Economy of Canada

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Economy of Canada
City of lights.jpg
Toronto, the financial centre of Canada
Currency Canadian dollar (CAD)
1 April – 29 March
Trade organisations
NAFTA, OECD, WTO and others
GDP $1.992 trillion (2014)[1]
$2.149 Trillion (2015 est)
GDP rank 11th (nominal) / 14th (PPP)
GDP growth
Decrease -0.1% (Q2 2015 est.)[2]
GDP per capita
$56,067.52 (2014)[3]
(10th, nominal; 9th, PPP) [4]
GDP by sector
agriculture: 1.7%, industry: 28.5%, services: 69.8% (2012 est.)
1% (March 2015) [5]
Population below poverty line
12.9 % [6]
32.1 (2005)
Labour force
18.89 million (2012 est.)
Labour force by occupation
agriculture: 2%, manufacturing: 13%, construction: 6%, services: 76%, other: 3% (2006 est.)
Unemployment 6.6% (November 2014)[7]
Main industries
transportation equipment, chemicals, processed and unprocessed minerals, food products, wood and paper products, oil sands, fish products, petroleum and natural gas and minerals such as gold iron and magnesium
Exports $529.0 billion (2014) [9][10]
Export goods
motor vehicles and parts, industrial machinery, aircraft, telecommunications equipment; chemicals, plastics, fertilizers; wood pulp, timber, crude petroleum, natural gas, electricity, aluminum
Main export partners
 United States 75.6%
 China 3.9%
 United Kingdom 3.0%
 Japan 2.1%
 Mexico 1.3%
 Hong Kong 0.9% [11]
Imports $524.0 Billion (2014) [9][10]
Import goods
machinery and equipment, motor vehicles and parts, crude oil, chemicals, electricity, durable consumer goods
Main import partners
 United States 66.9%
 China 6.8%
 Mexico 3.3%
 Germany 2.5%
 Japan 1.8%
 United Kingdom 1.6% (2014)[11]
FDI stock
$528.7 billion (31 December 2010 est.)
$1.389 trillion (31 January 2014)
Public finances
$200.6 billion CAD (2014) / 15.63% of GDP (2014 est.) [12]
$2.9 Billion (Federal, 2014-15)[13]
Revenues $682.5 billion (2012 est.)[14]
Expenses $749.5 billion (2012 est.)
Economic aid $4.1 billion (donor) (2010)
AAA (Domestic)
AAA (Foreign)
AAA (T&C Assessment)
(Standard & Poor's)[15]
Foreign reserves
$65.82 billion (31 December 2011 est.)[16]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

Canada has the 11th (nominal) or 14th-largest (PPP) economy in the world (measured in US dollars at market exchange rates), and is one of the world's wealthiest nations, and is a member of the Organisation for Economic Co-operation and Development (OECD) and Group of Seven (G7). As with other developed nations, the Canadian economy is dominated by the service industry, which employs about three quarters of Canadians.[17] Canada is unusual among developed countries in the importance of the primary sector, with the logging and oil industries being two of Canada's most important. Canada also has a sizable manufacturing sector, based in Central Canada, with the automobile industry and aircraft industry being especially important. With a long coastline, Canada has the 8th largest commercial fishing and seafood industry in the world.[18][19] Canada is one of the global leaders of the entertainment software industry.[20]

Basic information[edit]

With the exception of a few small island nations in the Caribbean, Canada is the only major parliamentary democracy in the western hemisphere. As a result, Canada has developed its own social and political institutions, distinct from most other countries in the world.[21] Though the Canadian economy is closely integrated with the American Economy, it has developed unique economic institutions.

