Canada is one of the world's wealthiest nations, and a member of the Organization for Economic Co-operation and Development (OECD) and Group of Eight (G8).
As with other developed nations, the Canadian economy is dominated by the service industry, which employs about three quarters of Canadians[citation needed]. Canada is unusual among developed countries in the importance of the primary sector, with the logging and oil industries being two of Canada's most important. Canada also has a sizable manufacturing sector, centred in Central Canada, with the automobile industry especially important. The Canadian economy of the 21st century is diversified.
Although Canada sells goods and services around the world, more than 80% of exports and 70% of imports are with the United States.Canada is evolving into a knowledge-based economy. Service industries now employ three out of four Canadians. More and more, Canadians work in offices, stores or warehouses rather than farms, mines, mills or factories. Canada’s economic well-being is tied to many factors: the wealth of natural resources; the strength of its manufacturing and construction industries; the health of the financial and service sectors; the ability to span distances using communications and transportation technologies; dynamic trade relationships with other nations; and the ability to compete in a global marketplace.
Canada has come a long way from the economic revolution sparked by the railway and the telegraph in the early 1800s. Over the years, a steady tide of technological progress has profoundly reshaped our economy, making possible the combustion engine, the assembly line, computer networks and professional consultants. Today, economic progress rides an electronic expressway of automation, information and instant communication. Advances in technology, the increased globalization of markets and the emergence of liberal trading regimes are fundamentally changing the way we conduct our business.Long removed from an economy based almost exclusively on natural resources, Canada is rapidly moving toward a knowledge-based economy built on innovation and technology. Canada's knowledge-intensive industries are generating advances in our ability to produce high-tech machinery and equipment, and encouraging industrial innovation as a result.
Canadian businesses are 'getting connected' more than ever before, exploiting advances in communications technology to reach out into the global marketplace in search of buyers for their products. Indeed, with a small domestic market, the steady expansion of multilateral trade is critical to the structure of our economy and the continued prosperity of our nation.International trade makes up a large part of the Canadian economy, particularly of its natural resources. The United States is by far its largest trading partner, accounting for about 79% of exports and 65% of imports as of 2006.Canada is a free market economy, usually seen to have slightly more government intervention than the United States, but less than most European nations.
Canada has traditionally had a lower per capita gross domestic product (GDP) than the United States, but higher than that of many western European economies. The Canadian economy has its economic sectors divided into four namely:1) Energy 2) Agriculture 3) Manufacturing 4) Service sectorEconomic sectorsAs the second largest country in the world, Canada has considerable natural resources spread across its varied regions. In British Columbia, the forestry industry is of great importance, while the oil industry is big in Alberta and Newfoundland and Labrador. Northern Ontario is home to a wide array of mines, while the fishing industry has long been central to the character of the Atlantic provinces, though it has recently been in steep decline.
These industries are increasingly becoming less important to the overall economy. Only some 4% of Canadians are employed in these fields, and they account for less than 6% of GDP.[citation needed] They are still paramount in many parts of the country. Many, if not most, towns in northern Canada, where agriculture is difficult, exist because of a nearby mine or source of timber.
Canada is a world leader in the production of many natural resources such as gold, nickel, uranium, diamonds and lead. Several of Canada's largest companies are based in natural resource industries, such as EnCana, Cameco, Goldcorp, and Barrick Gold. The vast majority of these products are exported, mainly to the United States. There are also many secondary and service industries that are directly linked to primary ones. For instance one of Canada's largest manufacturing industries is the pulp and paper sector, which is directly linked to the logging industry.
The relatively large reliance on natural resources has several effects on the Canadian economy and Canadian society. While manufacturing and service industries are easy to standardize, natural resources vary greatly by region. This ensures that differing economic structures developed in each region of Canada, contributing to Canada's strong regionalism. At the same time the vast majority of these resources are exported, integrating Canada closely into the international economy.
Howlett and Ramesh argue that the inherent instability of such industries also contributes to greater government intervention in the economy, to reduce the social impact of market changes.Such industries also raise important questions of sustainability. Despite many decades as a leading producer, there is little risk of depletion. Large discoveries continue to be made, such as the massive nickel find at Voisey's Bay. Moreover the far north remains largely undeveloped as producers await higher prices or new technologies as many operations in this region are not yet cost effective. In recent decades Canadians have become less willing to accept the environmental destruction associated with exploiting natural resources.
