires any individual possessing, examining, or transporting controlled goods to register with the CGP and undergo security assessments.
Common Market
A common market refers to a trade agreement made between countries, which signifies an advanced stage of economic integration among nations, building upon free trade agreements. A common market generally facilitates the unrestricted movement of goods, services, labour, and capital between member countries. It achieves this by eliminating non-tariff barriers to trade and harmonizing regulations and economic collaboration. Tariff threats from the Trump administration have compelled Canada to expedite the establishment of an internal common market among its provinces and territories. In June 2025, the Government of Canada passed the One Canadian Economy Act, which aims to strengthen Canada’s common market by removing federal barriers to internal trade and labour mobility, facilitating the free movement of goods, services, workers, and businesses across the provinces and territories.
Comparative Advantage
A comparative advantage is an economic theory that refers to when a country has an advantage in producing a specific good relative to other countries, caused by having a lower opportunity cost of production. Opportunity cost is the value forgone by choosing one alternative over another, and is calculated by subtracting the return on the chosen option from the return on the forgone option. The Law of Comparative Advantage, which originated from economist David Ricardo in 1817, showed how it was in the mutual interest of countries to specialize in producing goods with the lowest opportunity cost and then trade for other goods.
Countervailing Duties
A countervailing duty is defined as an additional duty levied by an importing country to counteract government subsidies provided to industries in the exporting country. Such duties are imposed when the subsidized imports are found to cause significant harm to the domestic industry of the importing country. In Canada, countervailing duties are governed by the Special Import Measures Act and administered jointly by the Canadian Border Services Agency and the Canadian International Trade Tribunal (CITT). Most recently, Canada has suffered from the U.S. implementation of large countervailing duties on Canadian softwood lumber.
Country of Origin (Food Labeling)
Country of origin labeling is a mandatory labeling requirement for many food products that informs consumers of the country where the food was produced or processed. In Canada, all prepackaged food products must include the name and primary business address of the company responsible for the product, whether the manufacturing company or the importing company. If a food product is manufactured entirely outside of Canada, the label must indicate that the product is imported.
CPTPP
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement between 11 countries including Canada in the Indo-Pacific region, providing Canada with preferential access to a trading bloc with a total of 580 million consumers. The agreement aims to strengthen economic relations and facilitate trade by eliminating tariffs and reducing trade barriers across virtually all economic sectors.
CUSMA (aka USMCA/T-MEC)
The Canada, United States, and Mexico Agreement (CUSMA) is a free trade agreement between the nations of North America. In 2018, member nations signed a protocol to modernize the existing North American Free Trade Agreement (NAFTA), which would later become known as CUSMA. In 2019, a protocol of amendment was signed to modify the new CUSMA agreement around aspects such as labour, the environment, and rules of origin. Finally, in July 2020, CUSMA officially came into force for all member nations, marking an important milestone for the economic relationship between Canada, the U.S, and Mexico. In the Canada-U.S. trade war, tariffs applied by the Trump administration have not been applied to imports from Canada covered under CUSMA. The U.S. claims that Canada is putting CUSMA in jeopardy by placing tariffs on products imported from the U.S., which are covered under CUSMA.
Customs Duties (Duties)
Customs duties or duties are a tax imposed on a good when it is imported across an international border and is calculated based on certain product characteristics. Customs duties are an important method for the Canadian government to raise revenue and protect domestic industries. In Canada, customs duties are governed by multiple pieces of legislation, including the 1985 Customs Act and the 1997 Customs Tariff, and are administered by the Canada Border Security Agency. In 2024, customs import duties accounted for $5.5 billion of total tax revenues.
Customs Valuation
A customs valuation is the appraised value of imported goods, which is made by customs officials to determine the amount of duties payable in the importing country. Customs valuations are governed by the Canadian Customs Act. Canada is a member of the General Agreement on Tariffs and Trade, which seeks to implement a fair and uniform system for customs valuation across member nations.
De Minimis
The de minimis threshold refers to the maximum monetary value at which courier shipments can enter Canada without payment of duties and taxes. For more than 35 years, Canada’s de minimis threshold was set at $20. As part of the CUSMA negotiation, Canada agreed to raise its de minimis threshold for imports via courier from the U.S and Mexico to $150 CAD for customs duties and $40 CAD for taxes.
