TORONTO - Canadian, U.S., and Mexican exporting companies are seeing stiff competition from Asian manufacturers who are able to produce goods at a lower cost. This competition is only expected to increase in the coming years according to The NAFTA Quarterly, published by Scotia Economics.

"This competitive challenge is perhaps most notable from China whose share of global trade and investment has risen sharply in recent years, aided by its accession to the World Trade Organization," says Adrienne Warren, Senior Economist, Scotiabank. "In 2001, China overtook Canada as the world's fourth largest exporter of goods worldwide, excluding intra-European Union trade.”

Canada’s opportunities, according to the report, lie in service exports. A skilled, educated workforce and an established commercial service sector are advantages. Shared language and cultural similarities are also important when delivering services to Canada’s biggest trading partner, the U.S.

Among the NAFTA nations the U.S. has the highest percentage of service exports (25%) followed by Canada (12%) and then Mexico (7%). Total service exports among the countries has risen six per cent each year since 1993, while manufactured goods have averaged seven per cent for the same time period.

The report also forecasts that an overall economic recovery should occur throughout the region later this year with Mexico emerging as the top performer.

"The Mexican economy is gathering momentum in this politically sensitive year," says Pablo Bréard, Vice-President, International Research, Scotiabank. "Real GDP should rise by almost 3% this year and advance 4 1/2% in 2004 as the manufacturing sector piggybacks on the U.S. industrial revival and the non-tradeable sector turns the corner."

For a complete version of NAFTA Quarterly go to http://www.scotiacapital.com/English/bns_econ/nafta.pdf.

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