Canada's Economy and Major Industries

Canada's Economic Identity

• Canada historically traded its primary resources to obtain semi-manufactured and finished goods
• Primary resources include crude oil, natural gas, potash, uranium, softwood lumber, diamonds, gold, iron ore, livestock, wheat, and fish
• Refining, processing, and manufacturing are required for these products, which are then sold domestically and internationally
• The historical Canadian identity is characterized by abundant natural resources but lacking skilled manufacturing
• Canada now has advanced manufacturing and processing capabilities
• The percentage of resource-based exports has decreased while exports of semi-manufactured and end products have increased
• Canada has a world-class high-tech industry in the GTA, K-W, and Ottawa regions
• Resource extraction is skilled work using advanced technology
• Strong manufacturing sectors need investments in human and physical capital (like Japan)

Canada’s Major Industries

• Primary industries are also known as "extractive industries"
• Natural resources include crops, cattle, poultry, milk, shellfish, cream, eggs, cement, sand, and gravel in addition to lumber and mining
• Examples of primary industries are Barrick Gold, Agnico Eagle Mines, Cold Water Fisheries, and West Fraser (lumber)

Secondary Industries

• Secondary industries involve processing and fabricating materials
• Wheat undergoes harvesting, separation from the stalk, and sale to milling companies for refinement
• In 2022, Canada was the world's fourth-largest wheat exporter and the largest exporter of durum wheat used in pastas
• Raw products (e.g., grinding wheat into flour) require further refining to be consumer-ready
• Flour undergoes further refinement and enrichment

Manufactured Goods

• Refined and enriched flour is seen as manufactured
• They require further processing
• The process raw materials using specialized machinery, package output in standardized quantities, scrutinize quality, and add value
• Specialized machinery increases the value
• Examples include processing live fish, cleaning, scaling, and canning
• Companies like George Weston Ltd (bread), Magna International (car parts), and Cenovus Energy Inc. (oil) are in the processing industry

Service Industry (Tertiary)

• Includes intangible goods
• Major categories are commercial services, travel services, transport, and government
• Commercial services deal with construction, insurance, finance, royalties, license fees, rentals, architectural/engineering work, culture, entertainment, IT, internet commerce, and communication tech
• Travel services include business and personal travel
• Transport includes transportation by air, water, and land, and freight for goods
• Government includes military, education, healthcare, and social/community services
• RBC, Shopify, and Sun Life Financial cover insurance

Canada's Global Trade

• In 2022, Canada's two-way trade in goods/services was nearly 1.9 trillion
• Exports and imports grew 21.2% and 20.5% respectively in 2022, and the trade to GDP ratio was 67.4%
• The US is Canada's largest export market, followed by China, the UK, Japan, and Mexico
• The US, China, Mexico, Germany, and Japan are major import partners
• Canada generally has a positive trade balance, marked by a $3.55 billion surplus in December 2024
• The trade balance fluctuates between surpluses and deficits
• Major exports include crude petroleum, motor vehicles, gold, refined petroleum, and industrial machinery
• Primary imports include industrial machinery, motor vehicles, electrical machinery, oil and mineral fuels, and pharmaceuticals
• Agreements like CUSMA (USMCA), CETA, and CPTPP enhance market access and trade
• The US is Canada's largest trading partner, with bilateral trade valued at over $923 billion in 2023
• Canada ranks as the 10th largest exporter and 13th largest importer

Canadian Exports

• Energy (oil and natural gas)
• The top exporting sectors in 2023 are energy (18% from Alberta), automotive/parts (11% from Ontario), metals and non-metal minerals (10%), and consumer products (9%)

Growth In International Business

• Communication technology, including email, conferencing software, cell phones, and mobile devices, have grown international expansion easier
• Businesses using new software and internet capabilities have an advantage
• Time zones can be limiting since people in other time zones may not be working
• In 1878, Sir Sandford Fleming, a Canadian, divided the world into time zones each 15 degrees longitude apart

Reasons for Recent Growth

• Transportation has been revolutionized
• Larger boats carry over 24,000 containers at once and travel well
• Planes now cross the Atlantic in hours
• Rail is widely used in Canada, the US, and Mexico
• Truck/tractor trailers deliver via North American highways
• Air is the fastest, but most expensive, way to ship
• Pipelines ship natural gas/crude oil

Free Trade

• The WTO has 166 members as of August 2024 that work to reduce restrictions
• Free Trade agreements enable the movement of goods across political boundaries, such as NAFTA/CUSMA and the European Union

Business Confidence

• International business is now less risky due to finance, insurance, legalized protection, and tracking systems
• Banks with international branches allow the free flow of funds
• Insurance protects businesses from damages and non-payments
• Legal firms protect intellectual property
• Courier companies ensure predictable and trackable

Global Competition

• New products are constantly being introduced
• Businesses spur more business

Canada-US-Mexico Free Trade Agreement (CUSMA)

• In the USA, CUSMA is the same as USMCA
• The US and Canada had a FTA in 1989
• The US, Mexico, and Canada had NAFTA in 1994
• NAFTA was updated to the CUSMA/USMCA under the Trump Administration, effective July 2020, and is often called NAFTA 2.0
• The free trade zone encompass about 500 million people and over $26 trillion in GDP
• The USA is Canada’s largest and most important trading partner
• USA receives over 65% of all Canadian exports
• Canada trades $2 trillion with Canada
• It comprises 67% of 2way trade
• As the US is so important, 30% of everything that Canada produces ends up in the USA and it has a trade surplus of over $230 billion
• Mexico only comprises about 1.2% of Canada’s exports, but about 5.5% of imports so it has a trade deficit with Mexico
• CUSMA preserves the trading relationship and modernizes provisions
• Typically Canada has a surplus in merchandise and a deficit in services and its top provinces for trade are Alberta and Ontario

