Canada External Sector

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Canada Macroeconomics

By

Gadiel Melendez



The Canada-U.S. trade and

investment partnership Canada and the United States enjoy an economic partnership unique in thecontemporary world. They share one of the world's largest and mostcomprehensive trading relationships, which supports millions of jobs in eachcountry. Since the implementation of the Canada-U.S. Free Trade Agreement in 1989, two-way trade has tripled. Under NAFTA, growth inbilateral trade between Canada and the U.S. has averaged almost 6.0%

annually over the last decade. In 2006, their bilateral trade in goods andservices was $577 billion, with over $1.6 billion worth of goods and servicescrossing the border every single day.

Canada's trade with the United States is equivalent to 53% of CA GDP. TheUnited States represents roughly 4/5 of Canada's exports and over 1/2 of the imports. Canada, in return, represents 22.2% of America's exports and

16.5% of its imports. To date, Canada is the number one foreign market for goods exports for 36 of the 50 states, and ranked in the top three for another 4 states. In fact, Canada is a larger market for U.S. goods than all27 countries of the European Union combined, which has more than 15times the population of Canada.



What is NAFTA?

North American Free Trade Agreement (NAFTA) is a regional trade agreement -Canada, Mexico, and US.

Much of NAFTA is structured as three separate bilateral agreements: (i) Canada andUS; (ii) Mexico and US; (iii) Canada and Mexico.

Canada-US free trade agreement (CUSTA), took effect January 1, 1989 -subsequently subsumed into NAFTA.

Presidents Bush and Salinas agreed in 1990 to pursue negotiation of a free tradeagreement between US and Mexico, Canada joining negotiations in 1991.

(ii) and (iii) found in NAFTA itself, took effect January 1,1994 during first Clintonadministration



What is NAFTA?

Signed by the US, Canada, & Mexico in the mid-1990s

Eliminated trade barriers between the 3

countries Free Trade between the 3 countries

How has it affected Canada¶s economy? ± It eliminated trade barriers with US & Mexico, and

allows them to trade more freely at a better cost



Canada¶s Industries

What¶s being produced in the factories? Transportation equipment, chemicals, processed

and unprocessed minerals, food products, wood

and paper products, fish products, petroleum,natural gas.



Canada¶s Natural Resources

What¶s available?Iron ore, nickel, zinc, copper, gold, lead,

molybdenum, potash, diamonds, silver, fish,

timber, wildlife, coal, petroleum, natural gas,hydroelectric power.



Which country is Canada¶s

biggest trading partner?



Canada¶s main exports partners

Canada¶s main exports partners are:

United States European Union

South Korea

China



Canada¶s Exports

Chief exports:

Exports total (2009): $431.1 billionTop expoMotor vehicles & parts, industrial

machinery, aircrafts, telecommunicationsequipment, chemicals, plastics, fertilizers, woodpulp, timber, crude petroleum, natural gas,electricity, aluminum.

Exporting partners: US (79.3%), UK (2.8%), China(2.1%)



Canada Exports

Before the creation of the Bank, the federal government andthe early banks issued notes designed to circulate a Canadaexports were worth 430.0 Billion CAD in February of 2009.International trade makes up a large part of the Canadian

economy. Exports amount to more than 45% of its GDP.Canada is one of the few developed nations that are a netexporter of energy. Canada also exports motor vehicles andparts, industrial machinery, aircraft, telecommunicationsequipment and electronics. The United States is by far itslargest trading partner, accounting for about 79% of exports.



Exports



Exports of goods on a balance-of-payments basis, byproduct



Services Exports



Canada¶s main imports partners

Canada¶s main imports partners are:

United States

European Union China

Mexico



Canada¶s Imports

Chief imports;Machinery & equipment, motor vehicles & parts,

crude oil, chemicals, electricity consumer goods.

Imports total (2009): $386.4 billion

Top importing partners: US (54.4%), China (9.4%),

Mexico (4.2%)



Canada Imports

Canada imports were worth 32.6 Billion CAD in February of 2010. Canadaimports mostly machinery and equipment, motor vehicles and parts,electronics, chemicals, electricity and durable consumer goods.



Imports



Imports of goods on a balance-of-payments basis, byproduct



Principal Commodity



Canada Balance of Trade

Canada reported a balance of trade surplus equivalent to1.4 Billion CAD in February of 2010. International trademakes up a large part of the Canadian economy. Exportsamount to more than 45% of its GDP. The United Statesis by far its largest trading partner, accounting for about79% of exports and 54% of imports as of 2009. Canadais one of the few developed nations that are a netexporter of energy. Canada imports mostly machinery

and equipment, motor vehicles and parts, electronics,chemicals, electricity and durable consumer goods.



Trading Partners



Balance International

Payments



Balance payments



Canada's balance of international payments



US CANADA

Trading Partners -Exports / Imports

US:75.5% / 63.4%

UK:2.9% / 2.6%

Japan:2.4% / 2.6% 4

Canada:17.1% / 16%

China:5.2% / 16.1%

Mexico:10.1% / 10.3%5

US is Canada'slargest tradingpartner. Canada isUS' largest tradingpartner.



Conclusion

The results for Canada in its battle to uphold nondiscriminatory treatment are mixed. On onehand, Canada has allowed overt discrimination to creep into its trade policy actions through theformation of its DTAs. Furthermore, I have identified how Canadian antidumping policies may beimplicitly extending trade preferences on imports from the United States beyond the levels alreadyconferred under CUSFTA or NAFTA. On the other hand, there are areas in which the Canadiangovernment has successfully withstood interest group calls for additional discrimination. Byexamining the cases of Certain Steel Goods, Bicycles, and Outdoor Barbeques, I have illustratedthree instances in which Canadian policymakers at the CITT recommended the imposition of atrade restriction ± through either application of a global safeguard or a China-safeguard policy ±that was structured in a manner which would have implicitly granted U.S. exporters additionaldiscriminatory (preferential) access to the Canadian market beyond that which they alreadyreceive through NAFTA. While in each instance the Canadian government declined to implementthe proposal, continued vigilance against the imposition of even these subtle forms of

discrimination is important going forward.



References

http://www.tradingeconomics.com/World-Economy/Exchange-Rates.aspx

www.bankofcanada.ca/en/

http: //www40.st at can.gc.ca/cbin/s234a.cgi ?se=balance%20 payment s&lan=eng&d t y p

e=fina



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Canada External Sector