ADVERTISEMENTS:
This article provides information about the complete overview of Canadian economy:
Canada has always been an open economy. Openness to trade, capital and labour has been an intrinsic part of the country’s economic success, but also exposes the economy to fluctuations. From the establishment of continuous European settlement until 1850 Canada was a colonial economy integrated primarily with the French and then the British economy.
Image Courtesy : baystreettrading.com/wp-content/uploads/2011/06/canadian_currency.jpg
ADVERTISEMENTS:
The 1840s and 1850s mark a watershed as Britain adopted free trade policies and allowed the British North American colonies to determine their own trade policies. This coincided with the growth of wheat exports from different parts of the country.
The major features of the last half of the nineteenth century were attempts to industrialise behind tariff barriers and the steady reorientation of international economic relations from Great Britain to the USA. The orientation towards the USA was rarely encouraged by trade policies after the non-renewal of the Reciprocity Treaty in 1866; Canada and the USA even came close to a trade war towards the end of the first decade of the 1900s.
The main source of foreign capital remained the UK, but US direct foreign investment in Canada accelerated from the 1870s to 1914. Migration patterns depended on the relative attractiveness of settlement on the Canadian and American frontiers.
ADVERTISEMENTS:
The Prairie wheat boom led to large changes in the total population and its distribution across the country. Since it coincided with large-scale emigration from Eastern Europe, the Prairies’ population had a different composition to that of the rest of Canada. The period 1914-1939 was one of instability in the domestic and world economy. The 1920s saw rapid growth and continuation of the reorientation of economic relations towards the USA. By the mid-1930s Canada was trying to convince the USA to negotiate reciprocal trade liberalisation.
During and after the 1939-45 war Canada helped to convince the USA and UK to lead the world to a liberal trading system based on liberal trade policies. Although Canada played an active role in GATT and was a firm proponent of multilateralism, trade barriers were reduced more slowly than in the other industrialised countries. Nevertheless, there was a substantial liberalisation of trade barriers and Canada was a major player in the world economy, reflected in its presence at the G7 summits, which began in the 1970s.
Despite the multilateral (non-discriminatory) approach, Canada’s trade remained highly concentrated on the USA. During the long economic boom of the 1950s and 1960s Canada also experienced large inflows of labour and capital. Canada was an open economy integrated into the world economy but with a heavy orientation towards the USA, and those features could not be readily changed.
Attempts to regulate foreign investment led to frictions with the USA, without noticeably diminishing the presence of US corporations in Canadian life. By the 1970s the UK had ceased to be a major trading partner and the next most important region after North America was East Asia, a phenomenon especially apparent in Vancouver.
As an affluent, high-tech industrial society, Canada today closely resembles the US in its market-oriented economic system, pattern of production, and high living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban. The unemployment rate has been decreasing steadily and the real rates of growth have averaged nearly 3.0% since 1993. The government budget surpluses are partially devoted to reducing the large public sector debt.
The 1989 US-Canada Free Trade Agreement (FTA) and 1994 North American Free Trade Agreement (NAFTA) have touched off a dramatic increase in trade and economic integration with the US. With its great natural resources, skilled labour force, and modern capital plant Canada can anticipate solid economic prospects in the future. The continuing constitutional impasse between English- and French-speaking areas is raising the possibility of a split in the federation, making foreign investors somewhat edgy.
Around September 1998, the Canadian dollar had reached an all-time low of less than 65 cents against the U.S. dollar. However, since then, it has steadily climbed upward, and recently had an amazing run, touching about 80 cents against the U.S. dollar.
The recent success of the Canadian dollar is driven largely by the engagement of the U.S. in the Iraq War, the huge deficit of the fiscally imprudent US Administration, and what could be argued is the battering of the U.S. employment outlook by such trends as outsourcing, and high immigration. However, even the height of the Canadian dollar, which was reached around October 2004, compares unfavourably to the historical record. The value of the Canadian dollar has quite commonly been in the 85 to 90 cents (US) range.