Less Economic Integration With the United States Research Paper

  • Length: 7 pages
  • Sources: 6
  • Subject: Economics
  • Type: Research Paper
  • Paper: #84399412

Excerpt from Research Paper :

Less Economic Integration Within the United States

Over the last several decades, the total amount of trade between the United States and Canada has been increasingly brought to the forefront. Part of the reason for this, is because the two nations share a common boarder that has encouraged both of them to trade more with each other. As time has evolved, this relationship has continued to increase exponentially with the two becoming increasingly interconnected based upon NAFTA. This has helped to fuel large amounts of natural resources that are exported from Canada into the U.S. Where, America has considerable demand for raw materials to meet the needs of: manufacturers, businesses and consumers. (Schwanen, 2005, pp. 309 -- 406) Evidence of this can be seen by looking than the below table, as this illustrates the total amounts of trade between both nations from 1996 to 2010.

Annualized Trade Figures between the U.S. And Canada from 1996 to 2010


Total Amount of Yearly Trade


$289 Billion


$318 Billion


$329 Billion


$364 Billion


$408 Billion


$379 Billion


$369 Billion


$390 Billion


$445 Billion


$502 Billion


$532 Billion


$565 Billion


$600 Billion


$430 Billion


$476 Billion

("Trade in Goods with Canada," 2011)

These different figures are significant, because they are illustrating how the trading relationship between the two countries has become increasingly dependent upon one another. However, since the onset of the recent economic collapse in the U.S., this partnership has been brought into question with: Canada largely dependent upon United States for various exports. At the same time, the large trade deficit that is being experienced in America has increased the overall amounts of strain with many Canadians questioning this arrangement. As a result, there needs to be less integration with the U.S., where Canada should be focusing on expanding their trading partnerships in other nations. Once this occurs, this will help to balance out the Canadian economy against sudden shifts that are taking place in the world economy. At which point, the nation will be better prepared to take advantage of new opportunities in other emerging markets around the world.

The Arguments in Favor of Deleveraging the Relationship between the U.S. And Canada

Obviously, the current trading relationship between the U.S. And Canada has been having an adverse impact on the Canadian economy. A good example of this can be seen by looking at the Canadian GDP between 2008 and 2010. As, this number was averaging 3% in 2007. Then, once the recession began in the United States, this caused the economy to stagnate in 2008 with this figure coming in at -.7%. However, once the recession began to take hold is when Canada experienced a major decline in GDP growth with there being a -1.7% decrease in second quarter of 2009. Once the economy began to slowly recover in the U.S., the Canadian economy followed a similar trend by: having a GDP rate of over 1.0% in 2010. At which point, the American economy began to enter a period of slow growth with Canada following a similar pattern. ("Canada GDP Growth Rate," 2011) This is significant, because it is illustrating that Canada is too dependent upon the U.S. For its economic well-being.

Given the fact that the country has vast amounts of resources, there are a number of opportunities that are available in some of the emerging markets around the world most notably: the BRICS. These are the countries of: Brazil, Russia, India, China and South Africa. During the recent economic downturn they have continued to deliver above average economic growth throughout the region. The reason why, is because these areas of the world have a need for a wide variety of natural resources. At the same time, the increased amounts of globalization have meant that American and European companies have been outsourcing a number of jobs to these regions. This is based upon the fact that they have tremendous advantages to include: more favorable tax policies, cheaper labor costs and an educated workforce. This has led to shift in these regions with them playing a more vital part in worldwide economic growth. ("Chinese Think Tank," 2011)

Evidence of this can be seen by looking no further than a bluebook report that was published by the Social Sciences Academic Press of China. They found that currently the BRICS account for a total of 22% of worldwide GDP growth. In the next 15 years, these economies will have rapidly growing momentum. ("Chinese Think Tank," 2011) This is because these different regions have favorable policies that are supporting consistent economic growth based upon the external environment. This is important, because it is illustrating that a shift is taking place in the world economy. Where, the U.S. is experiencing slower rates of growth, while the BRIC countries are having above average GDP numbers and will continue to do so for many years to come in the future. As a result, some kind of change needs to take place in the kind of trading relationship that Canada has with the U.S. In this case, the nation needs to focus on strengthening ties with these regions and begin selling more of their natural resources to these nations. If this kind of focus can be taken in the next few years, this will help to balance out the Canadian economy and increase the underlying amounts of GDP growth that the nation is experiencing. ("Chinese Think Tank," 2011)

The best way to achieve these objectives is to reach out several of the BRIC countries that are going to be requiring these kinds of natural resources. This will more than likely take place with these nations forming an agreement with Canada to provide them with a host of commodities ranging from: oil and natural gas to aluminum. Where, countries such as China, India, Brazil and South Africa will need these resources to help fuel economic growth in the future. If this kind an approach can take place, it will help to stabilize the Canadian economy over the long-term and diversity it away from being so dependent on the United States.

A good example of this demand can be seen with China. Where, they have formed a number of agreements with a host of nations to: send them a wide variety of products. This is because the country is lacking various resources that will help to fuel economic growth. To deal with these issues they have been aggressively focusing on using them to: address their needs for infrastructure development and meeting the increasing demand from consumers along with businesses. Evidence of this can be seen with the generation of electricity throughout the region. What has been happening; is that coal is one of the primary sources that are being utilized to help the nation to produce electric power. However, the country does not have enough reserves to keep up with this demand. To deal with these challenges, China has formed a number of agreements with a variety of nations around the world including: Vietnam and Peru. (Holmes, 2011) This is significant, because it is illustrating how there has been a continuing focus among these nations to meet this growing demand. In this case of Canada, they could form similar agreements with these countries to: deliver a wide variety commodities to them. This would diversify the economy and it will allow Canada to experience above average growth based upon what is taking place.

A good example of nations that are benefiting from having these kinds of relationships with the BRICS can be seen with Peru. They have a number of different agreements with China to export a wide variety of natural resources to them. Where, their economy did not fall into a recession when many countries (i.e. The United States and Europe) were: experiencing a dramatic slowdown. The below table highlights the overall amounts of GDP growth that the county experienced because of them exporting a wide variety of commodities to BRIC nations from 2008 to 2010.

GDP Growth Rate of Peru from 2008 to 2010


GDP Growth







("Peru," 2011)

These figures are important, because they are showing how the agreements that with Peru has are helping them to protect their economy from the adverse effects of the recession. As, there was a slowdown in economic growth, yet it was not nearly as severe as most countries with: them experiencing more of a soft landing. Then, once the world economy began to recover (which was being led by the BRICS) their underlying amounts of economic growth continued to increase. This is significant, because it is illustrating how their focus on meeting the needs of these nations provided them with consistent economic stability. The big reason why, is because they were one of the main suppliers of natural resources to these regions. ("Peru," 2011)

At the same time, they have focused on establishing a relationship with the United States.…

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