Everything you wanted to know about
Canada!
Foreign Trade
Canada
has just 0.5 percent of the world’s population, but accounts for 4 percent of
total exports in world trade. Exports have always been important to Canada’s
economy. In the early colonial period, the leading Canadian items of export were
fish and furs. During the 19th century, timber became the staple export item.
With the improvement of railway lines early in the 20th century and settlement
of the prairies, wheat became the chief item of export. The contribution of
mineral products to Canadian exports also accelerated in the early 20th century
as metal resources in the Laurentian and Cordilleran regions were exploited.
Gradually, manufacturing industries emerged and now produce more than half of
Canada’s exports.
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The growth of Canada’s trade in goods since 1945 has been remarkable. The value of exports in 1946 was C$2.3 billion; by 1995 this figure had grown to C$253.8 billion. Canada has one of the world’s highest ratios of goods exported to GDP: 33.6 percent. Goods imported have also grown, from C$1.9 billion in 1946 to C$225.4 billion in 1995. The surplus of exports over imports was C$28.4 billion in 1995. In the 1990s Canadian international trade in both exported and imported goods grew by an average of over 17 percent per year.
However, in the services sector, Canada’s imports exceed its exports. The largest components of this sector are interest payments on debt, the transfer of profits to foreign-owned corporations, and spending by Canadian tourists abroad. For this type of trade, Canada’s imports in 1995 exceeded its exports by C$39.6 billion. When this figure is combined with the figure for the trade in goods, Canada’s overall trade balance, called the balance of payments, is negative: total imports exceeded total exports by C$11.2 billion. A negative balance of payments depreciates a country’s currency, reducing the cost of its exports and increasing the market for them. On the other hand, it makes imports more expensive. Canada almost always has a negative balance of payments, yet continues to have a high standard of living.
Most of Canada’s foreign trade is with the United States, which typically buys about four-fifths of Canada’s exports and supplies about three-quarters of its imports. A large portion of this trade is made up of motor vehicles and motor vehicle parts. Because so many corporations operate on both sides of the Canada-U.S. border, much of the trade between the two nations actually consists of transfers within firms. Trade between Canada and Mexico is growing rapidly, but the total amount is still quite small—about 2 percent of imports and less than 1 percent of exports.
Canada also has significant export trade with other countries, including in descending order: Japan, Great Britain, Germany, South Korea, Italy, and China. Canada’s leading export commodities in descending order of importance as of 1994 were: motor vehicles and parts, mineral fuels, machinery, wood products, paper and paperboard, electrical equipment, wood pulp, aluminum products, and cereals. Leading imports were: motor vehicles and parts, heavy machinery, communication equipment, office equipment (especially computers), and industrial machinery.
Canada-U.S. trade is the largest bi-national flow in the world and, recognizing this fact, the two countries signed the Canada-United States Free Trade Agreement (FTA), which came into effect in 1989; it removed the trade barriers between them. In 1994 the FTA was expanded to NAFTA by including Mexico in this free trade zone. The effects of NAFTA are hotly debated in Canada, and supporters and critics have interpreted recent events in opposite ways. For example, the decline in Canadian manufacturing employment is seen by critics as evidence that the treaty is biased against Canada, while supporters argue that without it Canadian industry would have suffered even greater losses. It has proved extremely difficult to identify the specific impacts of NAFTA when so many other economic changes are taking place at the same time.
Since World War II, Canada has been at the forefront of the movement to reduce tariff barriers. Canada emerged from that war with the industrial capacity to supply consumer products that the world needed; another incentive was the feeling that trade barriers had partly contributed to both world wars. Canada was a founding member of the General Agreement on Tariffs and Trade in 1948 (reorganized as the World Trade Organization in 1996) and has since helped initiate other agreements. The most important are the Caribbean Agreement of 1986; the FTA, 1988; the Asia-Pacific Economic Cooperation (APEC) group of 1989; and NAFTA, 1994. In 1994 Canada also participated in the Summit of the Americas, a group of 34 countries dedicated to implementing tariff-free trade by 2005. Canada has favored allowing Chile to join the NAFTA agreement.
Currency and Banking
The unit of currency in Canada is the Canadian dollar, which consists of 100 cents (C$1.36 equals US$1, 1996). The Bank of Canada, which was founded in 1935 and is owned by the federal government, has the sole right to issue paper money for circulation.
All other Canadian banks had combined assets exceeding C$645 billion (over C$22,000 per capita) in 1995. About 90 percent of this capital is concentrated in six large domestically owned banks, known as the big six. In 1995 there were 9 domestic and 46 foreign-owned banks operating in Canada, employing 170,000 workers or 1.3 percent of the workforce. Most foreign-owned and major domestic banks have their head offices in Toronto, and a few are based in Montréal. Trust and mortgage loan companies, provincial savings banks, and credit unions also provide banking services. Securities exchanges operate in Toronto (which has the sixth largest in the world), Montréal, Winnipeg, Calgary, and Vancouver.
The recession of the early 1990s caused considerable problems for smaller banks and trust companies. Many had committed a high proportion of their loans to commercial real estate, which declined in value by an average of 40 percent between 1989 and 1994. Some 140 institutions either ceased operations or were purchased by more successful corporations. Even some large institutions were affected: In 1994 Confederation Trust, Canada’s fourth largest trust company, was declared insolvent and went out of business.
Meanwhile, changes in regulations have significantly affected the financial sector. Traditionally, the federal government has tightly controlled the number, ownership, and operations of Canadian banks. The process to acquire a charter was arduous; the proportion of foreign ownership was limited; and banks were prohibited from dealing in insurance and securities. During the 1980s Ottawa eased some regulations on foreign banks and began to grant charters more freely to them. Further, a major revision of the Bank Act in 1992 permitted banks, trust companies, and insurance companies to compete in each other’s markets. As a result of this change, the big six banks now offer a much wider range of services—including, for example, stock market transactions—and have significantly increased their control over the entire financial sector. They have also realized unprecedented levels of profit: over C$6 billion collectively in 1995, which equals nearly 1 percent of the entire Canadian GDP.
