Canada us economic relationship

Canada-US trade: How Trudeau might hit back against Trump - BBC News

canada us economic relationship

The trade relationship of the United States with Canada was the second largest in the world . prevalent in Canada{Citation needed|date=Oct }, studies have shown that United States citizens would not object to economic integration. The U.S. goods and services trade surplus with Canada was $ billion in reported substantially larger U.S. goods surpluses in the same relationship. Relations between the United States and Canada traditionally have been economic and trade policy, focusing particularly on issues that may.

US actions have great potential impact on Canada, but Canadian actions having little impact on the US. Dependence on American capital and technology has also resulted in a high level of US corporate ownership and control in important sectors of the Canadian economy with important consequences.

US corporate interests have been able to enlist the support of the US government in opposing policies that target development of Canadian industry. The US has also attempted to apply its laws to US subsidiaries operating in Canada to achieve its foreign policy goals. At times it is difficult to live with her.

At all times it is impossible to live without her. Canada remains the largest export market for the US, accounting for about 19 per cent of US merchandise exports about 67 per cent of Canadian imports in Canada for the past plus years has enjoyed a merchandise trade surplus with the US, with Canadian exports of natural resources offsetting imports of manufactured goods and technology. However, sinceChina has displaced Canada as the largest exporter to the US while Mexico is also an increasingly important competitor in the US market.

The US is by far Canada's largest source of direct investment and debt capital, and by far the largest destination for Canadian investment abroad. Shared Infrastructure Joint infrastructure has also furthered economic relations. Infor example, the St. Inthe two countries signed the Columbia River Treatylaunching a major project to build and operate four dams for electric power and flood control, with three of the dams in British Columbia and one in the state of Montana.

As the Canadian and US economies integrated in the second half of the 20th century, the two countries were closely linked through oil and gas pipelines, railways, highways, electricity grids and telecommunications networks. Shared Concerns Deepening economic ties over roughly years reflect the ongoing evolution of the Canadian and US economies, from rural to industrial and now to knowledge-based economies. Globalization and technological change, shifts in demand for natural resources, as well as new concerns — for example, environmental challenges such as climate changeand geopolitical challenges such as terrorism and border security — have all shaped the ongoing relationship.

It was not until the start of the s that trade with the US exceeded trade with Great Britain. Before the First World War, Canada—US trade was relatively small and concentrated, on the Canadian side, in agricultural productsfisheries and raw materials such as lumberwhile imports from the US included manufactured products. Although officially neutral, Britain had supported the Confederate states in the American Civil War — a key factor in US abrogation of the treaty.

This was an unexpected blow and over the next 40 years Canada made repeated efforts to persuade the US to enter into a new reciprocal trade agreement, starting with Prime Minister John A.

canada us economic relationship

Canada soon found itself battling a prolonged recessionwith many Canadians moving to the US and some suggesting the country would be better off joining the US. Improved access to the American market was seen as essential. The government of Prime Minister Alexander Mackenzie in drafted a proposed reciprocity treaty that matched the agreement, but also added a long list of manufactured goods, including agricultural equipment, steel, locomotives, furniture, paper and boots and shoes.

National Policy In office again after the federal election, Macdonald began implementing his proposed National Policy of high tariffs on manufactured imports but lower tariffs on raw materials and intermediate productsas well as a coast-to-coast rail system and rapid settlement of the West.

If Canada was to be denied the access it desired to the US market, it would create new opportunities within Canada for economic development through east—west nation-building.

Prime Minister John A. Macdonald's National Policy protected Canadian manufacturers with high tariffs on American imports, however it fueled the creation of a branch plant economy.

Major US corporations first began establishing bases in Canada late in the 19th century, increasing US investment. It was estimated that US corporations owned branch plants in Canada byand that more were added over the next 12 years.

Canada–US Economic Relations | The Canadian Encyclopedia

Twenty per cent of the book value of Canadian industry was US-owned by The Macdonald government felt it had little choice but to pursue a higher-tariff policy, facing a US policy of even higher tariffs.

Yet the National Policy legislation also included a standing offer of a reciprocity agreement with the US. Little progress was made untilwhen the American president, William Howard Taft, decided the time had come to develop a new bilateral relationship.

The government of Prime Minister Wilfrid Laurier reported to the House of Commons in that a free trade agreement had been reached. By this time, Canada had a population of 7. However, the Laurier government, despite a parliamentary majority, decided to first hold a free trade election. The Conservatives under Robert Borden defeated the Liberals and the free trade agreement with the US was not implemented. Fears of annexation by the US and concern over the loss of the British connection, along with strong business opposition, doomed the agreement.

