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Trading Partners
The dynamics and history of the Canada-US trading relationship

The unprotected border between Canada and the United States promotes an incredible amount of trade. $1.2 billion (US) is traded across the border every day.

This volume has continued to grow over the past decade; two-way trade between Canada and the United States has more than doubled in value since 1994. At about $188 billion (US), Canada supplied 16.5 per cent of all US imports of goods and services, while Canada bought 19 per cent of all American goods and services.

The Canadian government’s Canada-US relations website boasts that, “the United States sells almost three times as many goods to Canada, a market of 30 million people, as to Japan, a market of over 125 million… [and] Canada is a larger market for US goods than all 15 members of the European Union combined.”

A Brief History of Trade Across the 49th Parallel

1897: Yukon Gold Rush

50,000 Americans move north to take part in gold prospecting.

1911: Reciprocity

Prime Minister Wilfrid Laurier loses the national election because his platform proposes free trade with the US. The colonies in British North America had first signed a reciprocity treaty (another term for free trade) with the Americans in 1854. The Americans terminated the arrangement ten years later. Many American protectionists and annexationists believed that the loss of the treaty would cause severe economic turmoil in the British colonies and thus force them to join the United States. But the reciprocity arrangement became a rallying point for Canadian nationalists and the opposition defeated Laurier under the slogan, "No truck or trade with the Yankees."

1930s: Closer Ties

William Lyon Mackenzie King, frustrated with British interference, sought to take advantage of the power and growth of the US economy. On the other side of the border, President Theodore Roosevelt encouraged an improvement in relations with Canada. In 1936, Roosevelt visited Quebec becoming the first US President to pay an official visit to Canada.

1940: Military Support and Integration

In 1940, Roosevelt pledged to support Canada in the event of an attack from overseas. That same year, Prime Minister Mackenzie King went to Ogdensburg, New York to sign a defence agreement integrating Canada and the United States’ defence future.

Post-war 1940s: Free Trade?

Time magazine calls Canada “the 49th state.” Mackenzie King, afraid of what he called “US absorption,” abandons free trade negotiations.

1950s: US Foreign Investment and Control

By 1957, Americans controlled 70% of the capital of the Canadian petroleum and natural gas industry, and 90% of the auto industry.

1957-1963: Diefenbaker versus Kennedy

Prime Minister John Diefenbaker fights the tide of US industry control and challenges extensive US investment in Canada. Icy relations between Diefenbaker and Kennedy characterize the era.

1960s: Kennedy and Trade with Cuba

Canada asserts its own trading agenda and continues to trade with Cuba. US President Kennedy is infuriated, especially in light of the Cuban missile crisis.

1965: Auto Pact

The Canada-United States Automotive Products Agreement (Auto Pact) allowed for a duty free exchange of vehicles and their parts between Canada and the United States. The automotive manufacturing industry, thereby, employs thousands in Canada for decades to come.

1968-1984: Pierre Trudeau

In an era of increasing Canadian nationalism, Trudeau questions Canada's relations with the US. On a trip to Washington in 1971, he complains about US tariffs on Canadian exports. US President Richard Nixon expresses his opinion of Trudeau, calling him a jerk. In 1972, Nixon returned the visit and faced anti-US demonstrations in Ottawa. Trudeau later announces that Canada must diversify its relationships with other countries in an effort to avoid excessive influence by the United States. By 1972, 99% of Canada’s energy industry is foreign owned. In response, Trudeau establishes Petrocan and the National Energy Board. The National Energy Board lasts only four years, due to undermining American influence.

1984-93: Brian Mulroney

The tide turned again with a return to pro-American policies. In 1987, the Free Trade Agreement is signed and is later implemented on January 1, 1989.

1992: NAFTA

In December, Mulroney, Bush, and Gotari sign the North American Free Trade Agreement (NAFTA).

NAFTA and Dependence on the United States

Some suggest that Canada’s economy is overly dependent on demand in the United States. While most Canadians believe that the age of ‘globalization’ has diversified Canada’s international trade, there has been a marked increase in dependence on exports to the United States.

December 2002 marked the tenth anniversary of the North American Free Trade Agreement (NAFTA). Signed by former leaders Brian Mulroney (Canada), George Bush (United States), and Carlos Salinas de Gotari (Mexico), the agreement assured that North America would be a consolidated economic unit with the world’s only economic and military superpower at its centre.

A CBC illustration of Canada’s export levels includes the following tables which chart the trend toward dependence on exports to the United States.

[Source: What Border? The Americanization of Canada. CBC.ca]

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