Essay On The Relationship Between Canada And Globalization

Britain has always been Canada’s main trading partner but in the 1920s, this changed completely. American industries started buying raw materials, such as wood and minerals from Canada. By the end of 1926, Canada’s trade value was much greater with the United States than that of its trade with Britain. The positive relationship between Canada and the United States grew increasingly over the years; economic investments and American branch plants established during the 1920s, the expanding on foreign trade and the Auto Pact trade agreement after World War 2, and the Free Trade Agreement of 1989 and NAFTA. The events from the 1920s-1990s has created a relationship between Canada and the United States that has worked to benefit both countries.

At the same time as Canada was working toward greater political independence from Britain, the
country was forming closer economic ties with the United States. during the 1920s, an economy
for canada was growing. Industries evolved their mass production techniques during the 20s and
these techniques meant that there were going to be positive changes in the manufacturing process. Cars
and could produced more quickly and as prices dropped, more people could afford to buy things.
During the 1920s, not only did Canada become a major wheat exporter, but from 1918-1929, Ford
Motor vehicle ownership in Canada soared from 300,000 to 1.9 million. Until the 1920s,
Britain was Canada's main trading partner but as the economy of the United States became
Stronger, trades between Britain and Canada declined while with the United States, trade increased. By
1925, the United States was Canada’s number one trading partner. During many occasions, most
manufactured goods flowed from the U.S to Canada but sometimes the americans needed Canada’s
natural resources to manufacture their products, such as newspaper. Americans expanded their
investment in Canadian industries in the 1920s, creating branch plants which are operations set up in
Canada but are completely owned by American companies. Auto companies such as Ford and General
Motors, for example, were quick to establish Canadian branch plants. Branch plants enabled American
Companies to sell to Canadian consumers without incurring high transportation cost or paying the import
tariffs that the Canadian government used to protect Canadian manufacturers. Many Canadians loved
the idea of branch plants. They thought that these branch plants created jobs for them and helped the
Canadian industries grow, but other Canadians argued that these American factories would overrun
Canadian companies, putting them out of business. Some canadians also argued that the managers of
the branch plants were usually American and the profits earned in Canada would be sent to U.S companies. These branch plants were set up and it helped American companies with Tariffs. To support Canadian manufacturing in the early 20th century, the government had placed tariffs of finished goods from the U.S at one time, for example, a 35 percent tariff applied to imported American cars. now these tariffs raised the prices of american goods that were being sold in canada. These Branch plants allowed American businesses to avoid paying tariffs while factories in Canada were making the same products as the ones in the U.S. by 1930, 20 percent of the book value of Canadian industries was US-owned.

The economic boom of the 1950s and early 1960s was fuelled in part by increased trade with the United States. In the 1950s, many Canadian businesses found it easy to sell their products in the U.S. Canadians were also eager to buy American goods. At the same time, however, many Canadians were concerned about the growing American economic influence on Canada. American companies have been making vehicles in canada since the beginning of 1901, but because most cars and parts were manufactured in the United States, Canada was spending far more on american products then it was earning. This was due to Canadian-made goods being sold in the U.S. In 1958, the Canadian Deficit in trade of automotive products was -$315. By 1963, the Canadian Deficit was -$500. Canada and the United States decided to sign a trade agreement called the Auto Pact in January of 1965. This trade agreement allowed American auto companies to build plants in Canada and sell their cars duty free in both countries. The Auto Pact also benefited Canada because it protected the Canadian automotive industry. The agreement consisted of many requirements including; required 60 percent of the parts and labour on vehicles built in Canada to be Canadian, for every car that American auto companies sold in Canada, they were required to build a car in Canada. Tariffs were also placed on cars made in Germany, Japan, and Britain. The Auto Pact agreement had benefits to it including the creation of new markets that are for Canadian auto parts manufacturers, for example, Magna International Ltd. This also resulted in the growth of Canadian auto parts industries. Not only did the Auto Pact reduce the high trade imbalance between Canada and the U.S, but it also created thousands of high paying jobs in Canada. In the 1970s and the 1980s, companies like General Motors, Ford, and Chrysler carried on with building large assembly plants in Ontario. As the establishment of the Auto Pact expanded, so did foreign trades. Since it began in 1995, the World Trade Organization has been the chief engine of economic globalization. the WTO came into play when representatives of 44 countries, met and agreed that freer trade would not only avoid another depression like the one that occured in the 1930s, but it would also help countries recover from the war and it would promote comfort. 23 countries then signed the General Agreement on Tariffs and Trades in 1947. GATT membership and international trade increased over the years but many problems started to make there way into the picture and because of this the World Trade Organization was founded. The WTO organized trade negotiations, police trade agreements and rules on trade disputes between countries and by mid 2008, 153 countries belonged to the WTO. GATT and WTO became huge organizations throughout the years with many positive and negative events the occured.

Canadian businesses rely on international trade to keep the economy strong.

As a result, Canada has become the fifth largest trading country in the world, and exports now make up about 50 percent of the Canadian economy. Serval Canadian businesses urged the Progressive Conservative Government of Prime Minister Brian Mulroney to agree to a deal of any kind that would get rid of the remaining barriers to trade with the United States in the late 1980s. Mulroney agreed and in 1989 the First Free Trade Agreement of Canada-United States was established. This agreement eliminated almost all trade barriers, it let Canada keep their right to protect their cultural industries, education and health care as well. For the americans, this agreement gave their companies significant access to Canadian resources and other markets. Although this was a good deal for the United States, several Canadians feared that the bond between Canada and the U.S would become too strong and this would affect how independent the country's ability to act would be. After the First Free Trade agreement in 1989, prime minister Jean Chretien’s liberal government signed the North American Free Trade Agreement in 1994, regardless of the public concerns about the first agreement. This agreement did include mexico in the NAFTA free trade zone. Once NAFTA was signed, the Canadian government began to look for other trading partners, in 1997, Canada entered the agreement with Chile and Israel and in 2008, Canada signed with Colombia, Peru, and many more from Europe and South American countries. These agreements gave the United States and Canada b bigger bond to work

with.

Many opportunities and decisions that were made throughout the years like the economic investments and American branch plants established during the 1920s, the expanding on foreign trade and the Auto Pact trade agreement after World War 2, and the Free Trade Agreement of 1989 and NAFTA have brought canada and United States together positively. Hopefully there are many more positive opportunities to come.