Canada-US Trade: A Billion-Dollar Economic Partnership

The central idea of Harold Innis's thesis is an economic growth and development theory that was developed specifically to describe the economic history of Canada. What made the idea unique to Canada was how it evaluated the nation's particular geographic and historical circumstances (Barnes).et al. (2001). Staples are a group of natural resources (minerals, seafood, lumber, paper, fur) that have undergone minimal processing, according to Innis (1956). The theory of staples explains the expansion (or lack thereof) of the economy by focusing on the export of these goods to a primary economy. These necessities are shipped to the main economy to be processed into final commodities. A staples economy is defined by its dependence on imports from other large cities and its marginalization within the global economy.While Innis' staples theory includes economic dependency and its drawbacks, it is important to distinguish it from dependency theory (see Baran 1957 and Frank 1978). Thus, the expansion of staples is an incomplete form of industrial progress. Instead of encouraging economic diversification, Barnes et al. (2001) claim that economic development focuses on supporting the staples industries. The Clark-Fisher hypothesis is hampered by the fact that producers prioritize exports and are usually foreign-owned, with little consideration for the growth of the local economy (primary resources → manufacturing → services), which is the traditional trajectory of economic development (Watkins 1963). Even if there are other problems that come with limited economic development (a lack of diversity in consumption, varying employment rates by trade, and productivity inequalities),

this particular sort of development is known as the staples trap.

It should be emphasized, therefore, that an economy is not confined to the initial phase of the three stages of economic development. One aspect contributing to the expansion of staples and the trap that goes along with it is the internal conviction that a country's importance in the global economy is derived from its production of staples (Carey 1975; Watson 1977). Because of this misconception, governments and other institutions encourage the spread of staples, which furthers the trap.Consequently, a distinct manufacturing culture that sustains its own existence emerges inside the staples economy (Barnes et al. 2001).There are, of course, reasons why such a pattern of development occurs, even though it is ultimately not the greatest for the staples economy, despite the fact that economic dependency and a lack of internal economic development are harmful. Foreign-owned firms need to be involved from the beginning of development because of the high fixed costs involved in the production of staples. The other steps of the production process that involve the staple commodities are usually pre-existing in the major economy rather than the staples economy, and these foreign-owned enterprises are often involved in them. These phases encompass research and development, the development of equipment for removing the staples, and the production processes that utilize the staples as inputs. Governments in the staple economy are unable to satisfy the demands of foreign-owned corporations for infrastructure and advantageous business environments, which usually subsidize their survival, as a result of the corresponding loss of local power over businesses (Gunton 2003).

The staples economy is still reliant on its principal as a result. This is the staples trap.

While Innis' theory of staples was developed to explain the development of the Prairies and eastern Canada, other staple sectors, such as mining, coal mining, fishing, mining, forestry, and mining (Hayter and Barnes 1990; Wallace 1996; Parker 1997; Hayter 2000; Barnes et al. 2001), have also been the focus of recent research. Even if the theory of staples helps explain the pattern of economic change in Canada's regions, it's intriguing to apply it to modern Canada because, particularly after World War II, the nation's economy has changed towards the manufacturing and service industries.In actuality, economic geographers like John Holmes have conducted extensive research on the manufacturing sector, which produces cars and componentry and accounts for the majority of Canada's exports (1983, 1992, 1993, 1996, 2000).In addition, the "new staple economy" is starting to take form (see to Britton 1996). In the new staple economy, grain has become ethanol, ores have become metals, and raw logs have become prefabricated dwellings. However, because these changes involve a move from minimally processed to intermediate and final consumption commodities, they indicate that individuals are breaking free from the trap of staples.

This results in more value being added to Canadian production.

and if these changes are happening, the products shouldn't be called "staples." The same raw materials are still used in the production process, but more value-added work is now completed in the host country as opposed to the home country.Therefore, given that autos and their components now account for over 25% of exports and that staple commodities are becoming less important for the growth and development of the Canadian economy, is the staples hypothesis still relevant for evaluating the nation's economy? Yes, in fact. The government of Canada's supply of health care and, later, the relatively low value of the Canadian dollar (15–20 percent labor expense savings over the United States, hereinafter referred to as US) have resulted in an economical work force. As a result, the high-value-added production of body stampings, engines, and transmissions is located in the US, Canada's largest trading partner in the automotive industry, while labor-intensive automotive production, such as final assembly and certain labor-intensive automotive parts, is disproportionately drawn to Canada. This geographic division of labor and operations produced a "distinctive pattern of trade between Canada and the United States" (Holmes 1993, 26), with Canada enjoying an international trade surplus in vehicles and a deficit in automotive parts. Moreover, the decision-making procedures were geographically separated due to the three major manufacturers' US-based headquarters. This pattern of development is predicted by staples theory, but it is specific to the industrial sector.Rather than providing a case study of manufacturing in a particular industry and region, this article looks at Canadian industry-wide international trade patterns with the US. Canada trades with other countries, but the US makes up the vast majority of its trade, which has been steadily increasing. Consequently, the dominant