The Canadian economic system generally combines elements of private enterprise and public enterprise. Many aspects of public enterprise, most notably the development of an extensive social welfare system to redress social and economic inequities, were adopted after 1945, or after the events of World War Two.[21]

Canada has a private to public (Crown) property ratio of 60:40 and one of the highest levels of economic freedom in the world. Today Canada closely resembles the U.S. in its market-oriented economic system and pattern of production.[22] As of February 2013, Canada's national unemployment rate stood at 7.0%,[23] as the economy continues its recovery from the effects of the financial crisis of 2007–08. In May 2010, provincial unemployment rates varied from a low of 5.0% in Saskatchewan to a high of 13.8% in Newfoundland and Labrador.[24] According to the Forbes Global 2000 list of the world's largest companies in 2008, Canada had 69 companies in the list, ranking 5th next to France.[25]

International trade makes up a large part of the Canadian economy, particularly of its natural resources. In 2009, agricultural, energy, forestry and mining exports accounted for about 58% of Canada's total exports.[26] Machinery, equipment, automotive products and other manufactures accounted for a further 38% of exports in 2009.[26] In 2009, exports accounted for approximately 30% of Canada's GDP. The United States is by far its largest trading partner, accounting for about 73% of exports and 63% of imports as of 2009.[27] Canada's combined exports and imports ranked 8th among all nations in 2006.[28]

These primary industries are increasingly becoming less important to the overall economy. Only some 4% of Canadians are employed in these fields, and they account for 6.2% of GDP.[29] They are still paramount in many parts of the country. Many, if not most, towns in northern Canada, where agriculture is difficult, exist because of a nearby mine or source of timber. Canada is a world leader in the production of many natural resources such as gold, nickel, uranium, diamonds, lead, and in recent years, crude petroleum, which, with the world's second-largest oil reserves, is taking an increasingly prominent position in natural resources extraction. Several of Canada's largest companies are based in natural resource industries, such as EnCana, Cameco, Goldcorp, and Barrick Gold. The vast majority of these products are exported, mainly to the United States. There are also many secondary and service industries that are directly linked to primary ones. For instance one of Canada's largest manufacturing industries is the pulp and paper sector, which is directly linked to the logging business.

The reliance on natural resources has several effects on the Canadian economy and Canadian society. While manufacturing and service industries are easy to standardize, natural resources vary greatly by region. This ensures that differing economic structures developed in each region of Canada, contributing to Canada's strong regionalism. At the same time the vast majority of these resources are exported, integrating Canada closely into the international economy. Howlett and Ramesh argue that the inherent instability of such industries also contributes to greater government intervention in the economy, to reduce the social impact of market changes.[30]

Such industries also raise important questions of sustainability. Despite many decades as a leading producer, there is little risk of depletion. Large discoveries continue to be made, such as the massive nickel find at Voisey's Bay. Moreover, the far north remains largely undeveloped as producers await higher prices or new technologies as many operations in this region are not yet cost effective. In recent decades Canadians have become less willing to accept the environmental destruction associated with exploiting natural resources. High wages and Aboriginal land claims have also curbed expansion. Instead many Canadian companies have focused their exploration, exploitation and expansion activities overseas where prices are lower and governments more amendable. Canadian companies are increasingly playing important roles in Latin America, Southeast Asia, and Africa.

The depletion of renewable resources has raised concerns in recent years. After decades of escalating overutilization the cod fishery all but collapsed in the 1990s, and the Pacific salmon industry also suffered greatly. The logging industry, after many years of activism, has in recent years moved to a more sustainable model, or to other countries.

Province Unemployment rate percentage of population
Newfoundland and Labrador Newfoundland and Labrador 11.9
Prince Edward Island Prince Edward Island 11.6
Nova Scotia Nova Scotia 8.1
New Brunswick New Brunswick 11.0
Quebec Quebec 7.7
Ontario Ontario 6.4
Manitoba Manitoba 5.6
Saskatchewan Saskatchewan 5.2
Alberta Alberta 6.0
British Columbia British Columbia 6.0
Canada Canada (national) 6.8[31]

Measuring Productivity[edit]

Productivity measures are key indicators of economic performance and a key source of economic growth and competitiveness. The Organisation for Economic Co-operation and Development (OECD)[notes 1] The OECD Compendium of Productivity Indicators,[32] published annually, presents a broad overview of productivity levels and growth in member nations, highlighting key measurement issues. It analyses the role of "productivity as the main driver of economic growth and convergence" and the "contributions of labour, capital and MFP in driving economic growth."[32] According to the definition above "MFP is often interpreted as the contribution to economic growth made by factors such as technical and organisational innovation" (OECD 2008,11). Measures of productivity include Gross Domestic Product (GDP)(OECD 2008,11) and multifactor productivity (MFP).

