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Canada-United States Transportation Border Working Group, October 28, 2010 The Canada-US Trade and Investment Relation

Canada-United States Transportation Border Working Group, October 28, 2010 The Canada-US Trade and Investment Relationship. Presentation Overview. Canada’s Global Commerce Strategy Diversification of export markets, but the United States remains our most important trading partner

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Canada-United States Transportation Border Working Group, October 28, 2010 The Canada-US Trade and Investment Relation

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  1. Canada-United States Transportation Border Working Group, October 28, 2010The Canada-US Trade and Investment Relationship

  2. Presentation Overview Canada’s Global Commerce Strategy Diversification of export markets, but the United States remains our most important trading partner • Bilateral Trade and Investment: a profile • Activity on Trade Agreements: NAFTA and FTAs • International business development • Trade and Border Security: balance is required

  3. Trade and Investment – Goods • The US is Canada’s largest export market--destination of 75% of Canada’s merchandise exports • China surpassed Canada as most important source of US merchandise imports in 2007 • US Imports from China: US$296 Billion • US Imports from Canada: US$226 Billion • US is our main source of imports– in 2009 Canada imported over 4 times more goods from the US than from China • Canadian Imports from US: CAN$186 Billion • Canadian Imports from China: CAN$39 Billion

  4. Trade and Investment-- Energy Canada is the largest energy supplier to the US • 1.9 million barrels of crude oil daily (18% of US imports of crude oil) • 10 billion cubic feet (bcf) gas daily (82% of US imports) • Two – way trade in electricity • Supplies one-third of uranium for US commercial reactors • Energy imports account for most of the US Trade deficit with Canada

  5. Trade and investment– intermediate products • The Canadian and US economies have become highly integrated through • two-way direct investment • Canadian companies supplying critical intermediate inputs to their US customers • US companies supplying a large share of intermediate inputs used by Canadian companies • This integrated relationship benefits both countries, allowing them to better meet the challenges of foreign competition

  6. Share of U.S. Manufacturing Imports from U.S. Foreign Affiliates • Almost one-third of U.S. imports from Canada are produced by U.S. companies operating in Canada. • This is a significantly higher share than any other major source of U.S. imports. • This includes U.S. affiliate in Canada shipping back to their U.S. parent (intra-firm trade), as well as U.S. affiliates shipping back to unrelated U.S. companies. Percent All Countries Data: US BEA and USITC, 2007 Source: Office of the Chief Economist, DFAIT

  7. Distribution by Industry of U.S. Manufacturing Imports from Canada from U.S. Affiliates • 32% of U.S. imports from Canada by U.S. affiliates are in the Transportation Equipment sector. • Otherwise, there are a wide range of industries represented. Data: US BEA and USITC, 2006 Source: Office of the Chief Economist, DFAIT

  8. Distribution of American Manufacturing Imports from Canada • The U.S. imported US$199.0 billion in manufactured products from Canada in 2008. • It is estimated that $115.0 billion of this, or about 57.8%, are intermediate inputs used by U.S. companies to produce other goods or provide services. Note: Manufactured products excludes refined petrolium. Data: US BEA and USITC, 2006 Source: Office of the Chief Economist, DFAIT

  9. Canada is the most important destination for U.S. direct investment abroad. • U.S. companies have more direct investment in manufacturing in Canada than in Mexico, China and Japan combined. • A much higher share of manufacturing investment in Canada is involved in producing intermediate inputs that are sent back to the U.S. and used in U.S. production. Value of U.S. FDI in Manufacturing US$ Billions Data: US BEA, 2008 Source: Office of the Chief Economist, DFAIT

  10. Two-way direct investment in manufacturing (the sum of inward and outward FDI) between Canada and the U.S. is also the largest. • Canada has $42.9 billion invested in U.S. manufacturing industries. • As of 2006, this investment directly employed 183,800 Americans. Value of Two-way FDI in Manufacturing US$ Billions Data: US BEA, 2008 Source: Office of the Chief Economist, DFAIT

  11. U.S. Employment Attributable to Canadian Direct Investment • Of the 183.8 thousand Americans directly employed in the manufacturing sector due to Canadian direct investments in the U.S. the largest share was in the Transportation Equipment sector at 64,500 jobs. Thousands Data: U.S. Bureau of Economic Analysis, 2006 Source: Office of the Chief Economist, DFAIT

  12. What does This tell Us • The highly integrated bilateral trade relationship benefits both countries, allowing them to better meet the challenges of foreign competition • Actions that could disrupt it are both costly and time consuming at a time when our two countries face an unprecedented economic challenge and will weaken the long-term competitiveness of both of our economies. • With extensive value chains in place, barriers to imports from a source country (eg Canada) can hurt companies in the destination country (eg the US) • We need continued collaboration to ensure that the border is both secure and facilitates the legitimate movement of people and goods

  13. The Forward Agenda — NAFTA • The NAFTA has eliminated tariffs on most goods and generally facilitated cross border transactions, but • Regulatory and standards differences can still impact competitiveness • The NAFTA Free Trade Commission forward agenda is focussed on improving competitiveness, including by promoting regulatory cooperation: • Strengthen cooperation • Streamline regulations and process • Encourage compatibility of regulations • Promote use of common standards

  14. International Business Development • Canada’s IBD program is set in the framework of Canada’s 2009 Global Commerce Strategy, and an integrative trade model responding to clients needs • As is the case with the US, our programs place considerable emphasis on assistance for SMEs • Most Canadian exporters are SMEs and their exports account for 35% of total Canadian exports • Two thirds of Canadian exporters sell only to the US, and a large share of these are SMEs

  15. International Business Development • DFAIT serves Canadian companies, and primarily SMEs, by providing • Help in preparing to enter international markets • Information on market prospects • Qualified contact information, including on buyers, investors, intermediaries • Problem solving (or trouble-shooting) when problems are encountered in entering, or maintaining access to international markets • And beyond business development, expanding market access through negotiation of new FTAs

  16. Trade Agreements– Canada’s FTAs • Beyond the NAFTA, and in part inspired by it, Canada has been engaged in further bilateral trade liberalization initiatives • In the last 4 years we have concluded FTAs with Peru, Columbia, Jordan, Panama and the EFTA countries • This is in addition to earlier agreements with Chile, Costa Rica and Israel • We are also in negotiations with a number of other countries (eg, Ukraine, Central American 4, CARICOM), and advanced preparatory talks with India, Morocco and Turkey, and not least • Advanced negotiations on the CETA with the EU– the most significant Canadian trade initiative since the NAFTA • These agreements hold out many opportunities for Canada, but also for the United States in terms of making our continental economic platform more competitive and attractive to global business and investment

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