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Canada’s Position in the Trade Relationship
The Canadian dollar, manufacturing, and value-added
For Canadian manufacturers, the export market has surpassed the domestic market in importance. As of 1994, 55% of manufactured goods are exported, up from 40% in 1988.
Beyond favourable trade relations, there are several factors and strategies that play into the maintenance of an export-led economy. For Canada, the traditionally low Canadian dollar has been a gift for exporters, making Canadian products more affordable for US customers.
But in the integrated North American economy, the low dollar also makes paying Canadian workers more costly. The scenario is particularly visible in high paying professional sports like hockey, where National Hockey League (NHL) teams in Canada are hard-pressed to compete with US-based teams because paying with devalued Canadian dollars makes everything that much more expensive. It is important to note that this scenario is also played out in other human-resource based industries, and between 1988 and 1994, 17% of Canadian manufacturing jobs disappeared.
In this way, the ‘value-added’ sector of the Canadian economy (i.e. labour intensive industries) is thought to lag behind. While it is obvious that Canada’s competitive advantage lies in its wealth of natural resources, shipping products elsewhere to be processed, developed, and sold back to Canadian consumers hinders the domestic capacity for similar productivity.
Foreign Ownership in the Canadian Economy
The low dollar and emphasis on exports also means that foreign investors are able to buy Canadian assets at a lower cost. This trend has prevailed to the extent that Canada has among the highest rates of foreign ownership among industrialized countries.
Similarly, concern has arisen in Canada as various groups lobby to protect Canada’s water supply from NAFTA. Many worry that Canada’s vast supply of clean, fresh water runs the risk of being bought up by US corporations. Sun Belt Water Inc. of Santa Barbara, California, filed suit after losing a contract to deliver bulk shipments of Canadian water to California when the BC government banned the export of bulk water in 1991. While a BC court ruled against Sun Belt, the corporation has taken its case to a NAFTA tribunal.