Gross Domestic Product (GDP)[edit]

The OECD provides data for example comparing labour productivity levels in the total economy of each member nation. In their 2011 report Canada's Gross Domestic Product (GDP) was $CDN 1,720,748 million.[33]

Multifactor productivity (MFP)[edit]

Another productivity measure, used by the OECD, is the long-term trend in multifactor productivity (MFP) also known as total factor productivity (TFP). This indicator assesses an economy’s "underlying productive capacity ("potential output"), itself an important measure of the growth possibilities of economies and of inflationary pressures." MFP measures the residual growth that cannot be explained by the rate of change in the services of labour, capital and intermediate outputs, and is often interpreted as the contribution to economic growth made by factors such as technical and organisational innovation. (OECD 2008,11)

According to the OECD's annual economic survey of Canada in June 2012, Canada has experienced weak growth of multi-factor productivity (MFP) and has been declining further since 2002. One of the ways MFP growth is raised is by boosting innovation and Canada's innovation indicators such as business R&D and patenting rates were poor. Raising MFP growth, is "needed to sustain rising living standards, especially as the population ages."[34]

Central Government Debt[edit]

The OECD reports the Central Government Debt as percentage of the GDP. In 2000 Canada's was 40.9 percent, in 2007 it was 25.2 percent, in 2008 it was 28.6 percent and by 2010 it was 36.1 percent.[35] The OECD reports net financial liabilities measure used by the OECD, reports the net number at 25.2%, as of 2008,[35] making Canada’s total government debt burden as the lowest in the G8. The gross number was 68% in 2011.[36]

The CIA World Factbook, updated weekly, measures financial liabilities by using gross general government debt, as opposed to net federal debt used by the OECD and the Canadian federal government. Gross general government debt includes both "intragovernmental debt and the debt of public entities at the sub-national level." For example, the CIA measured Canada's public debt as 84.1% of GDP in 2012 and 87.4% of GDP in 2011 making it 22nd in the world.[37]

Household Debt[edit]

In March 2015 the International Monetary Fund reported that Canada's high household debt was one of two vulnerable domestic areas in Canada's economy; the second is its overheated housing market.[38]

According to a July 2015 report by Laura Cooper, an economist with the RBC—the largest financial institution in Canada— "outstanding household credit balances" had reached $1.83 trillion.[39] Canadian household credit growth had reached a peak in 2009 then plummeted to a cycle-low in late 2013.[39] There was a quickened pace of growth in household debt in December 2012 and another in April and May 2015.[39][40]

Household debt in 2013[edit]

According to the August 2013 third annual Ipsos Reid Debt Poll only 24 per cent of Canadians were debt free in 2013 compared to 26 per cent in 2012. The average personal non-mortgage debt in 2013 was $15,920 up from $13,141 in 2012. According to an IPSOS chart produced in 2013 debt levels increased "a staggering 35 per cent" in Western Canada compared to 10 per cent in Eastern Canada since 2012 even before the Alberta floods.[41] In Alberta in 2013 household debt rose 63 per cent to $24,271 per household from 2012 after the 2013 Alberta floods.[42] In 2013 the average personal debt load in British Columbia was "up 38 per cent to $15,549;" in "Manitoba and Saskatchewan, up 32 per cent to $16,145;" in Ontario, "up 13 per cent to $17,416," in Quebec up "3 per cent to $10,458;" and in Atlantic Canada, "up 12 per cent to $15,243."

Household debt in 2014[edit]

Statistics Canada announced in December 2014 that Canada's household debt-to-income ratio "hit a record high in the third quarter of 2014, climbing to 162.6 percent from 161.5 percent in the second quarter." However "household assets and net worth increased much faster than debt,"[43] with the national net worth at C$8.12 trillion in the third quarter of 2014, a increase of 2.8 percent from the second quarter.[44][45] Also through the inflation-targeting policy of the Bank of Canada, interest rates are kept low improving the ability of households to service their debt. "The debt-service ratio, or interest paid as a proportion of disposable income, fell to a record low 6.8 percent in the third quarter."[44]

Household debt in 2015[edit]

By 2015 according to the Globe and Mail, "The total debt owed by all Canadians at the end of March 2015 was a record $1.8-trillion with mortgage debt making up $1.29-trillion."[46]

