US and Canada Essay -- Economic Relations

Economic relations between Canada and the United States In January 1989, Canada and the US implemented the USA-Canada free trade agreement that marked a major increase in trade among them. Their commerce forms the largest bilateral trading relationship in the world. As a result of the free trade agreement, the economic relationship between them has succeeded and the two economies have become highly interconnected. In 1994, this agreement was partially altered and broadened to include Mexico in the North American Free Trade Agreement (NAFTA) (McKinney 2010). Canada’s economy is geographically divided into economic clusters that have deeper relations with the USA than the rest of Canada. For instance, eight of the ten biggest Canadians cities are within 100 miles of the US border. After the free trade agreement, Canadian economy emerged as more dependent on international trade, and US-Canada trade was in part responsible for that. Canada’s exports of goods and services increased from 25 percent of gross domestic product (GDP) in 1989 to 43 percent in 2002, and exports to the USA augmented from 18.6 percent to 37.6 percent of GDP during the same period. Canada’s imports of goods and services grew from 25.8 percent to 38.1 percent of GDP. The US share slightly increased from 63.8 to 71.1 percent (McKinney 2010). As an indicator of provinces’ lack of commerce among them, between 1989 and 2002, inter-provincial exports in Canada fell from 22.5 percent to 19.7 percent of GDP. In 2001, 90 percent of Canadian provinces exported more to the USA than to other provinces – only two provinces did so in 1989. Therefore, Canadian economy has been more intertwined with parts of the USA and relatively less linked across provinces (McKinney 2010)... ...nd investment in its oil sands. In fact, the rise in the guaranteed production of oil sands, as the US intends to do, will allow Canada to invest in new technologies to reduce the extraction cost of oil sands. Second, Canada would amend NAFTA to include a privilege treatment with regards to the US board control/access, and solution and/or extinction trade of disputes with the US, such as softwood lumber, agricultural policies and intellectual property rights. Finally, the US would have to reimburse all the energy contracts signed among Canada and China. Clearly the relationship between China and Canada would be seriously deteriorated. As a rising power, China would soon become the greater economy in the world and retaliation would be likely to happen. Although as risky as the first option, this one seems to be worse in the long-run, rather than in the short-run.