Teaching About the World’s Largest Trade Relationship

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

Study Canada Summer Institute 2014Dr. Paul A. Storer

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

Some Questions of Interest

• Why is Canada so important?

• How does globalization affect an economy?

• What happens when you trade with a much bigger country?

1. Canada is our largest trading partner ….

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

WSJ, Dec. 31 2009

Canada China Mexico Japan Germany Korea U.K.0%

2%

4%

6%

8%

10%

12%

14%

16%

18% 16.4%

14.6%13.2%

5.3%4.2%

2.7% 2.6%

Country Shares of Total US Goods Trade (2013)

China Canada Mexico Japan Germany Korea U.K.0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%19.4%

14.6%

12.4%

6.1%5.1%

2.7% 2.3%

Country Shares of US Goods Imports (2013)

Canada Mexico China Japan Germany U.K. Brazil0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20% 19.0%

14.3%

7.7%

4.1%3.0% 3.0% 2.8%

Country Shares of US Goods Exports (2013)

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

Source: Kasoff, Drennen, & Storer Chapter

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

petroleum imports

Canad

a

Saudi A

rabia

Mexico

Venezu

elaRussi

a

Colombia Iraq

Kuwait

Nigeria

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.53.1

1.3

0.90.8

0.5 0.4 0.3 0.3 0.3

U.S. Petroleum Imports, 2013

Mill

ion

Barr

els p

er D

ay

(Source: US EIA Monthly Review)

• Source: “The World’s Largest Trading Relationship”,• Embassy of Canada.

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

“Oil / Tar Sands”Source:The Economist

Oil Sands

Reserves• Source:• www.ubc.ca

Oil Sands: Surface Digging Method

• Source: www.guardian.com

Keystone XLPipelineIssue

Source: www.latimes.com

http://nationalpostcomment.files.wordpress.com/2011/11/keystone-pipeline.jpg?w=620

Source:TheEconomist

Lac Megantic Derailment & Explosionhttp://www.ctvnews.ca/polopoly_fs/1.1359962!/httpImage/image.jpg_gen/derivatives/landscape_960/image.jpg

Pipeline Alternatives: Rail

The Economist’s Solution

• GHG Emissions are an “external cost”

• Internalize the “externality”

• Put a price on carbon emissions

• Use will reflect the full costs

B.C. Carbon Tax Program

4. Canada’s economic base has evolved over time and economic policy is more

“hands off” than in the 1970s or 1980s

GDP Shares, April 2012

The Modern Canadian Economy: Technology

Transportation

http://www.airlinereporter.com/wp-content/uploads/2012/05/ascrj700.jpg

Adaptation: High-end Clothing

1970s: Government Ownership of Petro-Can

5. Canada-U.S. trade is often about trading

“apples for apples” and “making things together”

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

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

6. The Canadian economy is strong and quite competitive

Source: The Economist

…Canada’s economy has performed well under free trade

2

4

6

8

10

12

14

Unemployment Rate (%)

Canada

United States

2

4

6

8

10

12

14

Unemployment Rate (%)

Canada

United States

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-144

5

6

7

8

9

10

Unemployment Rate in %

U.S.A.

Canada

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-144

5

6

7

8

9

10

Unemployment Rate in %

U.S.A.

Canada

http://g-mond.parisschoolofeconomics.eu/topincomes/

•Top 1% Share in 2007

• 18.3%

• 13.8%

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

investment

http://www.findfamilyfun.com/birch-bay-washington.htm

• http://www.bloomberg.com/video/91845099/

• 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/

8. 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

• http://news.nationalpost.com• /2012/03/31/tempest-in-a-• yogourt-cup-u-s-based-• chobani-seen-as-threat-to-• local-makers/

9. 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

Mayflower Pub, Elgin St., Ottawa, July 3, 2012

• http://si.wsj.net/public/resources/images/OB-TN162_HEALTH_G_20120625193406.jpg

• Canada: A Source of “Vulnerabilities?”

Source: Bellingham Herald

• Source: ABC news • Source: International Border Commission

10. Canada-U.S. Trade: What Will the Future Bring?

70%

72%

74%

76%

78%

80%

82%

84%

86%

88%USA Share of Canada's Exports

Successes or Failures?

Source: http://www.thestar.com/opinion/editorialopinion/article/1029360--the-cost-of-freer-trade

http://www.dol.wa.gov/images/DLsamples-EDLLg.jpg