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Chapter 9: Canada's economy

A trading nation

Canada has always been a trading nation, and trade (commerce) still drives its economic growth. Canadians could not keep their standard of living without trading with other countries. Canada has one of the largest economies in the world.

Canada is a member of the G7, a group of leading industrialized countries, along with the United States, Germany, the United Kingdom, Italy, France and Japan. Discover Canada calls this group the G8 because it was written when Russia was also a member. Russia was suspended in 2014, and the group has met as the G7 since then. For the test, remember that Canada belongs to this group of major industrial economies and that trade is central to how Canadians earn a living.

Three kinds of industry

Canada's economy has three main types of industries.

Service industries provide thousands of different jobs in areas such as transportation, education, health care, construction, banking, communications, retail, tourism and government. Most working Canadians, more than three out of four when the guide was written, work in services.

Manufacturing industries make goods to sell in Canada and around the world, including paper, high technology equipment, aerospace technology, automobiles, machinery, food and clothing.

Natural resources industries include forestry, fishing, agriculture, mining and energy. They played an important part in Canada's history and development. Many regions still depend on developing natural resources, and a large share of Canada's exports are natural resource commodities.

Trading with the United States

Canada and the United States have a close relationship, and the US is Canada's largest trading partner. The guide notes that over three-quarters of Canada's exports go to the US, and that the two countries' supply chains are closely linked so they can compete with the rest of the world.

Every year Canada sends the US billions of dollars' worth of energy products, industrial goods, machinery and equipment, automotive, agricultural, fishing and forestry products, and consumer goods. Millions of Canadians and Americans also cross what is called the world's longest undefended border safely each year.

Free trade in North America

Canada enacted free trade with the United States in 1988. In 1994, Mexico became a partner in a broader deal, the North American Free Trade Agreement, known as NAFTA. Discover Canada presents NAFTA as joining the three countries of North America in one large free trade area with hundreds of millions of people and a very large volume of trade in goods. Since the guide was written, NAFTA has been replaced: on 1 July 2020 the Canada-United States-Mexico Agreement (CUSMA) took its place, keeping free trade among the same three countries.

Key points to remember for the test: free trade with the US came first (1988), NAFTA added Mexico (1994), and the United States remains by far Canada's most important trading partner. Free trade helps explain why so much of what Canada produces is sold south of the border.

Practice questions on this chapter

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