Digital Services Tax (DST)
The Digital Services Tax was a proposed tax which would require certain businesses to pay a 3% tax on revenue earned from selling to customers located in Canada. In 2025 the tax was rescinded after the U.S. government threatened to halt trade negotiations.
Digital Trade ( E-commerce)
Digital Trade is a term that refers to transactions of goods and services online, including non-traditional and non-monetary transactions, such as providing free online services in exchange for user data.
Digital Trade Agreement (DTA)
A digital trade agreement (DTA) is an agreement between countries that governs the terms of digital trade between the participating countries. Global Affairs Canada is currently contemplating the development of a Canadian DTA model, which would serve as a base model for future DTA negotiations with other countries, and is separate from a Free Trade Agreement.
Dumping
The Government of Canada defines dumping as the practice of selling goods to Canadian importers at a price below the selling price of comparable goods in the exporting country, or at unprofitable prices. Anti-dumping duties are applied to counteract the effects of dumping when it harms Canadian industries. These duties are administered by the Canadian Border Services Agency and the Canadian International Trade Tribunal, as stipulated by the Special Import Measures Act.
Economic Coercion
Economic coercion is the use of trade and investment measures to pressure or influence a foreign government into making a decision or action in order to achieve a political or policy goal.
Economic Union
An Economic Union, as defined by the OECD, represents a common market with measures for harmonizing economic policy, especially policy related to macroeconomic and regulatory frameworks. Typically, an economic union is established through an agreement between fellow nations or jurisdictions and is focused on the movement of goods, investments, and labour. Prominent economic unions include the 1992 European Union Economic and Monetary Union and the Eurasia Economic Union.
Export
An export is a good or service that is sold by a company within a domestic nation to buyers of the product in a foreign nation. The action of moving the sold goods from the domestic nation to the importing country is referred to as exporting.
Export Controls
Export controls are a policy measure used by governments to regulate trade regarding specific goods or technologies — most often used to control the trade in goods that have military applications. In Canada, controlled goods are placed on the export control list. The Minister of Foreign Affairs has the power to grant permits allowing entities to export items that are listed on the export control list.
Embargo (Trade Embargo)
An embargo is a type of economic sanction that can be imposed by a government on other nations or international organizations, which restricts all imports and exports between the two nations or groups. Embargos can encompass all goods and services, or can be targeted to only specific sectors — for example, only items with military applications. Typically, embargos are used to punish countries for objectionable actions or policies, in an attempt to halt such concerning behaviour.
Exchange Rate
An exchange rate represents the relative value of two different currencies. Canada has a floating currency, meaning its value is determined by the supply and demand of the currency in the international market. Specific economic factors that affect the Canadian dollar’s valuation include interest rates, inflation rates, and other financial assets.
Expropriation
Expropriation, as defined by Global Affairs Canada, refers to when a government seizes private property without just or reasonable compensation. In Canada, the Special Economic Measures Act (SEMA) governs Canada’s ability to seize foreign assets. In 2022, SEMA was amended to allow the federal government to seize, dispose of, forfeit, and redistribute assets that belong to sanctioned individuals or entities.
Fair Trade
Fair trade is an economic approach for market consumption that advocates for consumers to consider not only the cost of goods but also the working conditions and wages of the labourers who produced them.
Friendshoring
Friendshoring, as defined by the Conference Board of Canada, is the practice of relocating production and supply chains to allied countries. The goal of friendshoring is largely to reduce global security risks associated with critical imports — strengthen allied countries, and reduce dependence on unfriendly countries.
Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI) refers to a type of investment by which an investor commits funds to a foreign enterprise. This can result in the investor gaining partial or total control of the foreign enterprise. The Organisation for Economic Co-operation and Development and the Government of Canada define FDI as an investor establishing a lasting interest in an enterprise — typically by only counting FDI as buying more than a 10 per cent stake in a foreign enterprise.
Foreign Exchange Market (FEM or Forex)
A foreign exchange market (FEM) is a global currency market where participants can trade currencies. Foreign exchange markets are crucial for the facilitation of international trade as it allows domestic businesses to convert currency for foreign transactions.
Free Trade Agreement (FTA)
A Free Trade Agreement (FTA) is a treaty that opens markets between the participating nations through the reduction of trade barriers, including tariffs, quotas, and non-tariff barriers. FTAs aim to foster a more predictable, equitable, and clear environment for businesses operating in foreign nations.