According to Philip Cross of the Fraser Institute, in May 2015, while the Canadian household debt-to-income ratio is similar to that in the US, however lending standards in Canada are tighter than those in the United States to protect against high-risk borrowers taking out unsustainable debt.[43]

Household debt, the amount of money that all adults in the household owe financial institutions, includes consumer debt and mortgage loans. Paul Krugman argued that by 2007 household debt in the United States, prior to the financial crisis, had reached 130 percent of household income. Krugman distinguished between the total domestic non-financial debt (public plus private) relative to GDP which is "money we owe to ourselves" and net foreign debt.[47][48] Statistics Canada reported in March 2013 that "credit-market debt such as mortgages rose to 165% of disposable income, compared with 164.7% in the prior three-month period" in 2013[49] According to the IMF in 2012, "Housing-related debt (mortgages) comprises about 70 percent of gross household debt in advanced economies. The remainder consists mainly of credit card debt and auto loans."[50]

International Monetary Fund[edit]

In the International Monetary Fund's (IMF) quarterly World Economic Outlook released in April 2015, the IMF forecast that Canada’s real gross domestic product (GDP) would grow 2.2 percent. In the July World Economic Outlook the IMF forecast that Canada's real GDP would grow by 1.5 per cent in 2015.[51]

Bank of Canada[edit]

Inflation targeting[edit]

The Bank of Canada, a federal crown corporation, has the responsibility of Canada's monetary system. During the period that John Crow was Governor of the Bank of Canada—1987 to 1994— there was a worldwide recession and the bank rate rose to around 14% and unemployment topped 11%.[52] In 1991, with Prime Minister Brian Mulroney in office, the federal government and the Bank of Canada announced a new inflation targeting monetary policy that has been the cornerstone of Canada's monetary and fiscal policy ever since.[53][54] Although since that time inflation-targeting has been adopted by "most advanced-world central banks",[55] in 1991 it was innovative and Canada was an early adopter when the then-Finance Minister Michael Wilson approved the Bank of Canada's first inflation-targeting in the 1991 federal budget.[55] The inflation target was set at 2 per cent, which is the midpoint of an inflation range of 1 to 3 per cent. They established a set of inflation-reduction targets in order to keep inflation "low, stable and predictable" and to foster "confidence in the value of money," contribute to Canada's sustained growth, employment gains and improved standard of living.[53] Inflation is measured by the total consumer price index (CPI). In 2011 the Government of Canada and the Bank of Canada extended Canada's inflation-control target to December 31, 2016.[53] The Bank of Canada uses three unconventional instruments to achieve the inflation target: "a conditional statement on the future path of the policy rate," quantitative easing, and credit easing.[56]

As a result, interest rates and inflation eventually came down along with the value of the Canadian dollar.[52] From 1991 to 2011 the inflation-targeting regime kept "price gains fairly reliable."[55]

Following the Financial crisis of 2007–08 the narrow focus of inflation-targeting as a means of providing stable growth in the Canadian economy, was questioned. By 2011, the then-Bank of Canada Governor Mark Carney argued that the central bank’s mandate would allow for a more flexible inflation-targeting in specific situations where he would consider taking longer "than the typical six to eight quarters to return inflation to 2 per cent."[55]

The central bank— the Bank of Canada— issues its rate announcement through its Monetary Policy Report which is released eight times a year.[53] On July 15, 2015 the Bank of Canada announced that it was lowering its target for the overnight rate by another one-quarter percentage point, to 0.5 per cent[57] "to try to stimulate an economy that appears to have failed to rebound meaningfully from the oil shock woes that dragged it into decline in the first quarter."[51] According to the Bank of Canada announcement, in the first quarter of 2015, the total Consumer price index (CPI) inflation was about 1 per cent. This reflects "year-over-year price declines for consumer energy products." Core inflation in the first quarter of 2015 was about 2 per cent with an underlying trend in inflation at about 1.5 to 1.7 per cent.[57]

In response to the Bank of Canada's July 15, 2015 rate adjustment, Prime Minister Stephen Harper explained that the Canadian economy was being dragged down by forces beyond Canadian borders such as global oil prices, the European debt crisis, and China's economic slowdown" which has made the global economy "fragile."[58]