Canada had spent nearly 45 years seeking a reciprocal trade agreement, but when the Americans finally agreed, Canada changed its mind. The US initiative was designed to improve competition in the US market. It included a general reduction in tariff rates and the addition of many items to the free list, and it was highly favourable to Canadian exporters. Zero or near-zero tariffs were introduced for steel rails, timber, iron ore, agricultural equipment and a range of farm products.

But this promising period in Canada—US economic relations came to an abrupt end. Faced with an agricultural crisis, as farm prices collapsed, the US passed the Emergency Tariff Act ofwhich sharply raised tariffs on agricultural imports. This was followed, inby the Fordney-McCumber Tariff, which completely reversed the trade liberalization in the Underwood Tariff initiative and dealt a harsh blow to Canada. Not surprisingly, Canada and other countries retaliated with higher tariffs of their own.

However, in andCanada invited the US to negotiate a reciprocal trade agreement. There was no US response.

Canadian exporters did benefit from US prohibition, which ran from January to Decemberthough smuggling profits did not show up in official statistics. Great Depression Worse was to come with the Great Depression. Inthe US enacted the Tariff Act of — the Smoot-Hawley Tariff — which took US tariffs to record levels, not only dealing an immediate and devastating blow to the Canadian economy but precipitating competitive rounds of protectionism worldwide, making the Great Depression much worse.

Canada responded quickly, raising tariffs twice, in its and budgets. The Great Depression led to more trade protectionism and even higher tariffs in both Canada and the US.

Bennett tried to ease tariffs and gain more access to US and world markets during the Depression. This offset some of the damage from the harsh US measures but was not a long-term solution for Canadian economic growth and prosperity. By earlyPrime Minister R. Bennett met with Roosevelt in April, with the two leaders agreeing to increase trade.

A Canada—US agreement in was a modest step, but marked the beginning of an economic relationship that over time led to steadily declining tariffs and other trade barriers. A second reduction in tariffs came with a subsequent agreement under the Reciprocal Tariff Act. These agreements made it easier to export commodities such as fish, lumber, cattle, dairy products and potatoes, as well as machinery and equipment to the US, while Canada reduced some of its barriers to imports.

These were the first successfully concluded trade agreements between the two countries since the reciprocity agreement, a gap of roughly 80 years.

Canada-US trade: How Trudeau might hit back against Trump

Canada needed access to US industrial supplies and dollars to undertake its war effort. All Canadians were required to sell their holdings of foreign exchange to the Foreign Exchange Control Board and Canadians were not permitted to buy foreign exchange for pleasure travel. Until the Second World War, Canada had regularly run trade deficits with the US but had offset these through its surpluses with Britain. At the same time, to meet its industrial war and other needs, Canada found itself with a serious shortage of US dollars.

Under the resulting Hyde Park agreement, Canada and the US agreed to co-ordinate production of war materials to reduce duplication and to enable each country to specialize. Mackenzie King second from left and Franklin D. Roosevelt second from right courtesy NGC. The postwar economic recovery had led to a surge in imports as Canada experienced a sharp rise in domestic demand, along with conversion of its industrial base to peacetime production.

InCanada again introduced exchange controls to limit the purchase by Canadians of US dollars to essential purposes. The oil discoveries at LeducAlberta, and other discoveries in western Canada, meant that the US now had access to more secure oil supplies shipped overland rather than in ocean-going vessels.

The US gave Canadian oil preferential treatment in what at the time was a highly protected market. This also marked the beginning of a network of North American oil and gas pipelines.

Canada–US Economic Relations

The economic crisis in the mids and the growing interdependence in trade and resource development led to new discussions between Canada and the US for a free trade agreement. But Prime Minister Mackenzie King in halted discussions out of fear of rejection by Canadians concerned about the threat of assimilation into the US. Canada relied instead on successive rounds of the General Agreement on Tariffs and Trade now the World Trade Organization to progressively improve access to the US market.

These agreements over several decades led to the elimination or significant reduction in most tariffs between Canada and the US. Defence Industry Collaboration became more important in defence procurement during the Cold War.

The two countries agreed to maintain trade in defence products in rough balance. Canada relied on the US for major military technology, while the US agreed to assist the development of a defence industry in Canada by eliminating tariffs on most Canadian military products and exempting Canada from Buy America provisions that required the US Defence Department to purchase US products. While acknowledging that Canada had benefited in terms of capital, technology and management skills from US investment, the commission, chaired by Walter Gordonraised concerns about US domination in the oil and gas, mining and smelting, and various manufacturing industries.

canada us economic relationship

Canada had relied on foreign capital for development since Confederation and without it, the economy would have been smaller and the standard of living lower. But in the 19th century, most of that capital came from Great Britain, mostly in the form of debt that was paid back and concentrated in railways, construction of utilities and funding of governments.