Transportation
Transportation employs 5.6 percent of the country’s workforce and accounts for 4.7 percent of the GDP. Efficient, economical transportation is particularly important in Canada, which has significant water and mountain barriers as well as a dispersed population.
Water Transport
Since
the earliest explorations, water travel has been important. The Saint
Lawrence-Great Lakes navigation system extends 3769 km (2342 mi) from the Gulf
of Saint Lawrence into the center of the continent. The opening of the Saint
Lawrence Seaway in 1959 contributed greatly to industrial expansion, but the
seaway is declining in significance with the growth of intermodal transport,
which integrates water, rail, and road shipments. Vancouver and Halifax
especially have capitalized on intermodal shipment and are the seaway’s
strongest competitors. In the mid-1990s the seaway accounted for only 12 percent
of Canada’s international cargo shipments. About 60,000 vessels carrying
foreign trade enter and leave Canadian ports yearly; cargo unloaded in 1995
totaled some 83 million metric tons, and about 175 million metric tons were
loaded. The ports of Vancouver, Sept-خles, Montréal, Port-Cartier,
Québec, Halifax, Saint John, Thunder Bay, Prince Rupert, and Hamilton handled
most of the cargo. In 1995 shipping accounted for 6.1 percent of the total value
generated within the transportation sector.
Canada does not have a large merchant marine, and the great majority of Canadian overseas trade is carried in ships of other countries. Canadian merchant vessels of 1000 gross registered tons (GRT) or more numbered 62 in 1995, with a total GRT of more than 573,000. Most ships of Canadian registry operate along the coast, on the Saint Lawrence Seaway, or on the Great Lakes. Ships called lake carriers or “lakers” are built in eastern Canada specifically for the Seaway-Great Lakes traffic. Typically long and flat, they are sized to the dimensions of the seaway locks and include innovations such as the self-unloading carrier.
Railroads
Rail transportation has been crucial to the formation of Canada
but has declined in the late 20th century, due chiefly to the popularity of
motor vehicles. The two major railways are the Canadian National (CN), formerly
a federally owned corporation, and the Canadian Pacific Railway (CPR). Their
declining revenues led Ottawa to create a combined passenger network, VIA Rail,
in 1977. However, revenue from passenger service was not sufficient to cover the
costs of the service, and in 1990 half the routes were closed. Ottawa is
reducing federal subsidies of passenger rail, and further closures are expected.
However, the government is legally bound to operate a passenger rail service
across western Canada because that was a condition of British Columbia’s entry
into the Confederation in 1871.
The profitability of freight service has also been declining, although less severely. These problems stem largely from special rate structures legislated by Ottawa in 1897 as part of the Crow’s Nest Pass Agreement and later negotiations. In essence, the CPR received a grant to pay for laying track through Crowsnest Pass in the Rockies, and in return agreed to charge low rates for hauling grain. These rates were intended to remain in effect forever. As the CPR’s costs went up over the years and the so-called Crow rate did not, profits sank and it was difficult to make improvements to the line. The rate limits were partly abrogated in 1983 and fully removed in 1996, which was a profitable year for the CPR. Meanwhile, the CN was privatized (turned over to private operators) in 1995, and many of the rules regulating the rail system were relaxed. For example, the railroads could now close unprofitable branch lines that they had been required to maintain. As a result of this relaxation, railroads were better able to integrate their operations with marine and truck transportation companies in the emerging intermodal system. In 1995 railways accounted for 25.4 percent of the total value generated within the transportation sector.
Roads
Canada has one of the world’s best highway systems; good roads
are essential to a country of such wide spaces, scattered people, and geographic
barriers. The increasing use of these roads, however, coupled with reduced
government expenditures, has led to a deterioration in their quality. This
became an election issue in 1993, when the Liberal Party promised to establish a
C$6 billion program to improve roads. After the Liberals won, C$2 billion of
these funds was provided by Ottawa; the remainder was raised by municipal and
provincial governments.
The total length of the federal and provincial highway system in Canada in the early 1990s was 290,194 km (180,318 mi). The Trans-Canada Highway, completed in 1962, stretches from St. John’s, Newfoundland, to Victoria, British Columbia. In 1994 there were 48.4 registered private vehicles for every 100 Canadians, compared with 34.2 in Japan, 36.1 in Great Britain, and 57.7 in the United States. The ratio for commercial vehicles was 12.8 in Canada, 17.8 in Japan, 4.5 in Great Britain, and 18.1 in the United States. The trucking industry accounted for 37.7 percent of the total value generated within the Canadian transportation sector in 1994.
Air Transport
Two major airlines, Air Canada and Canadian Airlines International, maintain a broad network of domestic and international routes. Smaller carriers are also licensed. Air travel is particularly important in the far north because the widely scattered communities of the region are not connected by road or rail and water transport is limited to the brief summer periods. Of the more than 510 certified airfields, the busiest are Lester B. Pearson International Airport in Toronto; Vancouver International Airport; Dorval and Mirabel international airports near Montréal; and Calgary International Airport. In 1995 Ottawa announced its intention to privatize most airports in Canada. The same year, Canada and the United States signed the Open Skies Agreement, which removed many of the regulations that applied to air travel between the two countries. However, U.S. airlines are still prohibited from flying routes that are entirely inside Canada.
In 1995 air travel accounted for 11.0 percent of the total value generated within the transportation sector.