High wages and Aboriginal land claims have also curbed expansion.Instead many Canadian companies have focused their exploration and expansion activities overseas where prices are lower and governments more accommodating. Canadian companies are increasingly playing important roles in Latin America, Southeast Asia, and Africa. It is the renewable resources that have raised some of the greatest concerns. After decades of escalating overexploitation the cod fishery all but collapsed in the 1990s, and the Pacific salmon industry also suffered greatly. The logging industry, after many years of activism, have in recent years moved to a more sustainable model.
Energy Canada is one of the few developed nations that is a net exporter of energy.Most important are the large oil and gas resources centered in Alberta, but also present in neighbouring British Columbia and Saskatchewan. The vast Athabasca Tar Sands give Canada the world's second largest reserves of oil after Saudi Arabia according to USGS. In Quebec and British Columbia, as well as Ontario and Manitoba, hydroelectric power is a cheap and relatively environmentally friendly source of abundant energy. In part because of this, Canada is also one of the world's highest per capita consumers of energy.Cheap energy has enabled the creation of several important industries, such as the large aluminum industry in Quebec and British Columbia.
Historically, an important issue in Canadian politics is that while Western Canada is one of the world's richest sources of energy, the industrial heartland of Southern Ontario and Quebec has fewer native sources of power. It is, however, cheaper for Alberta to ship its oil to the western United States than to eastern Canada. The eastern Canadian ports thus import significant quantities of oil from overseas, and Ontario makes significant use of nuclear power.In times of high oil prices this means that the majority of Canada's population suffers, while the West benefits. The National Energy Policy of the early 1980s attempted to force Alberta to sell low priced oil to eastern Canada. This policy proved deeply divisive, and quickly lost its importance as oil prices collapsed in the mid-1980s.
One of the most controversial sections of the Canada-United States Free Trade Agreement of 1988 was a promise that Canada would never charge the United States more for energy than fellow CanadiansAgriculture Canada is also one of the world's largest suppliers of agricultural products, particularly of wheat and other grains. Canada is a major exporter of agricultural products, to the United States but also to Europe and East Asia. As with all other developed nations the proportion of the population and GDP devoted to agriculture fell dramatically over the 20th century.Unlike the agricultural industries of many developed nations, Canadian farmers have to compete internationally without large subsidies. The Canadian Government does subsidize farmers with aid in times of disaster, but does not usually give farmers "base" support. Dairy and poultry farmers are distributed across the country, but most of the production in the agricultural industry are found in central Canada.
Farmers earn their living from market sales only, and they focus mainly on the Canadian market; because they lack government subsidies, farmers rely on tariffs to limit the amount of agricultural importManufacturing The general pattern of development for wealthy nations was a transition from a primary industry based economy to a manufacturing based one, and then to a service based economy. Canada did not follow this pattern; manufacturing has always been secondary, though certainly not unimportant. Partly because of this, Canada did not suffer as greatly from the pains of deindustrialization in the 1970s and 1980s.central Canada is home to branch plants to all the major American and Japanese automobile makers and many parts factories owned by Canadian firms such as Magna International and Linamar Corporation.Central Canada today produces more vehicles each year than the neighboring U.S.
state of Michigan, the heart of the American automobile industry. Manufacturers have been attracted to Canada due to the highly educated population with lower labour costs than the United States. Canada's publicly funded, privately delivered healthcare system is also an important attraction, as it exempts companies from the high health insurance costs they must pay in the United States.Much of the Canadian manufacturing industry consists of branch plants of United States firms, though there are some important domestic manufacturers, such as Bombardier.
This has raised several concerns for Canadians. Branch plants provide mainly blue collar jobs, with research and executive positions confined to the United State.Service sector The service sector in Canada is vast and multifaceted, employing some three quarters of Canadians and accounting for two thirds of GDP.The largest employer is the retail sector, employing almost 12% of Canadians.
The retail industry is mainly concentrated in a relatively small number of chain stores clustered together in shopping malls. In recent years the rise of big-box stores, such as Wal-Mart (of the United States) and Future Shop (a subsidiary of the Us basedBest Buy), have led to fewer workers in this sector and a migration of retail jobs to the suburbs.The second largest portion of the service sector is the business services, employing only a slightly smaller percentage of the population. This includes the financial services, real estate, and communications industries. This portion of the economy has been rapidly growing in recent years. It is largely concentrated in the major urban centres, especially Toronto and Calgary (see Banking in Canada).
