ECONOMY
The U.S. and Canada enjoy an economic partnership unique in the world. The two nations share the world's largest and most comprehensive trading relationship, which supports millions of jobs in each country. In 2007, total trade between the two countries exceeded $560 billion. The two-way trade that crosses the Ambassador Bridge between Detroit, Michigan and Windsor, Ontario equals all U.S. exports to Japan. Canada's importance to the U.S. is not just a border-state phenomenon: Canada is the leading export market for 36 of the 50 U.S. States, and ranked in the top three for another 10 States. In fact, Canada is a larger market for U.S. goods than all 27 countries of the European Community combined, whose population is more than 15 times that of Canada. The comprehensive U.S.-Canada Free Trade Agreement (FTA), which went into effect in 1989, was superseded by the North American Free Trade Agreement among the United States, Canada and Mexico (NAFTA) in 1994. NAFTA, which embraces more than 450 million people of the three North American countries, expanded upon FTA commitments to move toward reducing trade barriers and establishing agreed upon trade rules. It has also resolved long-standing bilateral irritants and liberalized rules in several areas, including agriculture, services, energy, financial services, investment, and government procurement. Since the implementation of NAFTA in 1994, total two-way merchandise trade between the U.S. and Canada has grown by 265%, creating many new challenges for the bilateral relationship. The Security and Prosperity Partnership of North America, launched by the three NAFTA countries in March 2005, represents an effort to address these challenges and others on a continental basis.
Canada is an urban services-dependent economy with a large manufacturing base.
Since Canada is the largest export market for most states, the U.S.-Canada
border is extremely important to the well-being and livelihood of millions of
Americans.
The U.S. is Canada's leading agricultural market, taking 55% of its agro-food
exports in 2007. However, U.S. imports of Canadian livestock products,
particularly ruminants, fell drastically after the discovery of bovine
spongiform encephalopathy (BSE, mad cow disease) in early 2003. Shipments of
most Canadian beef to the U.S. were resumed in late 2003, and trade in live
cattle under 30 months resumed in July 2005. All remaining U.S. restrictions
affecting bilateral beef trade were lifted in November 2007. Canada is the
largest U.S. agricultural market, primarily importing fresh fruits and
vegetables and livestock products.
The U.S. and Canada enjoy the largest energy trade relationship in the world.
Canada is the single largest foreign supplier of energy to the U.S.--providing
17% of U.S. oil imports and 18% of U.S. natural gas demand. Recognition of the
commercial viability of Canada's oil sands in Alberta has raised Canada's proven
petroleum reserves to 179 billion barrels, making it the world's second-largest
holder of reserves after Saudi Arabia. Canada is planning Arctic pipelines and
liquefied natural gas terminals to provide more natural gas to the North
American market. Canada and the U.S. operate an integrated electricity grid
which meets jointly developed reliability standards and provide almost all of
each other's electricity imports. Canada is a major supplier of electricity
(mostly clean and renewable hydroelectric power) to New England, New York, the
Upper Midwest, the Pacific Northwest, and California. Canadian uranium helps
fuel U.S. nuclear power plants.
While 98% of U.S.-Canada trade flows smoothly, there are occasional trade
disputes affecting the remaining 2%. Usually these issues are managed amicably
through bilateral consultative forums or referral to World Trade Organization
(WTO) or NAFTA dispute resolution procedures. For example, in response to WTO
challenges by the U.S., the two governments negotiated an agreement on magazines
providing increased access for the U.S. publishing industry to the Canadian
market, and Canada amended its patent laws to extend patent protection to 20
years. Canada has challenged U.S. trade remedy law in NAFTA and WTO dispute
settlement mechanisms. Some of these cases involved actions taken by the U.S.
Government on softwood lumber imports from Canada. However, the two countries
implemented a comprehensive settlement on softwood lumber in late 2006 and these
cases were dropped. The U.S. is pressing Canada to strengthen its intellectual
property laws and enforcement. The U.S. and Canada resolved a WTO dispute over
dairy products in 2003. The U.S. and Canada also have resolved several major
issues involving fisheries. By common agreement, the two countries submitted a
Gulf of Maine boundary dispute to the International Court of Justice in 1981;
both accepted the Court's October 12, 1984 ruling that delineated much of the
boundary between the two countries' Exclusive Economic Zones (EEZs).
The U.S. and Canada signed a Pacific Salmon Agreement in June 1999 that settled
differences over implementation of the 1985 Pacific Salmon Treaty. In 2001, the
two countries reached agreement on Yukon River salmon, implementing a new
abundance-based resource management regime and effectively realizing coordinated
management over all West Coast salmon fisheries. The U.S. and Canada recently
reached agreement on sharing another trans-boundary marine resource, Pacific
hake. The two countries also have a treaty on the joint management of albacore
tuna in the Pacific, and closely cooperate on a range of bilateral fisheries
issues and international high seas governance initiatives.
U.S. immigration and customs inspectors provide preclearance services at eight
airports in Canada, allowing air travelers direct connections in the U.S. During
the 12 months ending in June 2007, nearly 21.9 million passengers flew between
the U.S. and Canada on scheduled flights. Toronto's Pearson International
Airport is the third-largest international passenger gateway to the U.S. after
London (Heathrow) and Tokyo (Narita) airports. A bilateral Open Skies agreement
signed in March 2007 removed all economic restrictions on civil aviation
services between Canada and the U.S. The two countries also share in operating
the St. Lawrence Seaway, connecting the Great Lakes to the Atlantic Ocean.
Canada and the U.S. have one of the world's largest investment relationships. The U.S. is Canada's largest foreign investor. Statistics Canada reports that at the end of 2007, the stock of U.S. foreign direct investment in Canada was $289 billion, or about 59% of total foreign direct investment in Canada. U.S. investment is primarily in Canada's mining and smelting industries, petroleum, chemicals, the manufacture of machinery and transportation equipment, and finance.
Canada is the fifth largest foreign investor in the U.S. At the end of 2006, the U.S. Commerce Department estimates that Canadian investment in the United States was $159 billion at historical cost basis. Canadian investment in the U.S. is concentrated in finance and insurance, manufacturing, banking, information and retail trade and other services.
GDP (2007): $1.266 trillion.
Real GDP growth rate (2007): 2.7%.
Per capita GDP (2007): $38,435.
Natural resources: Petroleum and natural gas, hydroelectric power, metals and minerals, fish, forests, wildlife, abundant fresh water.
Agriculture: Products--wheat, livestock and meat, feed grains, oil seeds, dairy products, tobacco, fruits, vegetables.
Industry: Types--motor vehicles and parts, machinery and equipment, aircraft and components, other diversified manufacturing, fish and forest products, processed and unprocessed minerals.
Trade: U.S. merchandise exports to Canada (2007)--$248.9 billion: motor vehicles and spare parts, industrial and electrical machinery, plastics, computers, chemicals, petroleum products and natural gas, and agricultural products. In 2007, 65% of Canada's imports came from the United States. U.S. merchandise imports from Canada (2007)--$313.1 billion: motor vehicles and spare parts, crude petroleum and natural gas, forest products, agricultural products, metals, industrial machinery, and aircraft. In 2007, 76% of Canada's exports went to the U.S.