The Chinese stock market lost about US$3 trillion of wealth in by July 2015 when panicked investors sold stocks created declines in the commodities markets which negatively impacts resource-producing countries, like Canada.[59]

Key industries[edit]

The Canadian economy in 2012, composed of the industries below, had a relative weighting by value of GDP:[29]

  • 12.34 Real estate and rental and leasing
  • 10.86 Manufacturing
  • 07.96 Mining quarrying and oil or gas extraction
  • 07.03 Health care and social assistance
  • 06.90 Public administration
  • 06.55 Finance and insurance
  • 05.41 Wholesale trade
  • 05.41 Retail trade
  • 05.38 Educational services
  • 05.21 Professional scientific and technical services
  • 04.20 Transportation and warehousing
  • 03.31 Information and cultural industries
  • 02.58 Administrative and support, waste management and remediation services
  • 02.46 Utilities
  • 02.10 Accommodation and food services
  • 02.04 Other services (except public administration)
  • 01.59 Agriculture forestry fishing and hunting
  • 00.76 Management of companies and enterprises
  • 00.75 Arts entertainment and recreation

Service sector[edit]

The Toronto-Dominion Centre in Toronto

The service sector in Canada is vast and multifaceted, employing about three quarters of Canadians and accounting for 78% of GDP.[60] The largest employer is the retail sector, employing almost 12% of Canadians.[61] The retail industry is mainly concentrated in a small number of chain stores clustered together in shopping malls. In recent years, there has been an increase in the number of big-box stores, such as Wal-Mart (of the United States) and Future Shop (a subsidiary of the US based Best Buy) and Zellers (most of their leases have since been purchased by Target). This has led to fewer workers in this sector and a migration of retail jobs to the suburbs.

The second largest portion of the service sector is the business service and hire only a slightly smaller percentage of the population. This includes the financial services, real estate, and communications industries. This portion of the economy has been rapidly growing in recent years. It is largely concentrated in the major urban centres, especially Toronto, Montreal and Vancouver (see Banking in Canada).

The education and health sectors are two of Canada's largest, but both are largely under the influence of the government. The health care industry has been quickly growing, and is the third largest in Canada. Its rapid growth has led to problems for governments who must find money to fund it.

Canada has an important high tech industry, and a burgeoning film, television, and entertainment industry creating content for local and international consumption (see Media in Canada).[62] Tourism is of ever increasing importance, with the vast majority of international visitors coming from the United States. Though the recent strength of the Canadian Dollar has hurt this sector, other nations such as China have increased tourism to Canada. Casino gaming is currently the fastest-growing component of the Canadian tourism industry, contributing $5 billion in profits for Canadian governments and employing 41,000 Canadians as of 2001.[63]


Bombardier Aerospace is the 3rd largest manufacturer of commercial aircraft in the world. Pictured here is a CRJ-900 airplane of Scandinavian Airlines (OY-KFA) built in Canada
Canada Export Treemap by Product (2012) from Harvard Atlas of Economic Complexity

The general pattern of development for wealthy nations was a transition from a primary industry based economy to a manufacturing based one, and then to a service based economy. Canada did not escape this pattern - at its (abnormally high World War II) peak in 1944, manufacturing accounted for 29% of GDP,[64] declining to 15.6% in 2005. Canada has not suffered as greatly as most other rich, industrialized nations from the pains of the relative decline in the importance of manufacturing since the 1960s.[65] A 2009 study by Statistics Canada also found that, while manufacturing declined as a relative percentage of GDP from 24.3% in the 1960s to 15.6% in 2005, manufacturing volumes between 1961 and 2005 kept pace with the overall growth in the volume index of GDP.[66] Manufacturing in Canada was especially hard hit by the financial crisis of 2007–08. As of 2010, manufacturing accounts for 13% of Canada's GDP,[29] a relative decline of more than 2% of GDP since 2005.

Central Canada is home to branch plants to all the major American and Japanese automobile makers and many parts factories owned by Canadian firms such as Magna International and Linamar Corporation. Central Canada today produces more vehicles each year than the neighbouring U.S. state of Michigan, the heart of the American automobile industry. Manufacturers have been attracted to Canada due to the highly educated population with lower labour costs than the United States.[citation needed] Canada's publicly funded health care system is also an important attraction, as companies are exempt from the high health insurance costs US firms pay, though they are offset by corporate health care taxes.

