Teaching About the World’s Largest Trade

Relationship (AKA: 10 Things You Should Know About the Canadian Economy)

2011 STUDY CANADA Summer Institute Dr. Paul A. Storer

Source:http://sbadrinath.files.wordpress.com/2009/03/different26rqcu3.jpg?w=400&h=226

1. Canada is our largest trading partner ….

1. … and we share the world’s largest bilateral trading relationship

2. Canada is the most important export destination

for 70% of the 50 states

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

Canada’s Rank for States’ Exports of Goods

0

2

4

6

8

10

12

14

16

18

20

Sh

are

(%)

California Oregon Washington

State Export Shares in 2009

Canada

China

Japan

Malaysia

Canada

Mexico

Canada

China

Japan

0

5

10

15

20

25

30

35

40

45

50

Sh

are

(%)

Michigan Ohio Pennsylvania

State Export Shares in 2009

China China China

Canada

Canada C

anada

Me

xico

Mexico Mexico

0

5

10

15

20

25

30

35

Sh

are

(%)

Colorado Georgia North Carolina

State Export Shares in 2009

China

China

Netherlands

Mexico

China

Canada

Mexico

Canada

Canada

Source: Kasoff, Drennen, & Storer Chapter

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

3. Canada is the biggest source of U.S.

petroleum imports

U.S. Petroleum Imports (2009)(Source: U.S. Energy Info. Agency)

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

• Embassy of Canada.

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

Oil Sands

Reserves

• Source:• www.ubc.ca

• Source: www.guardian.com

B.C. Carbon Tax Program

4. Canada’s economy is very advanced and trade is often

“apples for apples”

The Modern Canadian Economy: Technology

Transportation

SeaTac Airport Shuttle Trains:

•Source: http://www.visitingdc.com/images/seatac-train.jpg

SeaTac Airport Shuttle Trains:Made in PA by a Canadian Company

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

Making Things Together:Specialization, Scale and“Apples for Apples” Trade

Ford Edge:Oakville, Ontario. Canada cbc.ca

North American Specialization

Ford Escape:Kansas City, MO

5. The Canadian economy is strong and quite competitive

Source: The Economist

5. … Canadians are shopping for bargains in the United States

6. Trade isn’t just goods: Trade in services and foreign

investment

The Economist, U.S. Edition, January 22, 2011

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

Source: http://hockeygonewild.wordpress.com/2010/03/09/

Identify the symbols and logos:

http://www.flickr.com/photos/achimh/4368189976/sizes/l/in/photostream/

7. Canada had a long history of protecting its economy from

U.S. competition

Source:Hart, M.A Trading Nation

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

8. Canadians and Americans fear the border – but for

different reasons

Trade, Culture, and Sovereignty

• Source: Aislin Cartoon

• Montreal Gazette

Source: Molson

“I Am Canadian” ad

•Canada: A Source of

“Vulnerabilities?”

Source: Bellingham Herald

• Source: ABC news • Source: International Border Commission

•Source: U.S. Customs and Border Protection

Delays and

Displacement:Just-in-time

orJust-in-case?

9. Canada’s economy has performed well under free trade

Unemployment Rates

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Canada

United States

Unemployment Rates

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Canada

United States

Unemployment Rates

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Canada

United States

Unemployment Rates

2

3

4

5

6

7

8

9

10

11

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Canada

United States

December 2010 - Canada: 7.6%, United States: 9.4%

Total Employment(January 2007 = 100)

94

95

96

97

98

99

100

101

102

103

104

Canada

United States

Wall Street Journal, Monday January 3, 2011

10. NAFTA is much less ambitious than the European

Union (and isn’t even a complete free trade

agreement)

NAFTA and Rules of Origin

• Rules of origin grant access to NAFTA tariff preferences.

• Compliance costs are non-trivial.

• Rules limit a “perimeter” approach.

U.S. Commerce Department

Guide

Regional Value Content Example

U.S. – Canada Softwood Lumber Agreement 2006

•January 2007

Products Subject to SLA 2006• Softwood lumber products processed in Canada and

imported into the US and classified in Chapter 44 of the HTS

• 2007 HTSUS

• 4407.10.01

• 4409.10.05

• 4409.10.10

• 4409.10.20

• 4409.10.90

• *4418.90.2500

• *4418.90.4690

• *4421.90.7040

• *4421.90.9740

•* Lumber products classified in these tariff numbers that do not conform to the specifications of the exclusion in Annex 1A(4) are subject to SLA 2006

•2006 HTSUS•4407.10.00

•4409.10.05

•4409.10.10

•4409.10.20

•4409.10.90

•*4418.90.4590

•*4421.90.7040

•*4421.90.9740