Economy of Canada

Economy of Canada

Infobox Economy
country = Canada

width = 150
currency = Canadian dollar (CAD)
year = 1 April – 31 March
organs = NAFTA, OECD, WTO and others
rank = 13th
gdp = $1.274 trillion (2007 est.)
growth = 2.7% (2007 est.)
per capita = $38,200 (2007 est.)
sectors = agriculture (2.1%), industry (28.8%), services (69.1%) (2007 est.)
inflation = 2.4% (2007 est.)
poverty = 10.8% (relative) (2005) / 4.9% (absolute) (2004)
gini = 31.5% (2004)
labor = 17.9 million (2007 est.)
occupations = agriculture (2%), manufacturing (13%), construction (6%), services (76%), other (3%) (2006)
unemployment = 5.98% (2007 est.)
industries = transportation equipment, chemicals, processed and unprocessed minerals, food products, wood and paper products, fish products, petroleum and natural gas
exports = $440.1 billion (2007 est.)
export-goods = motor vehicles and parts, industrial machinery, aircraft, telecommunications equipment, electronics, chemicals, plastics, fertilizers, wood pulp, timber, crude petroleum, natural gas, electricity, aluminum
export-partners = U.S. 81.6%, UK 2.3%, Japan 2.1% (2006)
imports = $394.4 billion (2007 est.)
import-goods = machinery and equipment, motor vehicles and parts, electronics, crude oil, chemicals, electricity, durable consumer goods
import-partners = U.S. 54.9%, People's Republic of China 8.7%, Mexico 4% (2006)
gross external debt = $758.6 billion (2007 est.)
debt = $467.3 billion CAD (Federal, 2007)
revenue = $565.8 billion
expenses = $551.2 billion (2007 est.)
aid = $3.9 billion (donor) (2007)
spelling = Oxford

Canada is the home to the ninth largest economy in the world [cite web|url=|title=2006/2007/2008 GDP|publisher=IMF] (measured in US dollars at market exchange rates), [cite web|url=|title=2006 GDP figures|publisher=world bank] is one of the world's wealthiest nations, and a member of the Organization for Economic Co-operation and Development (OECD) and Group of Eight (G8). As with other developed nations, the Canadian economy is dominated by the service industry, which employs about three quarters of Canadians. [cite web|url=|title=Actual hours worked per week by industry, seasonally adjusted (monthly) |publisher=Statistics Canada] 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, centred in Central Canada, with the automobile industry especially important.

International trade makes up a large part of the Canadian economy, particularly of its natural resources. The United States is by far its largest trading partner, accounting for about 76% of exports and 65% of imports as of 2007. [cite web|url=|title=Imports, exports and trade balance of goods on a balance-of-payments basis, by country or country grouping |publisher=Statistics Canada] Canada's combined exports and imports ranked 8th among all nations in 2006. [cite web|url=

Economic sectors

Canada has considerable natural resources spread across its varied regions. In British Columbia, the forestry industry is of great importance, while the oil industry is important in Alberta and Newfoundland and Labrador. Northern Ontario is home to a wide array of mines, while the fishing industry has long been central to the character of the Atlantic provinces, though it has recently been in steep decline.

These industries are increasingly becoming less important to the overall economy. Only some 4% of Canadians are employed in these fields, and they account for less than 6% of GDP. Fact|date=September 2007 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 and lead. 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 industry.

The relatively large 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. [Howlett, Michael and M. Ramesh. "Political Economy of Canada: An Introduction." Toronto: McClelland and Stewart, 1992.]

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 and expansion activities overseas where prices are lower and governments more accommodating. Canadian companies are increasingly playing important roles in Latin America, Southeast Asia, and Africa.

It is the renewable resources that have raised some of the greatest concerns. After decades of escalating overexploitation 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, have in recent years moved to a more sustainable model.


industry in Quebec, Alberta and British Columbia.

Historically, an important issue in Canadian politics is that while Western Canada is one of the world's richest sources of energy, the industrial heartland of Southern Ontario has fewer native sources of power. It is, however, 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.

In times of high oil prices this means that the majority of Canada's population suffers, while the West benefits. 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.


Canada is also one of the world's largest suppliers of agricultural products, particularly of wheat and other grains. [ [ The Relative Position of Canada in the World Grain Market] ] Canada is a major exporter of agricultural products, to the United States but also to Europe and East 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, which is the WTO threshold. Consequently, Canada used only $848.2 million of its $4.3 billion subsidy allowance granted by the WTO. [ [ Canada's Domestic Agricultural Supports and the World Trade Organization] ]


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 follow this pattern; manufacturing has always been secondary, though certainly not unimportant. Partly because of this, Canada did not suffer as greatly from the pains of deindustrialization in the 1970s and 1980s.

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 neighboring 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. Canada's publicly funded health care system is also an important attraction, as it exempts companies from the high health insurance costs they must pay in the United States.

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

ervice sector

The service sector in Canada is vast and multifaceted, employing some three quarters of Canadians and accounting for over two thirds of GDP. [ [ CIA World Factbook - Canada] ] The largest employer is the retail sector, employing almost 12% of Canadians. [Wallace, Iain, "A Geography of the Canadian Economy." Don Mills: Oxford University Press, 2002.] The retail industry is mainly concentrated in a relatively small number of chain stores clustered together in shopping malls. In recent years the rise of big-box stores, such as Wal-Mart (of the United States) and Future Shop (a subsidiary of the US based Best Buy), have 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 services, employing 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 and Calgary (see Banking in Canada).

