United States-Canada Trade and Economic Relationship: Prospects and Challenges
Author(s)Fergusson, Ian F.
KeywordsEconomics and Cost Analysis
Government and Political Science
*UNITED STATES GOVERNMENT
FDI(FOREIGN DIRECT INVESTMENT)
SOFTWOOD LUMBER AGREEMENT
CANADIAN BEEF IMPORTS
IPR(INTELLECTUAL PROPERTY RIGHTS)
WHTI(WESTERN HEMISPHERE TRAVEL INITIATIVE)
WTO(WORLD TRADE ORGANIZATION)
NAFTA(NORTH AMERICAN FREE TRADE AGREEMENT)
Full recordShow full item record
AbstractThe United States and Canada conduct the world's largest bilateral trade relationship, with total merchandise trade (exports and imports) exceeding $561.5 billion in 2007. The U.S.-Canadian relationship revolves around the themes of integration and asymmetry: integration from successive trade liberalization from the U.S.-Canada Auto Pact of 1965 leading to the North American Free Trade Agreement (NAFTA) of 1994, and asymmetry resulting from Canadian dependence on the U.S. market and from the disparate size of the two economies. Canada is the largest single-country trading partner of the United States. In 2007, total merchandise trade with Canada consisted of $313.1 billion in imports and $248.4 billion in exports. However, China displaced Canada as the largest source for U.S. imports for the first time in 2007. While Canada is an important trading partner for the United States, the United States is the dominant trade partner for Canada, and trade is a dominant feature of the Canadian economy. Automobiles and auto parts, a sector which has become highly integrated due to free trade, make up the largest sector of traded products. Canada is also the largest exporter of energy to the United States. Like the United States, the Canadian economy is affected by the transformation of China into an economic superpower. The United States and Canada also have significant stakes in each other's economy through foreign direct investment. Disputes concerning the 2006 softwood lumber agreement are under arbitration and agriculture subsidies are being addressed by dispute settlement body at the WTO. In addition, U.S. regulatory proceedings restricted the importation of Canadian beef (now lifted). The terrorist attacks of 2001 focused attention on the U.S.-Canadian border. Several bilateral initiatives have been undertaken to minimize disruption to commerce from added border security. The focus on the border has renewed interest in some quarters in greater economic integration.
CRS Report for Congress.
Copyright/LicenseApproved for public release; distribution is unlimited.
Showing items related by title, author, creator and subject.
Regional Trade AgreementsFreund, Caroline; Ornelas, Emanuel (2012-03-19)This paper reviews the theoretical and
empirical literature on regionalism. The formation of
regional trade agreements has been, by far, the most popular
form of reciprocal trade liberalization in the past 15
years. The discriminatory character of these agreements has
raised three main concerns: that trade diversion would be
rampant, because special interest groups would induce
governments to form the most distortionary agreements; that
broader external trade liberalization would stall or
reverse; and that multilateralism could be undermined.
Theoretically, all of these concerns are legitimate,
although there are also several theoretical arguments that
oppose them. Empirically, neither widespread trade diversion
nor stalled external liberalization has materialized, while
the undermining of multilateralism has not been properly
tested. There are also several aspects of regionalism that
have received too little attention from researchers, but
which are central to understanding its causes and consequences.
Integration of Markets vs. Integration by AgreementsAminian, Nathalie; Fung, K.C.; Ng, Francis (World Bank, Washington, DC, 2008-03)This paper provides an analysis of the
two channels of regional integration: integration via
markets and integration via agreements. Given that East Asia
and Latin America are two fertile regions where both forms
of integrations have taken place, the authors examine the
experiences of these two areas. There are four related
results. First, East Asia had been integrating via markets
long before formal agreements were in vogue in the region.
Latin America, by contrast, has primarily used formal
regional trade treaties as the main channel of integration.
Second, despite the relative lack of formal regional trade
treaties until recently, East Asia is more integrated among
itself than Latin America. Third, from a purely economic and
trade standpoint, the proper sequence of integrations seems
to be first integrating via markets and subsequently via
formal regional trade agreements. Fourth, regional trade
agreements often serve multiple constituents. The reason why
integrating via markets first can be helpful is because this
can give stronger political bargaining power to the
outward-looking economic-oriented forces within the country.
A Preliminary Analysis of the Impact of a Ukraine-EU Free Trade Agreement on Agriculturevon Cramon-Taubadel, Stephan; Hess, Sebastian; Brummer, Bernhard (2010-04-01)Agriculture including food products is
of particular interest for Ukraine. However, in free trade
agreements involving the European Union, agriculture is
always given special treatment and subject to less and
slower liberalization than other sectors. This paper employs
the standard Global Trade Analysis Project model in order to
assess how World Trade Organization accession affects
agriculture in Ukraine, and how potential bilateral tariff
cuts may interact with potential productivity gains within
Ukrainian agriculture. The results indicate that, due to
trade liberalization, Ukraine can expect gains from a more
efficient allocation of its resources in line with
comparative advantage, leading to an increase of production
and exports of wheat, other grains, and oilseeds, but also
of several processed food products that benefit from less
expensive intermediate inputs. However, Ukraine's
exports are concentrated on a small number of destinations,
especially Russia and some other Former Soviet Union
countries because they fail to meet quality standards
elsewhere. When Ukrainian production of these products
increases due to increased allocative efficiency, exports to
Russia increase further and prices there fall, generating
negative terms of trade effects that largely offset the
allocative gains. Ukrainian imports of agricultural products
increase as well, partly because Ukrainian consumers switch
to higher quality imported goods even though domestic
production increases. Regarding free trade agreement
negotiations with the European Union, these results
highlight for Ukraine the fact that improved agricultural
productivity will help to get most out of improved market
access. However, the results also highlight for Ukraine the
great importance of adopting internationally accepted
quality standards in order to diversify its export structure.