Canada–United States trade relations

The United States and Canada have the largest trade relationship in the world.^[1] In 2012, U.S. merchandise trade with Canada consisted of US$324.2 billion in imports and US$292.4 billion in exports.^[2] The trade relationship between the two countries crosses all industries and is vital to both nations’ success as each country is the largest trade partner of the other.

The trade across Ambassador Bridge, between Windsor, Ontario, and Detroit, Michigan, alone is equal to all trade between the United States and Japan.^[3][4]

Before NAFTA

Canadian politicians have debated free trade since 1866. Free trade was generally supported by the Liberal Party of Canada, and was a main topic in the 1911 Canadian Federal Election. After the Liberals lost that election, the topic was a non-issue for many years. Although there were many bilateral agreements reducing tariffs, a free trade agreement was not reached until the Canada-United States Free Trade Agreement in 1987. The agreement intended to promote a free market between the two nations, and encourage investments within that market.^[5]

North American Free Trade Agreement (NAFTA)

The Canada–United States Free Trade Agreement laid the groundwork for a multilateral and multicultural agreement between, the United States, Mexico, and Canada, called the North American Free Trade Agreement (NAFTA), which has helped to increase more trade among them. Although there are some disfunction between the countries’ especially in the area of automobiles and agriculture, the trends are negligible as the agreement has arguably been a boon for all nations involved.^[4]

Disputes

There are several disputes arising from the bilateral trade between the two nations. The United States placed Canada on its Special 301 Report intellectual property rights enforcement (although under the mildest category of "rebuke"). Other products from Canada under dispute include softwood lumber, beef, tomatoes, and other agricultural products.^[4]

The heightened border security as a result of the 2001 terrorist attacks has been an issue of concern for businesses in both countries. The issue has become less of a concern since the attacks with the development of new technology, registration, training, and fewer rules. However, a midpoint estimate of USD$10.5 billion cost to businesses in delays and uncertain travel time have had an impact on trade.^[1]

One ongoing and complex trade issue involves the importation of cheaper prescription drugs from Canada to the United States. Due to the Canadian government's price controls as part of their state-run medical system, prices for prescription drugs can be a fraction of the price paid by consumers in the unregulated U.S. market. While laws in the United States have been passed at the national level against such sales, specific state and local governments have passed their own legislation to allow the trade to continue. American drug companies—often supporters of political campaigns—have obviously come out against the practice.

According to a 2007 study commissioned by the Canadian Embassy in the United States, Canada–United States trade supported 7.1 million American jobs.

U.S. State	U.S. Jobs Supported[6]	Rank
Alabama	105,000	22
Alaska	3,100	50
Arizona	128,750	20
Arkansas	63,250	32
California	832,250	1
Colorado	123,750	21
Connecticut	90,250	27
Delaware	21,250	46
District of Columbia	29,000	38
Florida	404,750	4
Georgia	211,750	9
Hawaii	37,000	38
Idaho	33,500	40
Illinois	304,500	5
Indiana	147,750	15
Iowa	78,000	30
Kansas	72,750	31
Kentucky	96,000	25
Louisiana	102,000	24
Maine	32,250	42
Maryland	140,250	23
Massachusetts	172,250	13
Michigan	221,500	8
Minnesota	141,250	19
Mississippi	61,750	33
Missouri	144,750	17
Montana	24,250	44
Nebraska	49,750	36
Nevada	61,250	34
New Hampshire	32,750	41
New Jersey	206,750	11
New Mexico	44,500	37
New York	468,750	3
North Carolina	208,500	10
North Dakota	18,750	47
Ohio	267,500	7
Oklahoma	82,250	29
Oregon	88,750	28
Pennsylvania	295,250	6
Rhode Island	26,000	43
South Carolina	95,250	26
South Dakota	21,500	45
Tennessee	146,000	16
Texas	521,750	2
Utah	61,250	35
Vermont	17,500	48
Virginia	197,000	12
Washington	153,000	14
West Virginia	37,000	39
Wisconsin	141,500	18
Wyoming	14,000	49
Total	7,079,350

Softwood lumber

Log driving near Vancouver, B.C., Canada

The Canada–United States softwood lumber dispute is one of the most significant and enduring trade disputes in modern history. The dispute has had its biggest effect on British Columbia, the major Canadian exporter of softwood lumber to the United States.

The heart of the dispute is the claim that the Canadian lumber industry is unfairly subsidized by the federal and provincial governments. Specifically, most timber in Canada is owned by provincial governments. The price charged to harvest the timber (the "stumpage fee") is set administratively rather than through a competitive auction, as is often the practice in the United States. The United States claims that the provision of government timber at below market prices constitutes an unfair subsidy. Under U.S. trade remedy laws, foreign goods benefiting from subsidies can be subject to a countervailing duty tariff to offset the subsidy and bring the price of the product back up to market rates.

