Case Study On Analyses Of Case Studies

Question 1: Why do Canada and the US have the largest bilateral trade in the world?

The bilateral trade between Canada and the United States has been noted to have the largest trading volume, of about $600 billion per annum. Each of the two countries is the largest exporter and importer of the other; as per the 2012 statistics, Canada’s merchandise trade to the United consisted of about US$324.2 billion and US $ 292.4 billion as exports and imports respectively. The trade between the two nations is very important because it crosses all sectors and industries, and each of them regards the other as its largest trade partner. In fact, the trade across the Ambassador Bridge alone is equal to all trades that occur between the United States and Japan. It is also noted that about 73% of the Canadian products are exported to the US, making Canada the largest exporter to its southern neighbour, which represents about a quarter of its GDP. This also translates to about 20% of the US imports in comparison to those made to China, as only 10% of them. On the other hand, Canada absorbs about 60% of the US goods, commanding about 60% of all imports of the country (PM Office, 2011; Peng, 2014).
There are several reasons that make the trade between the two countries the largest in the world. First, the two countries share the world’s longest undefended border making it the best friends concerning their bilateral trade. It is said that 75% of the Canada’s population reside within 100 miles of their border with US. One should note that Canada being the largest country in the world after Russia, it has vast resources that result in the trade volume being the largest. The country is the second as regards proven oil reserves, and taking into account that it has oil sand resources the trade is likely to grow. With the steady energy demand for industry and home consumption in the US, Canada has found a steady destination for energy exports. Moreover, the two countries share the same history, coasts, wildlife, values and atmosphere; this has facilitated easy movement of hundred thousands of the nationals of the two countries to visit or reside in either of them easily. Canada and the US belong to many multilateral organisations as partners, and they have been fostering their relations through them as partners. The organisations include APEC, NAFTA, NATO, OAS and the G7/8. In 2005, leaders of Canada, Mexico, and US launched the Security and Prosperity Partnership of North America (SPP), this develops their goal of making North America a more secure and safer area for more competitive businesses and resilient economies. The two countries have cooperated on various matters that are not purely commercial, and they have been instrumental in fostering their close relation. They have been in the forefront to control missile proliferation and weapons of mass destructions, global peace keeping and promotion of democracy and development. During the 9/11 terrorist attack, the US redirected its citizens to use Canadian airports and other community and military facilities for some days (Peng, 2014; Vesselovsky, 2010).

Question 2: Why do Canadian Market have a large Share in the United States

The increased Canadian market share in the US was underpinned by the Canada-US Free Trade Agreement (1988) and by the North America Free Trade Agreement (NAFTA) (1994). Despite nearly doubling the volume of trade between the two countries, the agreements have increased each country’s market share in the other. However, it has been expressed that the trade balance favours Canada. Taking into account that Canada is the third largest oil producer, in the world after Saudi Arabia and Venezuela, it should be expected that it will be the chief exporter of energy to the US since it shares a border with it. Its largest components of energy exports include natural gas, oil, electricity, uranium and petroleum products. The other easiness of Canada’s increased market share in US has resulted from the fact that the two countries speak the same language. English as a primary language has made it easier exportation of the Mass Media services and products to the US. The other reason is that the US needs Canadian imports to grow its jobs; since the signing of the NAFTA agreements, increased imports from Canada has been seen to correlate well with employment growth in the US. Many of the Canada’s manufacturing industry are branches of major Japanese and American automobile firms, and hence it should be expected that while they export from Canadian frontier to the US one, it will be easier for them to find markets in US and even expand in them. The other major area of export is the lumbering industry that makes the country the major exporter of softwood lumber to the US. AS the US construction industry is growing, the demand for Canadian timber has been increasing (Peng, 2014).
In Agricultural businesses, the country is the largest in the supply of agricultural products in the world. American industries need the agricultural products to use them in their food processing industries. Apart from being sold back in Canada, food products are sold through supply chains to the rest of the globe. The continuing recovery of the US economy has also been noted as increasing the demand for Canadian goods in US. The Canadian bio- industries have found cheaper market in US, because since the latter owns the largest healthcare in world, bio-industry products are needed for research and development in life science. Other products that are greatly demanded in the US from Canada are those for defence and aerospace. The US is the largest spender in aerospace and defence products, and Canada being the largest exporter to it, has accounted for 59% of its exports. The growing wireless, digital and health IT media in the US has made Canadian firms specialising in IT products to expand easily in the US market. The demand for green building materials from Canada is also rising due to the fact that many US firms, households and government agencies now require renewable material or energy (PM Office, 2011; Peng, 2014).

Question 3: Trade Dispute between America and Canada

US speculators say that since 98% of the trade is alright, Canada might be overreacting in its disputes and therefore they may inconsequential to the trade. However, for Canada, the US is increasingly putting barriers to their trade in many sectors and industries to result in the disputes that are being witnessed currently. Some of their disputes have concerned labelling of meat and pork and lumber. The US has maintained a Mandatory Country-of-Origin Labelling (MCOOL) to give strict provisions for labelling all cattle and hogs from Canada. The US has alleged that the Softwood Lumber Agreement is not being followed well because the lumbering industry is not liberalised, and they are provincial administrators that fix prices. The American Recovery and Reinvestment Act have mandated the exclusion of certain Canadian products among the traded goods. It is also important to note that as the US oil production expands, Canada has been on the run to look for other markets in China and elsewhere (PM Office, 2011; Peng, 2014).
Importantly, one should note that famers in the Canadian lumbering industry do not own land but lease from the government and only get royalties. The countries are likely to get embroiled in several other high profile disputes around corporation and joint-policy. The recent one is the stalling of the Keystone project, which analysts note that it could have chilled the relationship between the two countries. Although the matters have been taken to international trade organisation for solutions, members are not reaching agreements. Most international trade organisations have ruled in favour of Canada. For instance, the WTO has termed the America’s COOL measures as not consistent with its policies, but she has gone to appeal. The WTO and the North America Free Trade Agreement have noted that Canada’s claims are in compliance with their policies, and the US countervailing and anti-dumping violates the NAFTA’s policies. Although it may seem a small dispute currently, Canada’s decision to begin searching markets elsewhere for its products indicates that it is becoming increasing dissatisfied with the US policies. It terms the policies as hurting and placing barriers on their trades (Foreign Affairs, Trade and Development Canada, 2013; Peng, 2014).

Reference

Foreign Affairs, Trade and Development Canada. (2013).United States of America. Retrieved
on 05 March 2015 from http://www.international.gc.ca/strategy-strategie/r1.aspx?lang=eng
Peng, M.W. 2014. Peng Global Business. 3rd ed. Dallas: South-Western Cengage Learning.
http://pm.gc.ca/eng/news/2011/02/04/canadaus-trade-and-investment
Vesselovsky. (2010).Canadian market share in the U.S. and the roles of product mix and
competitiveness. Retrieved on 05 March 2015 from http://www.international.gc.ca/economist-economiste/analysis-analyse/brief-precis/brief-precis-02.aspx?lang=eng