The Canada – U.S.Trade Relationship
Think Creative.
Think Competitive.
Think Bottom Line.
Think Canada.
Global Supply Chain Management
Conference
Plattsburgh, NY
June 15, 2010
Michael Flaherty
Senior Trade Commissioner
Canadian Consulate General Buffalo
1
Canada has a Relatively Strong Economy
Despite the Global Slowdown
Real GDP Growth and Projections (%)
4.0
3.2
3.1
3.0
2010-11
1.8
1.9
1.7
1.6
%
2.0
1.0
0.8
1.0
0.7
0.7
0.5
0.3
0.0
Source: Consensus Forecasts, April 2010, Consensus Economics Inc.
Japa
any
Germ
Fran
ce
U.K.
U.S.
Can
ada
Italy
-0.6
-1.0
2006-09
n
-0.5
2
Canadian Response to Recession
$13 Billion - Personal Tax Cuts
+$21 Billion – Infrastructure Investment
+$9 Billion – Housing Stimulus
+$9 Billion – Business Assistance Programs
$52 Billion 2009-2010 Stimulus
In Canada it was More Like an
“Average” Recession………Why?
 Auto-Making
 Bankruptcies
 Sectors Effected
 Banks
 Credit
 Net Worth
U.S Response
 $787 Billion stimulus
 Banking, Automotive,
Insurance bailouts
 American Recovery and
Reinvestment Act (ARRA)
 Strengthened Buy-
American restrictions

Unintentional
consequences for
Canadian Companies
Why is This Important?
•Canada is top export market for 35 U.S. States
•Canada-U.S. trade supports over 7 million American Jobs
•$675 Billion in bilateral trade is the largest in the world!
Canada-U.S. trade
Canada’s trade in goods and
services with the U.S. is more
than twice the size of its
trade with the rest of the
world.
Distribution of U.S. Merchandise Trade
2008
Mexico
10.8%
REGIONAL SHARES OF CANADA’S TRADE IN
GOODS AND SERVICES, 2004 AND 2008
(PERCENT)
Exports
Imports
2008
2004
2008
2004
2008
World
100.0
100.0
100.0
100.0
100.0
100.0
US
78.5
72.8
67.1
62.4
73.1
67.7
EU
7.7
9.3
11.2
11.6
9.3
10.5
Japan
2.3
2.4
2.9
2.6
2.6
2.5
Other
OECD
3.6
4.5
5.8
6.0
4.6
5.3
8.0
11.0
13.0
17.4
10.3
14.1
S
o
u
r
c
e
:
4.5%
Germany
All Others
48.9%
China
12.0%
17.7%
Canada
Total Trade
2004
NonOECD
Japan
6%
The U.S. #1 trading partner
=
Canada
Canada-NY Trade
•Merchandise trade (2008)
•NY exports: $14.2 billion
•NY imports: $28.3 billion
•Trade: $42.6 billion
Our Solid Foundation
 35% of border shipments are
intra-firm transfers
 20% Automotives and parts

