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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
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
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