The Canada-U.S Economic Relationship

Study Canada Summer Institute, 2010 Dr. Paul A. Storer

“America’s Unhappy Borders”

The Economist, 8/27/05

Peace Arch Crossing

State Department Photo

Outline of Talk

• Canada-U.S. Interdpendence:

- National and Regional Trade

• Lessons from Canada:

- Environment

- Health Care

- Banking System

- Inequality and Social Programs

- Costs and Benefits of Trade

Source: Embassy of Canada

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Sh

are

Canada China Mexico Japan Germany

Country Share of U.S. Total Trade in 2007

0%

5%

10%

15%

20%

25%

Sh

are

Canada Mexico China Japan U.K.

Country Shares of U.S Exports in 2007

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Sh

are

China Canada Mexico Japan Germany

Country Share of U.S. Imports in 2007

0

2

4

6

8

10

12

14

16

18

Sh

are

(%)

California Oregon Washington

State Export Shares in 2007

China

China

Japan Japan

Japan

Mexico

Canada

Canada C

anada

0

10

20

30

40

50

60

Sh

are

(%)

Michigan Ohio Pennsylvania

State Export Shares in 2007

China Japan Belgium

Canada

Canada C

anada

Me

xico Mexico Mexic

o

0

5

10

15

20

25

Sh

are

(%)

Colorado Georgia North Carolina

State Export Shares in 2007

China

China

ChinaU

.K.

Japan

Canada

Mexico

Canada

Canada

Source: http://www.canadainternational.gc.ca/washington/

Canada’s Rank for States’ Exports of Goods

Canada-U.S. Integration

• 36 states have Canada as their largest export market.

• More than 40% of Canada-U.S. trade is within-firm trade. Clusters (eg autos) matter.

• Strong growth of intra-industry trade.

Tradition …

The Modern Canadian Economy: Technology …

…Transportation.

Bellingham Airport

Bellingham Herald

October 26, 2006

The Modern Canadian Economy:

ContinentalIntegration

&“JIT”

SeaTac Airport

•Source: http://farm4.static.flickr.com/3379/3198460812_79dd9093c2.jpg

Trade as a Fraction of U.S. GDP

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1929 1939 1949 1959 1969 1979 1989 1999

(Exports + Imports)/GDP

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

Trade As a Fraction of GDP: Canada

Source:Hart, M.A Trading Nation

Canada-U.S. Free

Trade: A Break

with History

Free Trade Agreements

• Canada-U.S. 1989, add Mexico in 1994.

• Both countries have signed other agreements (U.S. more active lately)

• NAFTA is much less ambitious than the EMU: no labor mobility, customs union, or common currency.

The Tariff “Wall”

“Greedy”AmericanWolves

Happy Canadian Farmers AndManufacturers

Sir John A.Macdonald

Source: Hart, M. A Trading Nation

Source: Hart, M. A Trading Nation

Energy Trade

An Important Supplier

of Secure Energy

U.S. Petroleum Imports (2006)(Source: U.S. Energy Info. Agency)

U.S. Petroleum Imports (2006)(Source: U.S. Energy Info. Agency)

Source: http://www.pse.com/energyEnvironment/EnergySupply_NaturalGasProfile.aspx

Source: “The World’s Largest Trading Relationship”,

Embassy of Canada.

Oil Sands

Reserves

Source:

www.ubc.ca

Source: www.guardian.com

Environment and Natural Resources

National versus Regional Policies

Globe and Mail, Dec. 11, 2002

0

1

2

3

4

5

6

7

Energy Consumption Per Capita(p. 12-13, Canada at a Glance)

Canada U.S. France Italy U.K.

Germany

Japan

Mexico

Tonn

es o

f oil

equi

vale

nt p

er p

erso

n, 1

998

B.C. Carbon Tax Program

Source: 2008 Budget, B.C. Ministry of Finance

Source: 2008 Budget, B.C. Ministry of Finance

Health Care

Are we following the

Canadian path?

June 9, 2009

0 2 4 6 8 10 12 14 16

United States

Switzerland

Germany

Norway

France

Canada

Sweden

Australia

Denmark

Italy

New Zealand

Japan

Spain

United Kingdom

Finland

Mexico

Slovak Republic

Korea

Health Care Spending, % of GDP, 2003

0

2

4

6

8

10

12

14

16

1960 1965 1970 1975 1980 1985 1990 1995 2000 2001 2002 2003

Health Care as a % of GDP

U.S.

Canada

Banking and Finance

Did Canada “Get it right?”

The Economist, U.S. Edition, May 23, 2009

Source: Bank of Canada Web site

Social Programs andthe Role of Government

www.inequality.com

Unemployment Rates

2

4

6

8

10

12

14

1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Canada

United States

Free trade

agreement

Employment-to-Population Rates

54

56

58

60

62

64

66

1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Canada

United States

Free trade

agreement

0.340

0.350

0.360

0.370

0.380

0.390

0.400

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Year

Gin

i Mea

sure

of

To

tal I

nco

me

Ineq

ual

ity

Increasing Inequality of Income

Free trade

agreement

Taxes in Canada

The level and mix of taxes.

Canada: 40%U.S.:31%

Trade, Culture, and Sovereignty

Source: Aislin Cartoon

Montreal Gazette

Source: Molson

“I Am Canadian” ad

The Post-9/11 Reality

How do we balance security

and integration?

Canada: A Source of

“Vulnerabilities?”

Source: Bellingham Herald

Source: ABC news Source: International Border Commission

“Alphabet Soup” Programs

DHS Secretary Napolitano: Hope and Change?

View #1: “the myth I’m trying to bust is that there’s no real border between Canada and the United States”

View #2: “We don’t want to damage economic security in the name of homeland security.”

Source: Globe and Mail

U.S. – Canada Softwood Lumber Agreement 2006

January 2007

Source: Bellingham Herald, Sept. 10, 2004