Much of the Canadian manufacturing industry consists of branch plants of United States firms, though there are some important domestic manufacturers, such as Bombardier Inc.. This has raised several concerns for Canadians. Branch plants provide mainly blue collar jobs, with research and executive positions confined to the United States.[citation needed]


Nodding donkey pumping an oil well near Sarnia, Ontario

Canada is one of the few developed nations that is a net exporter of energy - in 2009 net exports of energy products amounted to 2.9% of GDP. Most important are the large oil and gas resources centred in Alberta and the Northern Territories, but also present in neighbouring British Columbia and Saskatchewan. The vast Athabasca oil sands give Canada the world's third largest reserves of oil after Saudi Arabia and Venezuela according to USGS. In British Columbia and Quebec, as well as Ontario, Saskatchewan, Manitoba and the Labrador region, hydroelectric power is an inexpensive and relatively environmentally friendly source of abundant energy. In part because of this, Canada is also one of the world's highest per capita consumers of energy.[67][68] Cheap energy has enabled the creation of several important industries, such as the large aluminium industries in British Columbia [69] and Quebec.[70]

Historically, an important issue in Canadian politics is the interplay between the oil and energy industry in Western Canada and the industrial heartland of Southern Ontario. Foreign investment in Western oil projects has fueled Canada's rising dollar. This has raised the price of Ontario's manufacturing exports and made them less competitive, a problem similar to the decline of the manufacturing sector in the Netherlands.[71][72] Also, Ontario has relatively fewer native sources of power. However, it is cheaper for Alberta to ship its oil to the western United States than to eastern Canada. The eastern Canadian ports thus import significant quantities of oil from overseas, and Ontario makes significant use of nuclear power.[citation needed]

The National Energy Policy of the early 1980s attempted to force Alberta to sell low priced oil to eastern Canada. This policy proved deeply divisive, and quickly lost its importance as oil prices collapsed in the mid-1980s. One of the most controversial sections of the Canada-United States Free Trade Agreement of 1988 was a promise that Canada would never charge the United States more for energy than fellow Canadians.


Main article: Agriculture in Canada
An inland grain terminal in Alberta

Canada is also one of the world's largest suppliers of agricultural products, particularly of wheat and other grains.[73] Canada is a major exporter of agricultural products, to the United States and Asia. As with all other developed nations the proportion of the population and GDP devoted to agriculture fell dramatically over the 20th century.

As with other developed nations, the Canadian agriculture industry receives significant government subsidies and supports. However, Canada has been a strong supporter of reducing market influencing subsidies through the World Trade Organization. In 2000, Canada spent approximately CDN$4.6 billion on supports for the industry. Of this, $2.32 billion was classified under the WTO designation of "green box" support, meaning it did not directly influence the market, such as money for research or disaster relief. All but $848.2 million were subsidies worth less than 5% of the value of the crops they were provided for.

Political issues[edit]

Relations with the U.S.[edit]

Canada and the United States share a common trading relationship. Canada's job market continues to perform well along with the US, reaching a 30-year low in the unemployment rate in December 2006, following 14 consecutive years of employment growth.[74]

Flags of Canada and the United States

The United States is by far Canada's largest trading partner, with more than $1.7 billion CAD in trade per day in 2005. In 2009, 73% of Canada's exports went to the United States, and 63% of Canada's imports were from the United States.[75] Trade with Canada makes up 23% of the United States' exports and 17% of its imports.[76] By comparison, in 2005 this was more than U.S. trade with all countries in the European Union combined,[77] and well over twice U.S. trade with all the countries of Latin America combined.[78] Just the two-way trade that crosses the Ambassador Bridge between Michigan and Ontario equals all U.S. exports to Japan. Canada's importance to the United States is not just a border-state phenomenon: Canada is the leading export market for 35 of 50 U.S. states, and is the United States' largest foreign supplier of energy.