The education and health sectors are two of Canada's largest, but both are largely under the purview of the government. The health care industry has been rapidly growing, and is the third largest in Canada. Its rapid growth has led to problems for governments who must find money to fund it. Canada has an important high tech industry, and also an entertainment industry creating content both for local and international consumption.
Tourism is of ever increasing importance, with the vast majority of international visitors coming from the United States, though the recent strength of the Canadian Dollar has hurt this sector. But other nations have increased tourism to Canada such as China.Structure and trends Despite the transformations now rippling through the Canadian marketplace, the most dramatic structural change our economy has undergone is the rise of the services sector. Though our goods-producing industries account for 33% of our national economy, the Canadian services sector is much larger, employing three out of four Canadians and generating two-thirds of our gross domestic product.
What exactly makes up the Canadian services sector? It is easy to picture the physical products churned out by our manufacturing, agriculture, mining, forestry and construction industries, but the value of the services sector is less tangible. Goods need to be delivered, and this involves storage services, truck drivers, rail carriers and bicycle couriers. The actual exchange of goods often requires legal and financial services to process the transactions. Canadians also want to shop, eat out and be entertained by movies, operas, concerts and ballets. And nearly every aspect of government activity—from health care to education to national defence—is a service provided to Canadian citizens.
Economic size and growthJust as a Canadian family counts its bills and income to get a picture of its economic health, economists measure a country's expenditures and income. Gross domestic product (GDP) is a popular indicator used to estimate the value of economic activity. GDP measures two things at once over a given period of time: the total income of everyone in the economy and the total expenditure on the economy’s output of goods and services produced within the country. The reason that GDP can measure both income and expenditure at once is because they are actually the same thing.
To put it another way, every transaction has a buyer and a seller—every dollar spent by some buyer is a dollar of income for a seller. Thus, for the economy as a whole, income and expenditure must equal one another.In 2002, the Canadian economy put in a solid performance, posting the strongest GDP growth of all G7 countries. GDP grew at a rate of 3.3% for the year reaching $1.
15 trillion at current market prices.The growth in GDP reflected an increased demand for big ticket items, such as houses, cars and furniture. Residential construction activity was up 16.2%, the strongest showing since the mid-1980s. This stimulated the manufacturing of construction materials. Retailers’ activity expanded 6.
1%, which was most evident in sales at motor vehicle dealers, furniture stores and department stores. Wholesaling activity was also up 7.1% as automotive, lumber and furniture wholesalers had a particularly busy year.After suffering from a decline in output in 2001, the manufacturing sector posted a respectable gain of 2.6% in 2002. Residential construction demand in North America bolstered the production of wood products, which increased 10.
0%. The production of motor vehicles was up 4.8% while motor vehicle parts increased by 9.3%. Canada’s pharmaceutical industry had another good year with output expanding nearly 60.0% over the last two years.
However, one of the few weak points was the Information and Communications Technologies manufacturing sector. It continued its downward slide, falling 17.2% over the year.The year 2003 brought a number of shocks that restrained economic growth.
The largest impact on the Canadian economy was probably the rapid rise of the Canadian dollar after years of decline against its American counterpart. By the fall of 2003, the dollar had reached levels not seen for over a decade. As a result, many Canadian exporters saw their profits fall. On the other hand, Canadian travellers found that the price of a cup of coffee in Paris or an excursion to a tropical island had become more affordable.In May, a single cow in Alberta was found to have bovine spongiform encephalopathy (BSE) or mad cow disease.
The repercussions were severe; in 2002, Canada's beef export market was worth about $4.1 billion. Following the imposition of the ban by several countries, however, the value of these Canadian exports dropped to virtually zero. Also, the outbreak of severe acute respiratory syndrome (SARS) in the spring had an impact on tourism, particularly in Toronto. Huge forest fires in Western Canada affected local economies as well. A massive power outage in central Canada prevented millions from going to work for several days.
Compared with much of the world in 2002, including the United States, which was experiencing an economic slowdown, Canada performed relatively well. Throughout 2002 and into 2003, the Canadian economy remained robust. Canada’s GDP grew faster than any other G7 country and employment was strong. Also, interest rates reached record lows, thanks in large part to a low and stable rate of inflation.
Low interest rates further contributed to Canada’s strong growth, especially in the housing market. The Government of Canada has also consistently balanced its budget over the last several years. Although a number of shocks did have an impact on the economy, economic conditions are still fundamentally strong in 2003.
