The Economic Ties Between US and Canada

 Canadians believe that Canada is their best friend in the world, ranking slightly ahead of Great Britain and then with a significant gap down to third-ranked Italy in the comprehensive 2002 Chicago Council on Foreign Relations study of US attitudes toward foreign affairs. But the typical American knows very little about Canada and Canadians. Many people believe that the United States' top trading partners are China or Japan. As a matter of fact, American exports to Canada exceed those to Japan by nearly three times, and to China by twelve times. Additionally, in 2001, US exports to Canada exceeded US exports to the fifteen EU member states, which together account for 375 million people. About 19% of America's imports came from countries north of the border in 2001, while over 22% of its exports went to Canada. Canada has emerged as the top foreign supplier of essential petroleum products to the US, with $14.5 billion in shipments to the US in 2001 alone.

The amount of Canadian direct investment in US-based

businesses has also grown significantly, surpassing US$109 billion in 2001. Currently, these Canadian-owned businesses in the US offer roughly 640,000 jobs to American workers. Furthermore, with just fewer than 15 million trips in 2000, Canadians make up about 30% of all foreign tourists to the United States. In the US, connections to Canada through trade, direct investment, and tourism support about 3 million employment.

There is even more of a reliance on ties between Canada and the US. In 2001, exports accounted for more than 43% of Canada's GDP, significantly more than that of any other significant Western country. Approximately 87% of goods exported are intended exclusively for the US market. Over 139 billion dollars in US foreign direct investment have been made in Canada, and US-owned businesses operating there support over a million jobs and account for 10% of the country's GDP. Additionally, roughly 90% of all international visitors to Canada each year are Americans. Of Canada's 15.4 million jobs, trade, direct investment, and tourism contribute approximately 4 million jobs and approximately 40% of the country's GDP to the United States. As the most "oeglobalized" of the main Western nations in this period of globalization, Canada is also the most vulnerable to events occurring outside of its borders, particularly when it comes to events occurring within the United States.

In recent years, cross-border trade has grown at a rate that is about three times faster than the growth of all national economies combined. This norm was broken in 2001, when trade volume actually decreased somewhat for the first time since 1982.

An investor or business from one nation

may install new facilities or purchase the ownership of an existing business in another nation. This is known as foreign direct investment, or FDI. Mergers and acquisitions (M&A) account for the majority of foreign direct investment (FDI), as opposed to "greenfield" projects like constructing a new auto assembly factory abroad. In 2000, transnational M&A activity exceeded a record US$1 trillion, and between 1995 and 2000, both short- and long-term investment flows more than doubled. Even though M&A activity decreased to US$ 594 billion in 2001, it was still quite high compared to previous years.

International companies (TNCs) provide the majority of foreign direct investment (FDI). Currently, 850,000 foreign affiliates are operated by about 65,000 TNCs globally. 54 million people are employed globally by these affiliates, who generate US$19 trillion in sales annually—much more than the entire amount of goods and services traded globally. Undoubtedly, a notable characteristic of 21st-century globalization, particularly when juxtaposed with the previous era of "\~internationalization" spanning from 1870 to 1914, is the pivotal function fulfilled by transnational corporations. These TNCs not only make the majority of direct investments, but they also contribute one-third of global exports and one-tenth of the global GDP. Additionally, with 67 percent of commercial trade between the US and Canada and 63 percent of commerce between the US and Mexico taking place within a TNC, North America has one of the highest concentrations of intrafirm trade (defined as trading between units of the same TNC).

There has never been more people traveling

abroad for work, pleasure, or immigration—nearly three million individuals cross borders every day, quadruple the number who did so in 1980.

The significance of distance, space, and national borders is gradually being diminished by revolutionary developments in communications and transportation. The development of cyberspace, which enables a person to communicate in less than a second with a potential audience of hundreds of millions of people worldwide, is one of the main achievements of the Information Technology (IT) revolution. It also implies that, at least through cyberspace, the closest rival to a company—which is how local governments generate revenue and jobs—is less than a second away. Together with extensive deregulation and privatization, the global dominance of market systems has also made it more difficult for governments to defend and advance the interests of their citizens. For example, TNCs can move jobs to low-wage countries or other countries that offer unique advantages due to the growth in internationalization of production, which can be roughly divided into eight-hour segments starting in Asia and the Pacific, moving on to Europe and Africa, and ending in the Americas. Workers who have held similar positions in the past, however, are not frequently transferred, so they can end up looking for other work. For instance, more than 100 US companies currently contract out the cutting of software code to locations in India, where the task is finished and sent back over the course of the night via electronic networks.