Canada-US Free Trade Agreement – Why Should Canadians Concern Their Neighbors?

A trading nation is simply a nation where most domestic commerce makes up a significant portion of its gross domestic product. If you’ve ever been to Asia, you may have noticed that the nations there all have one thing in common: The majority of their currency is the major world currency, the dollar. Of course, this doesn’t mean that all countries with a strong U.S. debit presence are trading nations. In fact, it is a stretch for even two like countries to be trading nations, let alone one that relies almost entirely on the strength of its U.S. dollar.

Still, Canada has a distinct advantage over its trading contemporaries in the Global North. Canada’s economy is based almost entirely on exports, primarily oil and natural gas. As a result, much of the trading that takes place between Canada and the United States takes place on the strength of the United States dollar. Canada’s economy is also almost completely immune to any major currency fluctuations. In fact, if you take a look at recent numbers, it has been slower than the U.S. at times, but overall export growth has been strong, which means Canada has long been the economic engine of the North.

There are other signs that Canada is the Trading Nation that many people think it is. For example, the current state of China’s economy is doing far more to damage the value of the American dollar than the other way around. China’s massive manufacturing output, its huge appetite for commodities like oil and natural gas, and the fact that the U.S. accounts for roughly forty percent of China’s exports, means that China’s slowdown has been a boon for American exporters. In fact, just recently China announced that it would add $1 trillion to its gross domestic product through foreign trade.

This means that the United States has been virtually wiped out by China’s growth. However, while the United States has felt the pain of China’s growth, it has also enjoyed far more than most people thought it would. The country still holds the largest number of world trade shares, and even though the U.S.A. has suffered many economic blows in recent years, the country continues to buy enormous amounts of goods from around the world, even as it pumps billions of dollars into our failing economy. And while China may be a trading nation, it is also a cheap export nation, meaning that its goods go to countries like Canada, where labor costs are significantly lower than here in the States, in order to make their exports cheaper.

So, what does all of this mean for Canada? As it becomes more apparent that Canada has become the dominant international trading nation, its government will have to look at ways to expand and strengthen its own economy, and the first steps will likely be free-trade deals with the United States. But beyond that, a great deal of the economic makeup of Canada is based on exporting products to the United States, and so a sudden shift in trade flows, particularly towards the U.S., could have a dramatic effect on the Canadian economy, making it more difficult than ever for our neighbors to continue their prosperity. While the reasons for this shift may not be immediately obvious, we should all fear that the once-friendly relationship between our two countries may be torn apart by trade competition.

If you’d like to learn more about how other nations feel about the possibility of a Canada-U.S. free trade agreement, please see “Trading Nation” bylocks and Wheatbelt. This book provides the unique perspective of an independent Canadian, who takes a deep dive into the economics of trade between Canada and the United States. This highly-illuminated red offers up a wealth of important information about the way international trade works, why Canada’s free trade agreements are currently so favorable, and what implications a potential deal might bring. This comprehensive guide to global trade provides no opinion on the proposed Canada-U.S. free trade deal; instead, it offers up an analysis of why such a deal might benefit the United States more than it benefits Canada.