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The Free Trade Agreement and North American Free Trade Agreement represents both a response and a challenge to the changing nature of international business. Flows of capital and knowledge are at least as important as the flow of goods in international exchange. This note examines the lessons that other APEC countries may learn from the experiences of Canadian small/medium-sized enterprises in their process of adjusting to free trade. The note covers issues related to revising business strategies, adopting the product cycle, following customers, pursuing competitive advantage, enhancing employee empowerment, developing product differentiation and economies of expertise, focusing on entrepreneurship, finding strength in clusters, developing new linkages with large enterprises, issuing shares and expanding business loans. The note also discusses government policies that assist in these adjustments. Common problems include anti-dumping issues, dispute settlement, subsidies to specific sectors and businesses, cross-border movement of people, and product standards.