Rules of Origin

• The rules determine composition thresholds and requirements that allow for preferential tariff treatment under a free trade agreement
• $3300 is the exception, where goods under this threshold do not have to meet rules of origin

NAFTA vs USMCA

• NAFTA had stable import/export pricing, while most other categories increased by 86% due to synergies and efficiencies
• A goal of NAFTA signing was curbing illegal immigration to the USA by strengthening Mexico’s economy to raise living standards/wages alleviate poverty
• Cars need an increased content of 62.5% North American parts by sourcing from Mexico, which is cheaper to build tariff free
• Building a car is an international business, for different companies from all around the world are required to produce one car leading to higher specialization and therefore more competition and lower costs
• Major cars sold manufacture majority of the cars within North America to avoid the 2.5% foreign car tariff
• Largest Toyota facility outside of Japan is in Cambridge Ontario, as profit margin on cars are too low
• A drawdown of the agreements is the possibility of manufacturers moving to Mexico where cheaper labour costs are readily found
• New CUSMA requires 75% North American parts (up from 62.5%) with 45% wage of $16 an hour
• Automakers may reconsider the construction and assembly of car parts as a result
• If car companies cannot meet the 75% production standards, they may either choose to pay the tariff, or leave North America altogether
• More North American demands could raise car prices, which would result in less cars sold and fewer jobs

Global Trading Nations

• China went from 21st in the world in the late 1970s to first by 2008 and is the now runaway power combining both 2nd and 3rd
• Canada dropped from 9th to 13th
• Global export powerhouses are China, Hong Kong, S Korea Mexico, Singapore, Taiwan, and Russia which in the 1970s oil Saudi Arabia developing nations developed powerhouses however things have changed
• USA, Germany, and Japan remain as leading exporters
• Mexico has climbed to becoming the eleventh largest exporter thanks to the propelled NAFTA and now USMCA
• Vietnam has increased its exports by over 50 times
• The UK has fallen in global trade, and by 2020 fell out of the top 10 exporters
• In 1979 trade represented 36% of the global GDP but by 2019 the figure had grown to 60% due to cooperation and interdependence
• GDP is measurement of domestic production
• Singapore imposes zero tariffs on most goods thus encouraging companies to locate in Singapore in RCEP
• RCEP has China, Japan, South Korea, India, Australia, and New Zealand
• Canada and ASEAN commited to establish a strategic relationship
• Most power is concentrated in the global north, but Asia is growing
• South America and Africa are resource rich, but comparatively small and are still developing
• Japan is a small country with little natural resources but has human capital in terms of education, trading, and technology
• Canada found in one of the wealthiest regions
• EU used to be dominate during the age of mercantilism
• Political enemies can restrict receipt of essential goods through interdependence

EU

• The formation of a European Union removes the need cross four borders, use five languages, and use diverse currencies
• The EU includes 27 countries and almost half a billion people with its capital in Brussels, Belgium
• EU has its own currency (the Euro), even its own anthem and flag
• EU originated as the European Steel and Coal Community in 1952 in Paris, France, with six member states (Belgium, France, West Germany, Italy, Luxembourg, Netherlands)
• The Maastricht Treaty of 1993 established the current European Union
• EU aims for the free movement of people, goods, services, and financial capital promotion of peace, economic growth, gov, integration, safety, and prosperity
• Greatest achievements is the implementation of a common currency - the Euro which was adopted by twelve of the originating member states, excluding Great Britain, Sweden and Denmark
• The EU is Canada’s third largest trading partner behind the United States and China with their current 2 way trade reaching $77 Billion CAD Annually

Euro

• Banknotes have architectural images on them that symbolize European spirit
• The 5-euro banknote is Classical (Ancient Greece and Rome)
• The 10 euro features Romanesque characteristics
• The 20 Euro is Gothic
• The 50 Euro Note has Renaissance components to it
• The 100 Euro is Baroque
• The 200 Euro: 19th century iron and glass architecture
• Fourth Presidents: Willem F Duisenberg, Jean Claude Trichet, Mario Draghi, and Christine Lagarde
• The European Central Bank is in Frankfurt

European Facts

• Twelve stars are on the EU flag
• Countries pay membership dues/vote on EU laws
• EU citizens can live, work, and retire in any EU country
• Norway, Iceland, and Liechtenstein are not part of EU but part of the EEA
• Switzerland isfiercely independent and neutral and also part of the Schengen Area
• The Eurozone includes the economic union using the euro to facilitate trade and
• In general, EU laws do not apply to overseas islands and territories Maastricht Treaty renamed the EEC to the EU
• There is more cooperation between governments such as in the areas of defense and justice who work to set up plans
• the Euro is used in 20 EU countries: Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece,Ireland,Italy,Latvia,Lithuania,Luxembourg,Malta,the Netherlands,Portugal,Slovakia,Slovenia,and Spain
• Sweden, Norway, Denmark, Great Britain and Switzerland are notibly absent

World Trade

1. Stock markets down
2. Retaliatory tariffs hurt trade
3. Nations look inward, therefore self sufficient
4. Prices go up due to less competition
5. Local jobs/production increase
6. There is less cooperation, leading to political/economic rivalry
7. Gold and Silver are prominent
8. Long-term growth decreases
9. Smoot Hawley tariffs of 1930 worsened the great depression