FTAA
The Free Trade Area of the Americas (FTAA) was an agreement proposed in 1994 between 34 countries located across the American continent to create a Free Trade Area amongst member nations by 2005. Due to failed negotiations, the FTAA was stalled and missed the target deadline of 2005, and plans for further discussions have not taken place since.
GATT
The General Agreement on Tariffs and Trade (GATT) is an international agreement signed in 1947, which aimed to reduce tariffs and quotas on the trade of goods amongst member nations. GATT was originally signed by a total of 23 different nations, including Canada.
Global Value Chain
A Global Value Chain (GVC) is a term that encompasses the complete sequence of value-adding activities involved in the process of bringing a good or service from conception to end use. This includes everything from the initial procurement of raw materials, production, distribution, and ultimately the sale of the finished good. These activities are performed across multiple countries.
Intellectual Property
Intellectual property (IP), as defined by the Government of Canada, refers to the concept of tangible expressions of intellectual or creative pursuit (inventions, designs, creative works) which are treated as property in both the legal and social spheres. In Canada, different types of IP are governed by four different legal regimes: copyright, patent, trademark, and trade secret law.
Investor-State Dispute Settlement
An investor-state dispute settlement (ISDS) is a legal provision in a trade investment agreement or in a Free Trade Agreement (FTA). ISDS serves as a mechanism providing investors the right to seek international arbitration if it is believed that a foreign government participating in the agreement has breached one of its provisions. The purpose of an ISDS is to protect foreign investors, encouraging an increased flow of investment between the agreed parties.
Labour Mobility
Labour mobility is a term that generally refers to the free movement of labour between provinces, regions, and countries. Within Canada, the labour mobility provision of the Canadian Free Trade Agreement (CFTA) states that if a skilled worker has been certified in their occupation by the regulatory body in one province, they must be recognized in other provinces as well without going through significant additional training, work experience, or examination unless an exception has been posted.
Landlocked
The term landlocked refers to a state or country that is surrounded by the land of other countries and has no access to a coastline. Not having access to an ocean coastline restricts access to international trade and free maritime waters, putting the state or country at an economic disadvantage. These countries are commonly referred to as Landlocked Developing Countries.
Liberalization
Liberalization, as defined by Global Affairs Canada, is a term that refers to the reduction of tariffs and other measures that restrict international trade.
Made in Canada
Made in Canada is a product labeling term introduced in the 1980s, that is used as a means of identifying Canadian content within the marketplace. To be considered a “Made in Canada” product, a good must satisfy three conditions:
- The final substantial transformation of the good occurred within Canada,
- At least 51% of the total direct cost of production of the product has been incurred in Canada, and
- The claim is accompanied by an appropriate qualifying statement — such as “with important parts.”
Market Access
Market access is a term that refers to the capacity of a country’s goods or services to enter and compete within a foreign market. Market access can be affected by barriers to trade such as tariffs, quotas, and non-tariff barriers. Canada’s primary tool for both receiving and giving market access to foreign nations is free trade agreements, through which Canada currently has preferential market access to 51 different countries and 1.5 billion consumers.
Monetary Union (Currency Union)
A monetary union is defined as a zone that operates under a single monetary policy and freely circulates a single currency, or currencies that are perfect substitutes. One of the most well-known monetary unions is the European Economic and Monetary Union (EMU), which operates under a single monetary policy and circulates a single currency.
Most-Favoured Nation (MFN)
Most-favoured-nation treatment (MFN) is the principle that countries should not enact discriminatory treatment of goods based on the country of origin or destination. This principle is enshrined in Article 1 of the General Agreement on Tariffs and Trade (GATT). Specifically, the best market access conditions that have been granted to one country that is a member of GATT must be automatically granted to all members as well, hence all members receive the same preferences as the most-favoured nation.
Multilateral Trade Agreement
A multilateral trade agreement refers to a non-discriminatory agreement signed by three or more nations to regulate trade between members. Typically, multilateral trade agreements will lower trade barriers and increase economic integration between the participating members. The largest multilateral trade agreements that Canada is a part of are the Canada-United States-Mexico Agreement (CUSMA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the General Agreement on Tariffs and Trade (GATT).