The world’s largest single
integrated industrial
value chain
 50%+ of merchandise trade is
materials and products (i.e.
plastics, machinery, medicines,
equipment) used as inputs for
other goods
… our trade is based on the fact that
we make things together!
Geographic proximity
 Many Canadian
production hubs are
closer to key US markets
than corresponding
American centres.
 Of Canada’s 20 largest
cities, 17 are within 100
miles of the border.
Approximately 90% of
Canadians live within this
distance.
500 km
St. John's
Edmonton
Saskatoon
Québec
Charlottetown
Calgary Regina Winnipeg
Fredericton Halifax
Victoria Vancouver
Ottawa Montréal
Seattle
Toronto
Boston
Milwaukee Windsor
New
Chicago
Cleveland
York
Philadelphia
Detroit
Baltimore
Pittsburgh
Washington
St Louis
Denver
San Francisco
Atlanta
1000 km
.
Los Angeles
Houston
Miami
Mexico City
Connectivity
Road
Rail
Power
11
Supply Chain Integration Supports a
Huge Trade in Energy
• Largest supplier of energy,
•
92% of Canadian energy exports go to U.S. markets
• Completely integrated energy infrastructure
North American Gas Pipeline Grid
North American Crude Oil Pipeline
Grid
Supply Chain Integration
• 49% of Canadian FDI goes to the U.S.,
• 16,000 Canadian owned companies in the U.S.
• These companies depend on integrated supply chains
-Bombardier - 46% of suppliers are US firms
-Boeing – 35 Canadian suppliers help produce aircraft
Canadian Owned Companies
The size and diversity of our relationship
hides a significant constraint…
14
Most of our trade flows through only a few border crossings
Automotive Industry Benefits from a Highly
Integrated U.S. – Canada Supply Chain
•Auto parts may cross the border 7 times before final assembly
•Integration has allowed both countries to specialize in different areas of
expertise
•Assembly plants and major parts companies are clustered in Southern
Ontario and Interstate – 75 to enable efficient integration of crossborder supply chains
•Detroit 3 operate high volume assembly plants in Canada, producing
over 1.3 Million vehicles in Canada in 2008
•Canada is the largest market for U.S. vehicles, 36% of total vehicle
exports
•U.S. is the largest market for Canadian vehicles, 25% of total vehicle
exports
Case Study – Chevy Equinox
Case Study – Wastewater and Pipe
Sector
•$6.2 B – 25% U.S. exports
go to Canada
•$2.1B U.S. trade surplus
•Majority of both countries
infrastructure projects depend
on cross-border supply chains
•Canadian innovations
contribute to a cleaner
environment and safe drinking
water.
ARRA BA Restrictions
 Canadian companies accustomed to
“traditional” BA provisions on iron and steel
in place since 1930s
 ARRA extends BA restrictions

“All manufactured goods used in the
construction, maintenance or repair of a
public building or public work funded by
ARRA be produced in the USA.”
Consequences of BA
 Threaten to disrupt the highly integrated supply chains
in the North America, making US and Canadian
companies less competitive in the world market
 Increased project costs
 Delays in project start-ups
 Unintended consequences - retaliatory protectionism
could further disrupt trade and lead to further loss of
jobs
BA’s Unintended Consequences: City
of Salem, NJ
 City of Salem, NJ water project
 GE Water Systems USA providing equipment

Water filtration equipment manufactured by GE
Canada
 Salem had to apply for an EPA waiver; a cumbersome and
expensive process

Professional engineering and management consulting
firm to assist in the application process
 EPA issued the waiver after eight weeks (June-August
2009)
Importance of Resolving the Issues
 Millions of jobs have been generated through bi-lateral
business agreements and relationships over decades
 Secure and predictable access underpins our trading
relationship. NAFTA is a fundamental example of this
 Cooperation supports the global competitiveness of our
exporters and is key to creating and sustaining employment
in both of our countries
The Canada-USA Agreement on
Procurement : Three Elements
 Permanent, reciprocal commitments under the World
Trade Organization (WTO) Government Procurement
Agreement (GPA) with respect to provincial, territorial
and state procurement.
 US is providing Canada with access to procurement by 37
states
 Canada is providing access to procurement by all
provinces and territories, except Nunavut, in accordance
with GPA undertakings.
The Canada-USA Agreement on
Procurement : Three Elements
 Until September 30, 2011 (when ARRA funds will all be
spent):

Canada has agreed to provide U.S. suppliers;


Access to construction contracts across the
provinces and territories, as well as in a number of
municipalities.
United States has agreed to provide Canadian suppliers;

Access to state and local public works projects under
seven of the programs funded by ARRA with no BA
restriction.
The Canada-USA Agreement on
Procurement : Three Elements
 Commitment to enter into discussions within 12 months
with a view to expanding commitments on government
procurement
 Both sides agreed on a fast-track consultation process to
engage consultations no later than 10 days after a request
has been made
The Agreement Works for Both
Canada and the US
 With this agreement, we are sending a clear message that
jobs are better secured by opening economic
opportunities rather than by closing them – now and
in the future
 US and Canadian local, federal, and provincial governments
can source from wherever makes the most business sense,
increasing efficiency and finding the best solution for
individual projects
 ARRA funding can bring the quickest and biggest bang for the
buck
 Everybody wins