Canada-U.S. Relationship

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North American Free Trade Agreement Economic Impact

Canada and the United State have enjoyed a long and enduring relationship. This partnership on a broad range of issues, as well as commercial and interpersonal connections, has strengthened these ties throughout the years. Canada also enjoys friendly relations with Mexico, although both geographic and linguistic barriers have prevented their relationship from blossoming into one with comparable intensity that Canada shares with its biggest and closest neighbor.

The North American Free Trade Agreement (NAFTA) was enacted in 1994 in order to allow the three democracies that share the continent an opportunity to maximize their trade partnership. Trade and investment among Canada, the United States and Mexico have increased significantly since NAFTA was implemented, with trade at least 265% larger now than it was 20 years ago. The economic relationship between Canada and the United States, including trade, FDI and tourism, was currently valued at more than $1.4 trillion dollars, an economic output that accounts for more than one quarter of the world’s GDP.

Below are three graphs that show the significance of these relationships over the past 20 years and the cross-border expansion that has taken place.

Bilateral North American Trade for Merchandise (Millions $US)

This graph shows the substantial relationship growth between Canada and the United States and how heavily the countries rely on each other for merchandise.

Trilateral Merchandise Chart

Bilateral North American Trade for Services (Millions $US)

The graph below shows the incredible growth of the Canada – U.S. relationship in the Services industry.

Trilateral Services Chart


Bilateral North American Foreign Direct Investment (Millions $US)

This graph shows the significant partnership between Canada and the United State and the value both countries see in investing in businesses across the border.

Trilateral FDI Chart



Sources: Industry Canada, Trade Data Online; U.S. Census Bureau, Foreign Trade; and OECDiLibrary, OECS Statistics on International Trade in Services, EBOPS 2010, Statistics Canada, Table 376-0051 - International investment position, Canadian direct investment abroad and foreign direct investment in Canada, by country, annual (dollars), CANISM (database); U.S. Bureau of Economic Statistics, Balance of Payments and Direct Foreign Investment Position Data, U.S. Direct Investment Abroad on a Historical-Cost Basis