National Security Exception
A national security exemption is a clause in Canadian international trade agreements, which allows Canada to deviate from the obligations of the trade agreement if it is deemed necessary to protect the interests of national security. Across all of Canada’s international free trade agreements, the language establishing the national security exemption remains consistent, although the use of the term national security is not explicitly defined in any of Canada’s international trade agreements.
NAFTA
The North American Free Trade Agreement (NAFTA) was an agreement signed by Canada, the U.S., and Mexico, which came into effect in January 1994. The economic benefits from this agreement were monumental for all countries. NAFTA was one of the most ambitious trade agreements in history, and created one of the world’s largest free trade areas.
National Champions
A national champion refers to a private corporation that is granted a dominant position in the national economy due to government policy. The role of a national champion is generally to seek profit and advance the interests of the nation. National champions also help prevent venture capital acquisitions.
Nearshoring
Nearshoring is a term used to describe the process of a firm relocating its business operations to a nearby country, often sharing a border with the domestic nation. Nearshoring provides goods with a quicker transition speed from manufacturing to customers in the market.
Net Benefit Test
The net benefit test or net benefit review is a review conducted by the Federal Government of Canada, which regulates significant foreign acquisitions of Canadian companies to ensure foreign investments benefit the Canadian economy and do not compromise national security. A net benefit review is triggered when the acquisition of a Canadian company is above a certain threshold, and it considers the following factors: effect on economic activity, degree of participation by Canadians in the Canadian business, effect on productivity and innovation, effect on competition, compatibility with culture and policy, and international competition. The net benefit test is legislated under the Investment Canada Act, and is administered by the Department of Innovation, Science, and Economic Development.
Non-tariff barrier (NTB)
A non-tariff barrier, as defined by Global Affairs Canada, is a term used to describe measures taken by a government, other than tariffs, that attempt to restrict or distort international trade. Non-tariff barriers include measures such as quotas, procurement strategies, and sanctions. One of Canada’s most well-known non-tariff barriers is its quotas on dairy products used to protect the Canadian dairy industry from foreign countries and dates back to the 1970s.
OECD
The Organization for Economic Co-operation and Development (OECD) is an international organization that was established in 1960, and serves as a forum and knowledge hub helping to advance economic development through standards, statistics and analysis, and dialogue. The OECD provides economic standards that range from non-binding recommendations, like the 2019 AI Recommendation, to legally binding international agreements, such as the 1997 Anti-Bribery Convention. Canada was an original founding member of the OECD, is a very active member at the committee level, and ranks 7th overall in terms of contributions to the OECD.
OPEC
The Organization of the Petroleum Exporting Countries (OPEC) is an international organization that coordinates and unifies the petroleum policies of its member countries. Such coordination seeks to ensure the stability of oil markets in order to provide a regular supply to consumers and a steady income and return on investment to countries invested in the petroleum industry. OPEC was first created in 1960 at the Baghdad Conference and included five original members: Iran, Iraq, Saudi Arabia, Kuwait and Venezuela. Today, the organization has grown to 11 members.
Product of Canada
Product of Canada is a term used to label products that help consumers denote Canadian content in the marketplace. Product of Canada claims are governed under the Competition Act, the Consumer Packaging and Labelling Act, and the Textile Labelling Act, and are enforced by the Canadian Competition Bureau. Companies are not required to label their products ‘Product of Canada’, but if a claim is made, it will be investigated and enforced by the Canadian Competition Bureau. In order for a product to be considered a product of Canada, it must have had the final substantiation transformation of the good happen in Canada, and at least 98% of the total direct costs of production of the good to have been incurred in Canada. “Product of Canada” is often mistaken for ‘Made in Canada’, which is held to a lower threshold of 51% of total direct costs of production incurred in Canada.
Protectionism
Protectionism is a term that refers to government policies aimed at protecting domestic industry from foreign competition.
Quota
A Quota is a form of trade barrier that sets explicit limits on the physical amount of a particular good that can be imported or exported during a specific time frame. Quotas are typically measured in terms of volume, but can be measured in terms of value. Quotas can be set on a selective basis, varying according to the country of origin, or quotas can be set on an international basis, specifying total limits to the imports and exports.
Rules of Origin
Rules of origin are a set of rules used to determine the country where a product was made. When goods cross the border, customs officials use these rules to determine whether the goods are eligible for reduced tariffs or are subject to trade restrictions.
