A Tale of Two Countries:US – Canada Trade

Basic Trade Vocabulary

• Export – any good that is sent out of the country

• Import – any good that is brought into the country from another

• Voluntary Trade – trade between countries in which both countries benefit from the exchange

• Trade Barriers – economic, political, or geographical conditions that make trade difficult or impossible

• Specialization – when a country produces the goods it can make easily and trades for the goods it cannot easily produce

US – Canada Trade

•Canada and the US both have market-style economies

•Largest trade relationship in the world – valued at $627 billion in 2011

•Canada is the #1 foreign supplier of energy to the United States.

Side by Side Comparison

Canada United States

GDP $1.389 trillion $15.04 trillion

GDP per capita $40,300 $48,100

Services (% of GDP)

71% 80%

Industry (% of GDP)

27% 19%

Agriculture (% of GDP)

2% 1%

Specialization

Canada

• Motor vehicle, machinery, and aircraft parts

• Telecommunications equipment

• Plastics, chemicals

• Wood pulp and timber

• Crude petroleum, natural gas, electricity

United States

• Agricultural products

• Chemicals

• Capital goods

• Automobiles

• medicine

Exports and Imports

• Canada• 75% of exports go to the US• 50% of imports come from the US

• United States• 19% of exports go to Canada• 14% of imports come from Canada

(2nd to China)

Making Trade Easier

• North American Free Trade Act (NAFTA)• Signed in 1994• Promoted free trade between Canada,

Mexico, and the US by removing economic trade barriers

Exchanging Currencies

• In order for countries to trade, they must exchange currencies.

• Exchange Rate – the value of one country’s currency compared to another country’s currency

• For example, if an American company wants to buy lumber from a Canadian company, the American company will exchange American Dollars for Canadian Dollars so that the trade can take place.

References

• CIA World Factbook (2012):• Canada -

https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html

• United States – • https

://www.cia.gov/library/publications/the-world-factbook/geos/us.html