Proposals

Since the September 11th attacks, there has been debate on whether there should be further North American integration. Some have proposed the adoption of the Amero under the North American Currency Union as the official currency of North America. While these discussions are more prevalent in Canada, studies have shown that United States citizens would not object to economic integration. Former U.S. Ambassador Paul Cellucci stated, however, “Security trumps trade” in the United States, and so as long as Canada is a possible point of entry for terrorists, such integration seems unfeasible.^[7]

Energy

The strength of the Canada–U.S. relationship is demonstrated by impressive bilateral trade of approximately $1.9 billion a day, along the world’s longest undefended border. Energy trade is the largest component of this cross-border commerce. Canada has the third-largest oil reserves (after Saudi Arabia and Venezuela), thanks to its oil-sands resources. The United States has historically been Canada’s only foreign market for natural gas, oil, and hydropower. In 2010, almost 100% of Canada’s exports in these commodity classes were destined for the United States. Canada is the largest foreign supplier of crude oil (25% of oil imports) and natural gas to the United States. In short, this energy relationship has enhanced U.S. energy security and provided Canada with steady demand for its energy exports.

However, this highly integrated U.S.–Canada energy relationship may change dramatically in the near future. U.S. oil and natural gas production and reserves are expanding because of growing tight oil and shale gas developments. Furthermore, the U.S. Energy Information Administration (EIA) forecasts slower growth in U.S. oil and natural gas consumption in the coming decades until 2035. Consequently, the United States no longer appears to be an unlimited market for Canadian energy, leaving Canada seeking new export destinations. In addition, imminent policy decisions in the United States, such as whether to approve Keystone XL, may have profound effects on the U.S.–Canada energy relationship and will significantly affect energy markets beyond North America.

Both Canada and the United States are increasingly reliant on foreign investment to develop their resource sectors, with Asia serving as an important source of capital. Asian investors initially focused on project investments as minority joint venture partners but are showing increasing interest in owning production companies. Asian investors' objectives for investing in the North American energy sector include both attractive financial returns on investment as well as an interest in North America as an energy supply source for their economies. The expanding energy investment and trade between North America and Asia can be mutually beneficial.^[8] For more information see Pacific Energy Summit.

Media and culture

Because English is the majority language in both countries, and accents and dialects on both sides of the border are (relatively) similar and being a variety of North American English (as compared to the British or Australian English), both high culture and mass media are easily traded. Granted, both countries have minority-language media—Canada's large francophone population and the United States' large hispanophone population—as well as immigrants and indigenous language speakers, but cultural trade mostly concerns English-language media.

The major difference is that the U.S. media market is more than 15 times larger, meaning that the Americans enjoy greater economies of scale. Historically, this has always been the case since the 19th century, when Canada was flooded with American books, but the beginning of Canada's cultural protectionism dates to the 1920s, when Canada's radio market was dominated by American broadcasts, leading cultural nationalists to form the Canadian Radio League, which lobbied for a publicly funded broadcaster to compete with U.S. stations. In the 1950s, television experienced a similar dispute, with Canadian stations airing U.S. programming and U.S. stations broadcasting into Canada, leading to the creation of CBC Television. Since the 1970s, Canadian radio and television stations have been required by law to air a minimum percentage of Canadian content.

One source of tension is a difference in philosophy: the Canadian position is that its culture is a prerequisite for safeguarding its nationhood and should thus be excluded from free trade agreements, whereas Americans negotiators see media as just another commodity. This difference came to light during the dispute over "split-run" magazine during the 1990s. Split-runs are magazines produce a slightly modified edition (say, for a Canadian market) and resell much of the advertising space to Canadian advertisers. Canadian publishers argued that the Americans were poaching all their advertising revenue without producing substantial Canadian content. American publishers and the U.S. government countered that banning "split-runs" was illegal under international trade law. There have also been disputes over the generous tax credits that the Canadian federal and provincial governments give to television and film productions. This, combined with a weaker Canadian dollar caused American filmmakers to complain during the 1990s that "runaway productions" were hurting American employment in the film industry, especially in California.

See also

• NAFTA's effect on United States employment
• North American Forum on Integration
• North American SuperCorridor Coalition
• Security and Prosperity Partnership of North America

References

1. http://www.nationalaglawcenter.org/wp-content/uploads/assets/crs/RL33087.pdf
2. 2012 U.S. trade in goods with Canada, http://www.census.gov/foreign-trade/balance/c1220.html#2012
3. US Embassy in Ottawa, http://ottawa.usembassy.gov/content/textonly.asp?section=can_usa&document=trade
4. "Agricultural trade disputes between Canada and the United States: costly but diminishing. – C.D. Howe Institute Commentary (, 2005)".
5. Canada - United States Free Trade Agreement
6. "State Trade Fact Sheets 2008". Canada International. Retrieved 16 November 2010.
7. “Cellucci’s Message,” National Post, March 26, 2003.
8. http://nbr.org/downloads/pdfs/eta/PES_2013_summitpaper_Slutz.pdf