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Trade and Investment Canada is by far the United States' largest trading partner, with more than 1.4 billion in trade a day. By comparison, in 1999 this was more than U.S. trade with all the countries of Latin America combined. U.S. exports to Canada exceed those to all members of the European Union combined. Just the two-way trade that crosses the Ambassador Bridge between Michigan and Ontario equals all U.S. exports to Japan. Canada's importance to the United States is not just a border-state phenomenon: Canada is the leading export market for 35 of 50 U.S. States. Bilateral trade increased by about 50% between 1989, when the U.S.-Canada Free Trade Agreement (FTA) went into effect, and 1994, when the North American Free Trade Agreement (NAFTA) superseded it. Trade has since increased by 40%. NAFTA continues the FTA's moves toward reducing trade barriers and establishing agreed upon trade rules. It also resolves some long-standing bilateral irritants and liberalizes rules in several areas, including agriculture, services, energy, financial services, investment, and government procurement. NAFTA forms the largest trading area in the world, embracing the 406 million people of the three North American countries. The largest component of U.S.-Canadian trade is in the automotive sector. Under the 1965 U.S.-Canada Automotive Agreement (Auto Pact), which provided for free trade in cars, trucks, and auto parts, two-way trade in automotive products rose from $715 million in 1964 to $104.1 billion in 1999. Auto Pact benefits are incorporated into NAFTA. The U.S. is Canada's leading agricultural market, taking nearly one-third of all food exports. Conversely, Canada is the second-largest U.S. agricultural market (after Japan), primarily importing fresh fruits and vegetables and livestock products. Nearly two-thirds of Canada's forest products, including pulp and paper, are exported to the United States; almost 75% of Canada's total newsprint production also is exported to the U.S. At $21 billion in 2000, U.S.-Canada trade in energy is the largest U.S. energy trading relationship in the world. The primary components of U.S. energy trade with Canada are oil, natural gas, and electricity. Canada is the United States' largest oil supplier and the fifth-largest energy producing country in the world. Canada provides about 16% of U.S. oil imports and 14% of total U.S. consumption of natural gas. The United States and Canada's national electricity grids are linked and both countries share hydropower facilities on the Western borders. While 95% of U.S.-Canada trade flows smoothly, there are occasionally bilateral trade disputes over the remaining 5%, particularly in the agricultural and cultural fields. Usually, however, these issues are resolved through bilateral consultative forums or referral to WTO or NAFTA dispute resolution. In May 1999, the U.S. and Canadian Governments negotiated an agreement on magazines that will provide increased access for the U.S. publishing industry to the Canadian market. The United States and Canada also have resolved several major issues involving fisheries. By common agreement, the two countries submitted a Gulf of Maine boundary dispute to the International Court of Justice in 1981; both accepted the Court's October 12, 1984 ruling which demarcated the territorial sea boundary. In 1990, the United States and Canada signed a bilateral Fisheries Enforcement Agreement, which has served to deter illegal fishing activity and reduce the risk of injury during fisheries enforcement incidents. The U.S. and Canada signed a Pacific Salmon Agreement in June 1999 that settled differences over implementation of the 1985 Pacific Salmon Treaty for the next decade. Canada and the United States signed an aviation agreement during President Clinton's visit to Canada in February 1995, and air traffic between the two countries has increased dramatically as a result. The two countries also share in operation of the St. Lawrence Seaway, connecting the Great Lakes to the Atlantic Ocean. The U.S. is Canada's largest foreign investor; at the end of 1999, the stock of U.S. direct investment was estimated at $116.7 billion, or about 72% of total foreign direct investment in Canada. U.S. investment is primarily in Canada's mining and smelting industries, petroleum, chemicals, the manufacture of machinery and transportation equipment, and finance. Canada is the third-largest foreign investor in the United States. At the end of 1999, the stock of Canadian direct investment in the United States was estimated at $90.4 billion. Canadian investment in the United States--which includes investment from Canadian holding companies in the Netherlands--is concentrated in manufacturing, wholesale trade, real estate, petroleum, finance, and insurance and other services. |
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