Bilateral trade increased by 52% between 1989, when the U.S.-Canada Free Trade Agreement (FTA) went into effect, and 1994, when the North American Free Trade Agreement (NAFTA) superseded it.[citation needed] Trade has since increased by 40%. NAFTA continues the FTA's moves toward reducing trade barriers and establishing agreed-upon trade rules. It also resolves some long-standing bilateral irritants and liberalizes rules in several areas, including agriculture, services, energy, financial services, investment, and government procurement. NAFTA forms the largest trading area in the world, embracing the 405 million people of the three North American countries.

The largest component of U.S.-Canada trade is in the commodity sector.

The U.S. is Canada's largest agricultural export market, taking well over half of all Canadian food exports.[79] Similarly, Canada is the largest market for U.S. agricultural goods, with nearly 20% of American food exports going to its northern neighbour.[citation needed] Nearly two-thirds of Canada's forest products, including pulp and paper, are exported to the United States; 72% of Canada's total newsprint production also is exported to the U.S.

At $73.6[dead link] billion in 2004, U.S.-Canada trade in energy is the largest U.S. energy trading relationship, with the overwhelming majority ($66.7 billion) being exports from Canada. The primary components of U.S. energy trade with Canada are petroleum, natural gas, and electricity. Canada is the United States' largest oil supplier and the fifth-largest energy producing country in the world. Canada provides about 16% of U.S. oil imports and 14% of total U.S. consumption of natural gas. The United States and Canada's national electricity grids are linked, and both countries share hydropower facilities on the western borders.

While most of U.S.-Canada trade flows smoothly, there are occasionally bilateral trade disputes, particularly in the agricultural and cultural fields.[citation needed] Usually these issues are resolved through bilateral consultative forums or referral to World Trade Organization (WTO) or NAFTA dispute resolution.[citation needed] In May 1999, the U.S. and Canadian governments negotiated an agreement on magazines that provides increased access for the U.S. publishing industry to the Canadian market. The United States 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 12 October 1984 ruling which demarcated the territorial sea boundary. A current issue between the United States and Canada is the ongoing softwood lumber dispute, as the U.S. alleges that Canada unfairly subsidizes its forestry industry.[citation needed]

In 1990, the United States and Canada signed a bilateral Fisheries Enforcement Agreement, which has served to deter illegal fishing activity and reduce the risk of injury during fisheries enforcement incidents. The U.S. and Canada signed a Pacific Salmon Agreement in June 1999 that settled differences over implementation of the 1985 Pacific Salmon Treaty for the next decade.[citation needed]

Canada and the United States signed an aviation agreement during Bill Clinton's visit to Canada in February 1995, and air traffic between the two countries has increased dramatically as a result. The two countries also share in operation of the St. Lawrence Seaway, connecting the Great Lakes to the Atlantic Ocean.[80]

The U.S. is Canada's largest foreign investor and the most popular destination for Canadian foreign investments; at the end of 2007, the stock of U.S. direct investment in Canada was estimated at $293 billion, while Canadian direct investment (stock) in the United States was valued at $213 billion.[81][82] U.S. FDI accounts for 59.5% of total foreign direct investment in Canada while Canadian FDI in the U.S. accounts for 10% (5th largest foreign investor).[83] US investments are primarily directed at Canada's mining and smelting industries, petroleum, chemicals, the manufacture of machinery and transportation equipment, and finance, while Canadian investment in the United States is concentrated in manufacturing, wholesale trade, real estate, petroleum, finance, and insurance and other services.[84]

Free Trade Agreements[edit]


Nations that have Free Trade Agreements with Canada are in dark blue, nations in negotiations are in cyan. Canada is green. (As of July 2009)

Canada is negotiating bilateral FTAs with the following countries and trade blocs:

Canada has been involved in negotiations to create the following regional trade blocks:

See also[edit]


  1. ^ The OECD produces an annual report on member nations who share the goal of "contributing to the development of the world economy" by attaining the "highest sustainable economic growth and employment and a rising standard of living while maintaining financial stability."


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  • Howlett, Michael and M. Ramesh. Political Economy of Canada: An Introduction. Toronto: McClelland and Stewart, 1992.
  • Wallace, Iain, A Geography of the Canadian Economy. Don Mills: Oxford University Press, 2002.

Further reading[edit]

External links[edit]