Reciprocal Tariff
A reciprocal tariff is a trade policy strategy where one country mirrors the tariff rates imposed by another country.
Sanctions (Trade Sanctions)
A sanction is a term that refers to economic restriction measures such as embargoes, import restrictions, or asset freezes. These measures are enacted by one or more countries against a target country in order to achieve specific political or policy objectives.
SIMA
The Special Import Measures Act (SIMA) is Canadian legislation that protects Canadian industry from harm caused by the dumping and subsidizing of imported goods. SIMA is a reflection of Canada’s commitment to the General Agreement on Tariffs and Trade 1994 and the Agreement on Subsidies and Countervailing Measures. The Canadian International Trade Tribunal (CITT) is responsible for making the determination of whether the dumping or subsidizing of imports has occurred, causing injury to Canadian industry, and the appropriate measures are enforced by the Canadian Border Security Agency (CBSA). Typically, the anti-dumping and countervailing duties are used by CITT and the CBSA to offset the price advantage caused by dumping and subsidizing.
Subsidy
A subsidy is a term that refers to when a Government grants an economic benefit to producers of a good to enhance their competitive ability in the marketplace. Subsidies can take the form of a direct cash injection or other types of economic policy, such as export credits.
Sunset Provision
A sunset provision, also known as a sunset clause, is used to describe a provision within a legal statute, regulation, or agreement that automatically expires on a certain date, allowing for the automatic repeal of laws or regulations once the specified date has been reached. One of the most prominent sunset provisions used in Canadian trade history was in the North American Free Trade Agreement (NAFTA), which has a sunset provision to terminate the agreement after 16 years unless renewed by all agreeing parties. Upon the renegotiation of NAFTA into CUSMA, the sunset provision was kept, and it now applies to CUSMA timelines.
Tariffs
A tariff is a tax imposed on imports to Canada from another country. A tariff is a type of customs duty that can be levied in an ad valorem form (percentage of value) or on a specific basis (e.g., value per weight interval). Tariffs are generally used by governments for three reasons: generating revenue for the government, protecting domestic industries, and as a diplomatic tool.
Tariff Escalation
Tariff escalation refers to situations when higher import duties are applied on processed goods compared to import duties on the corresponding raw materials. The practice of tariff escalation is used to safeguard domestic industries and to discourage the processing of raw materials in their countries of origin.
Trade Deficit
A trade deficit is a term that refers to when the value of a country’s imports exceeds its exports, creating a negative balance of trade. In June 2025, Canada recorded the second-largest merchandise trade deficit on record, amounting to $5.9 billion CAD, although this was mostly due to a one-time high-value import of oil equipment.
Trade Diversification
Trade Diversification refers to a strategy to reduce a country’s dependence on a small number of trading partners or products through the expansion of its export market and product mix. Trade diversification aims to reduce risks and foster growth opportunities.
Trade Facilitation
Trade facilitation involves measures and initiatives designed to simplify and streamline customs procedures, lower trade costs, and enhance the efficiency and transparency of international transactions. Ultimately, trade facilitation aims to reduce the time and cost associated with international trade, benefiting exporters and importers. In Canada, the Trade Commissioner Service and Export Development Canada both aim to facilitate trade.
Trade Surplus
A trade surplus is a term that refers to when the value of a country’s exports exceeds its imports, creating a positive trade balance. Canada recorded a trade surplus every year between 1980 and 2008, with the exception of 1991-92.
Trade War
A trade war is an economic dispute between countries that are trying to damage each other’s trade. Typically, in a trade war, a country retaliates against trade measures taken by another country, which results in the intensification of trade restriction measures between the countries in a tit-for-tat style reprisal pattern.
WTO
The World Trade Organization (WTO) is an international body that acts as a forum for negotiating agreements that aim to lower barriers to international trade and create a fair and competitive environment, with the goal of fostering economic growth and development across the globe. The WTO also provides legally binding agreements accompanied by regulatory frameworks for member countries, and currently consists of 16 separate multilateral agreements and a total of 166 member countries. The WTO was established in 1995 as the successor organization to the General Agreement on Tariffs and Trade (GATT). Canada was a founding member of GATT in 1947 and later the WTO upon its establishment.
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