How Canada’s Exports to the US Boost Its Economy

Canada is one of the world’s largest exporters of goods and services, ranking 12th in the world in 2020 with a total value of $388 billion USD. The United States is by far Canada’s largest trading partner, accounting for 73% of its exports and 49% of its imports. In this article, we will explore how Canada’s exports to the US benefit its economy, what are the main products and sectors involved, and what are the challenges and opportunities for the future.

The Benefits of Exporting to the US

Exporting to the US has several advantages for Canada, such as:

Access to a large and diversified market: The US is the world’s largest economy, with a GDP of $21 trillion USD and a population of 331 million. It offers a huge and varied demand for Canadian products and services, ranging from energy and natural resources to automotive and aerospace. Exporting to the US allows Canada to diversify its sources of income and reduce its dependence on domestic consumption.
Proximity and integration: The US and Canada share a long and friendly border, as well as a common language, culture, and legal system. They are also highly integrated through various trade agreements, such as the North American Free Trade Agreement (NAFTA) and its successor, the United States-Mexico-Canada Agreement (USMCA). These agreements facilitate the flow of goods, services, capital, and labor across the border, reducing trade barriers and costs.
Innovation and competitiveness: Exporting to the US exposes Canadian firms to a competitive and dynamic market, where they have to meet high standards of quality, efficiency, and innovation. This encourages them to invest in research and development, adopt new technologies, and improve their productivity and performance. Exporting to the US also gives Canadian firms access to new ideas, knowledge, and networks that can spur innovation and growth.

The Main Products and Sectors Involved

Canada exports a wide range of products and services to the US, covering almost all sectors of the economy. According to the World Bank data for 2020, the top 10 products exported by Canada to the US were:

Petroleum oils and oils obtained from bituminous minerals ($47.6 billion USD)
Gold in unwrought forms non-monetary ($15.9 billion USD)
Automobiles with reciprocating piston engine displacement over 3000 cc ($12.1 billion USD)
Automobiles with reciprocating piston engine displacement between 1500 cc and 3000 cc ($11.4 billion USD)
Coniferous wood sawn or chipped lengthwise ($7.5 billion USD)
Petroleum gases ($7.4 billion USD)
Aircraft parts ($5.8 billion USD)
Sulfur ($5.7 billion USD)
Aluminum ($5.6 billion USD)
Wheat ($4.9 billion USD)

These products reflect Canada’s comparative advantage in natural resources, especially energy and minerals, as well as its strong manufacturing sector, especially automotive and aerospace. However, Canada also exports many other products and services to the US that are not captured by these statistics, such as:

Services: Canada is a major provider of services to the US, such as transportation, tourism, finance, insurance, education, health care, entertainment, and professional services. According to Statistics Canada data for 2019, Canada exported $97 billion CAD worth of services to the US, accounting for 55% of its total service exports.
High-tech products: Canada is also a leader in exporting high-tech products to the US, such as software, biotechnology, telecommunications equipment, medical devices, robotics, artificial intelligence, clean technology, and nanotechnology. According to Innovation, Science and Economic Development Canada data for 2018, Canada exported $18 billion CAD worth of high-tech products to the US, accounting for 13% of its total high-tech exports.

The Challenges and Opportunities for the Future

Despite the benefits of exporting to the US, Canada also faces some challenges and risks that could affect its trade relationship with its southern neighbor. Some of these are:

Trade disputes: The US and Canada have had several trade disputes over the years, involving issues such as softwood lumber, dairy products, steel and aluminum tariffs, aircraft subsidies,
and digital taxes. These disputes can result in retaliatory measures that harm both sides’ economies and consumers.
Political uncertainty: The US political landscape can also affect Canada’s trade prospects with the US. For example, the change of administration from Trump to Biden has brought some relief for Canada on issues such as climate change, immigration,
and multilateralism. However, it has also raised some concerns about potential protectionist policies or regulatory changes that could affect Canadian exports.
Diversification: While exporting to the US has many advantages, it also exposes Canada to the risk of overdependence on a single market. If the US economy slows down, faces a crisis, or imposes trade barriers, Canada could suffer significant losses. Therefore, Canada needs to diversify its export markets and products, and explore new opportunities in emerging economies, such as China, India, Brazil, and the European Union.

Canada’s exports to the US are a vital source of income, growth, and innovation for its economy. They also reflect the close and mutually beneficial relationship between the two countries. However, Canada also needs to be aware of the challenges and risks involved, and seek to diversify its trade portfolio and enhance its competitiveness. By doing so, Canada can ensure its long-term prosperity and resilience in the global market.

Canada’s exports to the United States: A resilient industry

Canada and the United States have a long history of trade relations, dating back to the Canada–United States Free Trade Agreement in 1989. The two countries are each other’s largest trading partners, with bilateral merchandise trade reaching $1,086 billion in 2020 . Despite the challenges posed by the COVID-19 pandemic, Canada’s exports to the United States remained resilient, accounting for 73.25% of Canada’s total exports in 2020 .

The main products that Canada exports to the United States are mineral fuels, oils, distillation products ($163.53 billion), vehicles other than railway, tramway ($45.67 billion), and machinery, nuclear reactors, boilers ($29.57 billion) . These products reflect the high degree of integration and complementarity between the two economies, especially in the energy and automotive sectors. Canada also exports a variety of agricultural products, such as cereals, meat, fish, and vegetables, as well as wood and paper products, to meet the demand of American consumers and industries.

Canada’s exports to the United States have shown remarkable recovery after the initial shock of the pandemic in April 2020, when they dropped to $31.7 billion, the lowest level since 2009 . By July 2020, exports had rebounded to $46 billion, close to the pre-pandemic levels in February 2020 . Exports continued to grow at a moderate pace for most of the remaining months, ending the year at $43.8 billion in December 2020 .

The outlook for Canada’s exports to the United States is positive, as both countries are committed to strengthening their trade relationship and supporting their economic recovery from the pandemic. The United States–Mexico–Canada Agreement (USMCA), which entered into force on July 1, 2020, provides a modernized framework for trade and investment between the three countries. The USMCA preserves and enhances market access for Canadian goods and services in the United States, while ensuring a level playing field for businesses and workers .

Canada’s exports to the United States are not only a vital source of income and jobs for Canadians, but also a testament to the enduring friendship and partnership between the two countries.

References:

http://www.nationalaglawcenter.org/wp-content/uploads/assets/crs/RL33087.pdf

http://nbr.org/downloads/pdfs/eta/PES_2013_summitpaper_Slutz.pdf

https://ustr.gov/countries-regions/americas/canada

https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/usmca-aeumc/index.aspx?lang=eng

https://tradingeconomics.com/canada/exports/united-states

https://wits.worldbank.org/CountryProfile/en/Country/CAN/Year/LTST/Summarytext

https://oec.world/en/profile/country/can/

https://www150.statcan.gc.ca/n1/pub/13-605-x/2017001/article/14841-eng.htm

https://www.shippingsolutions.com/blog/exporting-to-canada