A Tale of Two Countries: US – Canada Trade

Basic Trade Vocabulary Export – any good that is sent out of the countryExport – any good that is sent out of the country Import – any good that is brought into the country from anotherImport – any good that is brought into the country from another Voluntary Trade – trade between countries in which both countries benefit from the exchangeVoluntary Trade – trade between countries in which both countries benefit from the exchange Trade Barriers – economic, political, or geographical conditions that make trade difficult or impossibleTrade 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 produceSpecialization – 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 economiesCanada and the US both have market- style economies Largest trade relationship in the world – valued at $627 billion in 2011Largest trade relationship in the world – valued at $627 billion in 2011 Canada is the #1 foreign supplier of energy to the United States.Canada is the #1 foreign supplier of energy to the United States.

Side by Side Comparison CanadaUnited 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 partsMotor vehicle, machinery, and aircraft parts Telecommunications equipmentTelecommunications equipment Plastics, chemicalsPlastics, chemicals Wood pulp and timberWood pulp and timber Crude petroleum, natural gas, electricityCrude petroleum, natural gas, electricity United States Agricultural productsAgricultural products ChemicalsChemicals Capital goodsCapital goods AutomobilesAutomobiles medicinemedicine

Exports and Imports CanadaCanada 75% of exports go to the US75% of exports go to the US 50% of imports come from the US50% of imports come from the US United StatesUnited States 19% of exports go to Canada19% of exports go to Canada 14% of imports come from Canada (2 nd to China)14% of imports come from Canada (2 nd to China)

Making Trade Easier North American Free Trade Act (NAFTA)North American Free Trade Act (NAFTA) Signed in 1994Signed in 1994 Promoted free trade between Canada, Mexico, and the US by removing economic trade barriersPromoted 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.In order for countries to trade, they must exchange currencies. Exchange Rate – the value of one country’s currency compared to another country’s currencyExchange 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.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):CIA World Factbook (2012): Canada - world-factbook/geos/ca.htmlCanada - world-factbook/geos/ca.htmlhttps:// world-factbook/geos/ca.htmlhttps:// world-factbook/geos/ca.html United States –United States – factbook/geos/us.htmlhttps:// factbook/geos/us.htmlhttps:// factbook/geos/us.htmlhttps:// factbook/geos/us.html