Streamlined Border Flows Streamlined Border Flows (cont’d)) Efficient Access Efficient Access (cont’d) Distances to U.S. Markets are Very Short Distances to U.S. Markets are Very Short (cont’d)) Open Skies Increases Transborder Flights Leading Trading Nation U.S. and Canadian Economies Are Integrated Largest U.S. Trading Partner Strong Historical Trade Ties with Europe Unique Access to Asian Economies Table of Contents

Streamlined Border Flows Since the enactment of the North American Free Trade Agreement (NAFTA) in 1994, Canada provides long-term assured access to the North American market — nearly 400 million people with a combined GDP of over $9.4 trillion ($U.S.).. Source: Statistics Canada Annual Transborder Crossings – Total Number of Trucks Entering Canada Millions of Crossings

Streamlined Border Flows (continued) In addition to eliminating tariffs, NAFTA provides procedures for: -border facilitation; -movement of personnel; -investment and intellectual property protection; and -product certification. Automated permit ports, transponder identification systems and joint processing centres are being tested and deployed.. Source: Transport Canada Annual Transborder Crossings – Total Number of Canada-U.S. Air Passengers Millions of Crossings

Efficient Access Canada's transportation infrastructure is well connected to that of the U.S., and is among the best in the world. San Diego El Paso Brownsville Laredo Fort Lauderdale Miami New York Boston I-5 I-15 I-25 US- 83 I-35 I-94 I-80 I-75 I-69 I-90 I-87 I-95 I-29 Edmonton Halifax Toronto I-91/93 Calgary Seattle Chicago Detroit US- 219 Montreal Ottawa Regina Winnipeg TransCanada Highway Vancouver I-15

Efficient Access (cont’d) With 31 million people, we have: -634,600 miles of road system; -45,347 miles of railway track; -61,245 miles of pipelines; -Atlantic, Pacific and Arctic ports; -9 major international airports; and -156 Canada-U.S. border crossings. Select Transborder Highway Corridors B.C. to San Diego (via I-5) Alberta to San Diego (via I-15) Alberta to El Paso (I-15/25) Man./Sask. to Brownsville (via US 83) Winnipeg to Laredo (via I-29/35) Winnipeg/Thunder Bay to Laredo (via I-35) Winnipeg to Detroit to Sarnia (via I-94) Winnipeg to New York (via I-80) Sault Ste. Marie to Fort Lauderdale (via I-75) Sarnia to Laredo (via I-69) Ontario (Fort Erie) to Miami (via US-219) Ontario (Fort Erie) to Boston (via I-90) Quebec to New York (via I-87) Quebec to Boston (via I-91/93) New Brunswick to Miami (via I-95)

Distances to U.S. Markets Are Very Short Almost half of the U.S. population lives within a 10 hour drive of Toronto, and over 60 percent from a two hour flight. Source: Transport Canada

Distances to U.S. Markets Are Very Short (cont’d) Jim Miller, Senior Vice-President, Sales & Marketing Honda Canada "There are no longer two separate Canadian and U.S. marketplaces on this continent. It has become one North American market and Canada is an ideal base from which to serve it." An "Open Skies" agreement*, signed February 1995, has considerably facilitated business travel between Canada and the U.S. *Under "Open Skies” Canadian Air Carriers gained unlimited rights to establish routes from any point in Canada to any point in the United States. Similarly, U.S. carriers also gained unlimited access to the Canadian market (with a phase in period for up to three years) Increase in Transborder Routes Since Open Skies Scheduled flights between Canada and the U.S. Source: Transport Canada Feb. 1995April 1999

Source: Transport Canada Scheduled flights between Canada and the U.S. Open Skies Increases Transborder Flights Business travel between Canada and the U.S. has increased considerably since the inception of The "Open Skies” Agreement (February, 1995) Direct air service now links major cities between Canada and the U.S Feb. 95Feb. 97Feb. 98

Leading Trading Nation Canada is the leading trading nation among G-7 countries. Canada has the highest portion of trade related GDP. Exports % of GDP CanadaU.S.G CanadaU.S.G7 Imports % of GDP Source: Compilation based on data from the World Trade Database, Statistics Canada and the OECD.

The U.S. imports more from Canada than from any other country The Canadian and US economy are highly integrated and inter-dependant Mexico 10.8% China 8.0% Germany 5.4% U.K. 3.4% Taiwan 3.5% Korea, S. 3.0% France 2.6% Italy 2.2% All Others 28.5% Japan 12.8% Canada 19.5% Share of U.S. Imports, 1999 *January to September Source: U.S. Department of Commerce

The US’ Largest Trading Partner Petresa Canada Inc. Jaime Berbés, General Manager, "We knew there was a window of opportunity for our product but the economics of manufacturing weren't feasible without the NAFTA agreement. Canada's tariff-free status gives us access to North America." Source: U.S. Department of Commerce Share of U.S. Exports — 1999* Japan 8.5% U.K. 5.8% Germany 3.9% Koreas, S. 3.5% France 2.8% Netherlands 2.8% Taiwan 2.7% Singapore 2.4% All Others 32.5% Canada 22.9% Mexico 12.3% *January to September Canada and the U.S. have the world’s largest trade partnership, with two-way trade amounting to C$463.6 billion in In fact, this averages to slightly over C$1.25 billion dollars a day in trade. Between 1994 and 1998, trade between Canada and the U.S. grew at a compound average annual rate of 7.8%.

Strong Historical Trade Ties with Europe Source: Statistics Canada European markets continue to provide tremendous trade opportunities for Canada. Two way trade between Canada and Europe is vigorous. Canada's Trade with Europe — TOTAL E.U. Sweden Ireland Spain Belgium Italy France Netherlands Germany U.K. Average Annual Growth, %

Unique Access to Asian Economies Canada's Trade with Asia — Average Annual Growth, % Total APEC* Papua New Guinea Philippines Indonesia Thailand Malaysia Hong Kong S. Korea Taiwan China * Excluding U.S. and Mexico Source: Statistics Canada The emerging Asian economies are untapped markets and offer long-term potential for Canadian exporters. With its geographical location, its immigration links and its active involvement in APEC to reduce trade barriers, Canada is uniquely positioned to gain from the long-term potential of Asian economies.