Why is trade important to Canada? Now that is an important question for any country.
The basic of trade involves sharing the surplus in exchange for what is required locally. This 9000-year-old tradition took many forms, local and across borders, and today, it lies at the foundations of the developed countries.
International trading is done to get better quality products, products in shortage or surplus, or even procure merchandise with no alternative in the local market. The importance of international trade can never be undermined at any level.
So, How Important is the Trade Industry to Canada?
There are many upshots of international trade for any country and specifically for Canada.
International trade upholds and upgrades a country’s competitive advantage in comparison with its counterparts. That means it allows Canada to efficiently and effectively produce or manufacture goods and services at a low cost. That increases the production amount and international sales.
International trade in Canada is also important because it raises the consumer surplus by increasing the competition and lowering the prices. As more and more consumers enter the purchasing circle, more advantage and power is delivered to the trading parties.
When foreign investments land in a country, it causes a competitive drive among the local producers. This results in better quality products and helps to dissolve the regional domination of one set of sellers. Such investments also pave the way for introducing the latest technologies as tricks of the trade are shared across international borders.
It creates more job opportunities for the local communities, which signals a loud advocate for Canada’s economy. That answers why Canada trades with other countries.
The Deal of International Trade in Canada
Canada’s dependence on trade for its economic sustenance and growth is shown by the fact that its GDP was 1.9 trillion CDN dollars in the year 2020. Canada export partners have decreased substantially due to Covid Restrictions and the export of goods.
During better years, Canada’s major export partners have been with the U.S. and Mexico, including Europe and Asia, with a particular focus on trade with European countries. Some of Canada’s largest trading partners include United Kingdom, Japan, South Korea, and Germany.
Canada was able to pull off its international trade balance to $1.5 billion dollars in February 2021. That speaks volumes of Canadian trade history. These are all excellent news for business entrepreneurs who are looking to expanding their businesses outside of Canada.
True, the value of the Canadian dollar against the U.S. dollar is low, but it means Canada’s advantage when it comes to exports. In addition, the Canadian government offers multiple supports in logistics and finance to businesses when it comes to expanding their international trade.
Canada’s foreign trade’s prevalent areas of produce include oil, natural gas, machinery, gems/precious metals, and lumbar. The living standards of the Canadians and the prosperity level of the country are dependent on trade. Canada’s exports and imports were approximately $1.1 trillion in total in 2011.
This amounts to an average of about $31,600 for every person in Canada or $3 billion every day. The contribution made by the trade sector to the economy was approximately 63.3% in 2011. This share by trade sector had risen over the decades, especially during the 1990s when it ascended nearly 34% points.
This was due to eliminating trade-dampening tariff barriers between Canada and the United States and Mexico, some of its most important trading partners. This is seconded by the fact that one in five jobs in Canada depends on exports.
According to the stats gathered in 2018, Canada was
- number 10 economy in the world in terms of GDP
- the number 12 in total exports
- the number 15 in total imports
- the number 20 economy in terms of GDP per capita
The leading Canadian exports included crude and refined petroleum, gold, and vehicle parts. According to the Canadian trade statistics, raw aluminum and rapeseed, potassic fertilizers, newsprint, and sawn wood were significant exports. While Canada’s significant imports included refined and crude petroleum, cars, delivery trucks, computers, armored vehicles, aqueous paints, asphalt, lettuce, and cabbage.
According to the Observatory of economic complexity, Canada exported C$43B worth of exports in November 2020 while its imports amounted to C$48.2B. This indicates a negative trade balance of C$5.17B. So a country that mainly relies on trade needs to achieve a balance between imports and exports.
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Benefits of international trade for Canada
Here are some benefits enlisted to highlight the benefits of globalization in Canada’s trade industry and its everyday effects on the life of an average Canadian.
- Trade allows for Canadians to sell and purchase goods and services in the international market. In this way, they can showcase their products on multiple platforms and have access to various products from around the world.
- Trade activities help create and support jobs in Canada. Such undertakings contribute directly to those producing such goods and services and indirectly via support to the trade industry.
- More exports create room for extra and auxiliary production, which may exceed the domestic market requirements. It allows for fair pricing of the local community’s products due to the low production cost for producers. So it helps in bringing affordable price tags for all.
- International trade is competitive in every way. This means that producers strive to access cost-effective initiatives that focus on products that give them an edge over others in the international market. This increases productivity, which means more jobs or higher wages or both for the employees. It results in the growth of the individual company with more extensive clientele and a better reputation, thereby enabling them to withstand the business ups and downs.
- A company’s growth means increased tax returns to the government, and eventually, the whole economy prospers.
- International trade helps to identify the specialized ones among all, meaning the best producers among all. Specialized sectors improve and perform better, and the cost of switching between different sectors is avoided, thereby providing everyone with the same means to help them grow.