The education and health sectors are two of Canada's largest, but both are largely under the purview of the government. The health care industry has been rapidly 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 also an entertainment industry creating content both for local and international consumption. 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.

Political issues

Regional imbalances

The Canadian economy differs greatly from region to region. Traditionally Central Canada has been the economic engine of Canada, home to more than half of its population and much of its industry. Recent years have seen rapid growth in Western Canada as trade with Asia has enriched British Columbia and oil wealth provided a major boost to Alberta and Saskatchewan.

The four Atlantic provinces, though once the centre of economic activity, underwent a major decline in the late 19th century and have traditionally been significantly poorer than the rest of Canada, especially after the recent collapse of the fishing industry. Recent years have seen some significant moves towards diversification, especially as offshore oil and gas wealth have begun to flow into the region. Quebec has also traditionally been poorer than the Canadian average although by a lesser margin than the Atlantic provinces. In more recent years Newfoundland and Labrador have started to see a change in their economy, being called the "Celtic tiger of Canada," (in a comparison to the economic transformation in Ireland); it has also been called a "mini Alberta" because of new oil and gas exploration.

Relations with the U.S.

Canada and the United States share a deep and 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. [ [ The Daily, Friday, January 5, 2007. Labour Force Survey ] ] Disputes over trade tariffs, multi-lateral military action and controversial Canadian legislation such as same-sex marriage, immigration law, and legal medical marijuana have raised tensions and cooled relations between these two countries.

Despite these differences, the United States is by far Canada's largest trading partner, with more than [ $1.7] billion CAD in trade per day in 2005. 81% of Canada's exports go to the United States, and 67% of Canada's imports are from the United States. [ [ Imports, exports and trade balance of goods on a balance-of-payments basis, by country or country grouping ] ] Trade with Canada makes up for 23% of exports and 17% of imports for the United States. [ [ FTD - Statistics - Trade Highlights - Top Trading Partners ] ] By comparison, in 2005 this was more than U.S. trade with all countries in the European Union combined, [ [ FTD - Statistics - Country Data - U.S. Trade Balance with European Union ] ] and well over twice U.S. trade with all the countries of Latin America combined. [ [ FTD - Statistics - Country Data - U.S. Trade Balance with South and Central America ] ] 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. Fact|date=September 2007 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 406 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. [ [ Agriculture and Agri-Food Canada / Agriculture et Agroalimentaire Canada ] ] Similarly, Canada is the largest market for U.S. agricultural goods with nearly 20% of American food exports going to its Northern neighborFact|date=February 2007. 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] 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 hydro power 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.Fact|date=May 2007 Usually these issues are resolved through bilateral consultative forums or referral to World Trade Organization (WTO) or NAFTA dispute resolution.Fact|date=May 2007 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.Facts|date=May 2007

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.Facts|date=May 2007

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.Facts|date=May 2007

The U.S. is Canada's largest foreign investor; at the end of 1999, the stock of U.S. direct investment was estimated at $116.7 billion, or about 72% 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.Facts|date=May 2007

Canada is the third-largest foreign investor in the United States. At the end of 1999, the stock of Canadian direct investment in the United States was estimated at $90.4 billion. Canadian investment in the United States is concentrated in manufacturing, wholesale trade, real estate, petroleum, finance, and insurance and other services.Facts|date=May 2007

Median household income comparison

"Free Trade" Agreements

(source: [ DFAIT] )

*Canada-U.S. Free Trade Agreement (Signed 12-Oct-1987, superseded by NAFTA, which includes Mexico)
*North American Free Trade Agreement (Signed 01-Jan-1994)
*Canada-Israel Free Trade Agreement (Signed 01-Jan-1997)
*Canada-Chile Free Trade Agreement (Signed 05-Jul-1997)
*Canada-Costa Rica Free Trade Agreement (Signed 01-Nov-2002)
*Canada-European Free Trade Association Free Trade Agreement (Signed 26-Jan-2008)

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

*South Korea
*Dominican Republic

*Andean Community (Negotiations have already concluded with Peru)
*CARICOM (Caribbean Community)

Canada is also involved in the negotiations to create the following reigonal trade blocs:

*Canada Central American Free Trade Agreement
*Free Trade Area of the Americas (FTAA)

ee also

*Canadian and American economies compared
*Economic history of Canada
*Economy of Ontario
*Economy of Quebec
*Economy of Alberta
*History of the petroleum industry in Canada
*List of Canadian provinces and territories by gross domestic product

External links

* [ OECD's Canada country Web site] and [ OECD Economic Survey of Canada]


[There is an apparent discrepancy between the factbook's 65.4% of GDP estimate for Canada's debt in 2006 [] , and the 30.2% trumpeted by the Canadian government at [] . Both numbers are correct. The reason is that the Canadian government uses the OECD's "net" financial liabilities, while the CIA World Factbook uses a different measure of financial liabilities. The OECD itself reports the gross number as 68%, and the net number as 30.2% [] . The net number places Canada as one of the least indebted G8 countries, while the gross number is less flattering.]


*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.

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