Canada and the US: Trade Partners for Economic Growth

The United States of America and Canada participate in the most extensive trading connection in the world, which is responsible for the maintenance of millions of jobs in both countries. We are each other's most important trading partners, with approximately $3.6 billion worth of products and services making their way across the border every single day in the year 2023. Co-investment and co-development are involved in the production of many of these items, which results in our networks being highly integrated. Additionally, the United States of America and Canada have a major investment relationship. The United States of America is the single largest investor in Canada, and as of the end of 2022, Canada was the largest source of foreign direct investment (FDI) in the United States. Furthermore, Canada is the single largest foreign supplier of energy to the United States of America than any other country.

The trade relationship between the United States and Canada has been governed by a series of free trade agreements for the greater part of four decades. The most recent of these agreements is the Canada-United States-Mexico Agreement (CUSMA), which went into effect in July of 2020. Through the establishment of durable and efficient supply chains throughout all of the most important economic sectors, CUSMA serves as the foundation for our robust and well-balanced trading relationship with the United States of America and Mexico.

There are less advantages to being close to the United States.

Why, then, should one diversify? Being in close proximity to the United States of America is not as easy as it used to be, to answer the question in a nutshell. This is due, in part, to the shockingly protectionist stance taken by the administration of President Donald Trump of the United States of America; nevertheless, the fundamental cause of the problem predates Trump.

For the past fifteen to twenty years, the United States of America has not been the driving force behind the expansion of the global economy as it once was. During the past two decades, the United States' contribution to global growth has decreased from approximately 32 percent in the 1990s to approximately 17 percent in current decade. current is a nearly fifty percent reduction. According to our research of trade statistics from the World Bank that was provided by the Institute for Competitiveness & Prosperity, Asia's contribution has increased from 32 percent to just over 50 percent during the same time period. A twofold obstacle has been presented to Canada as a result of this. To begin, we have a considerable lack of exposure to economies that are emerging markets, which means that we are not receiving much of an advantage from the acceleration of their growth. A further ten percent of our trade is sent to other advanced economies with moderate development, the most of which are located in Europe. This is in addition to the seventy-five percent that is sent to the United States. Our commerce with rising economies that are growing at a quicker rate, such as China, India, South Korea, Mexico, and Brazil, accounts for only around nine percent of our total trade. Our colleagues have a substantially higher average than this. In Germany, the percentage of exports that are destined for emerging markets and other developing countries is typically in the 20s; in Japan and the United States, it is typically in the 30s; and in Australia, it is typically in the 40s.

The Asian markets are considered to be dangerous.

Emerging markets, and Asian markets in particular, are sometimes perceived as further away and less familiar than other markets. The penetration of these areas is considered to be riskier and more expensive. The repercussions have been extremely severe. Over the course of the past fifteen years, Canada's share of the global export market has decreased from more than four and a half percent to approximately two percent. While it was inevitable that a portion of this trend would occur as a result of the participation of large emerging market economies in the global trade and investment network, Canada's decline has been especially unexpected.

Canada's performance since the year 2000 has been the second poorest among the top 20 exporting countries in the world; only Japan has experienced a worse decrease in its trade share than Canada has. Canada's market share in the United States, which is also experiencing a decline on a worldwide scale, is decreasing. We ought to instead concentrate on expanding our market share in markets that are expanding their market share. This necessitates expanding our commercial activities to include emerging market economies, notably those located in Asia. First and foremost, we will begin with India and China, which are the two largest economies in Asia. The new United States-Mexico-Canada pact (USMCA) includes clauses that permit signatories to withdraw from the pact in the event that one of the countries pursues a separate free-trade arrangement with a "nonmarket country," specifically China. However, this should not be a barrier to this change in direction.

Are the economies of the United States and Canada so intertwined?

For instance, there is no longer any profit to be made from operating a big steel and iron foundry; hence, an overwhelming majority of steel is produced by smaller mills. These mills are available in both the United States of America and Canada, and they are specialized in the production of a specific commodity. The problem is that a significant number of essential products are only manufactured on one side of the border. It is extremely difficult, if not impossible, to obtain them from within your own sovereign nation. This rebar has an epoxy coating on it. Reinforcing concrete that will be exposed to salt water, such as building bridges in cold areas or anything else that will be constructed in an ocean, is one of the applications for this material. Exactly one company in Canada is responsible for its production. Despite the fact that it is utilized in every region of the northern United States as well as on both coasts, the demand for this particular product is still higher in Canada, which is why it is not very logical to manufacture it in the United States. This is a facility in Quebec that produces aluminum. Electricity is the primary expense that must be incurred in order to extract aluminum from its ore. As a result of the province of Quebec's abundant hydroelectric power, the cost of electricity is significantly lower there. If Americans want to buy aluminum, it is much more logical for them to purchase it in Quebec rather than attempting to produce it in locations that have expensive electricity.