In contrast, US investment from the late 19th century and in the 20th was in the form of direct investment, allowing permanent ownership and control of enterprises.

By the s, direct investment had become the most important form of foreign capital in Canadian industry, mainly in subsidiary companies or branch plants. In85 per cent of foreign capital invested in Canada was owned in Great Britain and 14 per cent in the US. Bythe British share had fallen to 17 per cent while the US share was 77 per cent. The concern of the Gordon commission was that US corporations controlled businesses in the fastest-growing sectors of the Canadian economy. It was also concerned that US subsidiaries would give preference to US suppliers of machinery and equipment, parts and components and professional services over competing Canadian suppliers, while good jobs in research and development, finance and corporate strategy would be held in US head offices.

The report proposed that wherever possible, branch plants should employ Canadians in senior management and technical positions, retain Canadian engineering and other professional and service personnel, and whenever possible do their purchasing of supplies, materials and equipment in Canada.

The commission also called on foreign subsidiaries to publish full financial statements of their operations in Canada, include on their boards of directors a number of independent Canadians and sell an appreciable interest — 20—25 per cent — of their equity stock to Canadians. The commission also called for restrictions on foreign ownership in Canadian banks and life insurance companies.

By the s, politicians were raising concerns about US ownership and control of Canadian industries, including the oil industry. Limiting US Ownership Inthe report of the Task Force on the Structure of Canadian Industry was published, recommending the creation of a development corporation to support the growth of Canadian-controlled companies, and the regulation of foreign takeovers of Canadian companies.

Inthe federal government created the Canada Development Corporation to support the development of Canadian-controlled companies in the private sector, but it was dismantled in Inthe federal government established Petro-Canada as a Crown Corporation to build a Canadian-owned presence in the oil industry it was privatized in and merged with Suncor Energy in This was followed, inby the National Energy Programwhich set the goal of 50 per cent Canadian ownership of the Canadian oil and gas industry by In14 foreign, mainly US oil companies accounted for 82 per cent of Canadian oil production.

A variety of measures were announced to favour Canadian-controlled oil companies, including Petro-Canada, initiatives strongly opposed by the US. The US strongly opposed the sale, and the Canadian subsidiary of a US company refused to sell the grain handling equipment to make the sale possible, citing US laws that made sales to China illegal.

After negotiations between the two countries, the grain-handling equipment was supplied. Following the Cuban revolution ofthe US imposed a trade embargo on Cuba and tried to force Canadian subsidiaries of US corporations to abide by the embargo. However, Canada insisted that the subsidiaries were subject to Canadian, not US laws. InCanada passed the Foreign Extraterritorial Measures Act, requiring companies in Canada to abide by Canadian laws rather than foreign laws.

Proposals[ edit ] Since the September 11th attacks, there has been debate on whether there should be further North American integration. Ambassador Paul Cellucci stated, however, "Security trumps trade" in the United States, and so as long as Canada is a possible point of entry for terrorists, such integration seems unfeasible.

Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. March Energy[ edit ] The strength of the Canada—U.

Energy trade is the largest component of this cross-border commerce. Canada has the third-largest oil reserves after Saudi Arabia and Venezuelathanks to its oil-sands resources. The United States has historically been Canada's only foreign market for natural gas, oil, and hydropower.

How the Shale Gas Revolution May Alter Canada - U.S. Economic Relations

In short, this energy relationship has enhanced U. However, this highly integrated U. Consequently, the United States no longer appears to be an unlimited market for Canadian energy, leaving Canada seeking new export destinations. Both Canada and the United States are increasingly reliant on foreign investment to develop their resource sectors, with Asia serving as an important source of capital.

Asian investors initially focused on project investments as minority joint venture partners but are showing increasing interest in owning production companies. Asian investors' objectives for investing in the North American energy sector include both attractive financial returns on investment as well as an interest in North America as an energy supply source for their economies.

The expanding energy investment and trade between North America and Asia can be mutually beneficial. Canada is the only industrialized country in the world to still use a "supply management system" for regulating the supply of dairy products. March See also: List of Canadian television stations available in the United States and List of United States stations available in Canada Because English is the majority language in both countries, and accents and dialects on both sides of the border are relatively similar and being a variety of North American English as compared to the British or Australian Englishboth high culture and mass media are easily traded.