Executive summary
Canada is one of the most vigorous trading partners with the US, European Union and other countries in Asia. Some of her major trading partners include the US, UK, China, and Japan. Notably, the US is the leading trading partner. Its trading volume amounts to 70% of total transactions in Canada. Moreover, some of the major commodities that Canada exports to her trade partners include food substances, energy, minerals ores and forest products.
On the other hand, Canada imports machinery, equipment and chemicals from some of her trading partners. Needless to say, the US enjoys a comparative advantage in its transaction with Canada. In line with this, Canada has a comparative advantage of trading with her partners in the midst of her competitors. Some of the factors that have positioned the country in a more competitive platform include globalization, economies of scale, technological advancement, consistency in exportation and industrial stability.
Major trading partners with Canada
It is apparent that Canada has numerous trading partners all over the globe (Salvatore, 2010). For this reason, it can be considered as a trading nation whose transaction through trade amounts to about 75% of its GDP (PRLog, 2011). Studies have shown that the US is the most prominent trading partner since the transactions account to 70% of total trading exchange with Canada.
Evidence has shown that for a long time now, much of the Canadian transactions have been done by US, a factor that has made the partner to dominate the transaction in an overwhelming rate (PRLog, 2011).
Pointless to say, due to the bilateral and free trade agreements between the US and Canada since 1988, it has led to economic growth and increase in per capita income (Salvatore, 2010). In addition, Mexico, Japan, China and UK are other major trading partners with Canada. Other partners include Norway, Brazil, South Korea and Netherlands (PRLog, 2011).
Major commodities and services
It is imperative to note that there are numerous merchandises that are exported and imported by Canada and her trading partners. The transaction involves huge deposits of income moving in and out of each country. For instance, research has shown that Canada is the greatest supply of energy to the United States.
Factually, there are numerous forms of energy such as gas, oil, uranium and electric power which are derived from Canada by the US. Due to the fact that Canada is an agricultural country, it supplies most of food products to the US. Hamid (2011) asserts that the US imports an average of 50% of food products from Canada.
Moreover, there are other automobile merchandises such as cars and auto parts which the US imports from Canada. Other essential products include forest products such as timber. On average, Canada exports 77% of its merchandises to the United States while in return; it gets 65% of the overall imports (PRLog, 2011).
It is important to note that the proportion of imports obtained from the US to Canada entails machineries, fruits and vegetables. It is important to note that economic downturn facing Canadian’s trading partners gives the US a comparative advantage to become a dominant trade partner with Canada.
Besides, evidence has shown that UK obtains 2.7% of its total imports from Canada (PRLog, 2011). The export rate has been affected by frequent protracted recession on the UK economy. Despite the fact that the total exports to UK has fallen by 7% for some decades now, the country still imports food products, mineral ores and lumbering products from Canada (PRLog, 2011).
In return, Canada imports processed metals, chemicals and plastic from UK which amounts to 3% of its total imports. It is imperative to note that just like in the US and UK, Canada exports similar products to other trading partners at varying proportion.
Canada also exports fish products, machinery, equipment, industrial goods and automotive products to her trading partners. Evidence has shown that minerals such as diamond, nickel and gold have been some of the fast-moving goods for exports (PRLog, 2011). In line with this, vehicle parts and fertilizers are commodities that are at a high demand among the trading partners. Of essence to note is that Canada imports consumer goods such as auto parts, chemicals, machinery and equipments mostly from China, Mexico and the US.
Summary of imports and exports
Analysis
Economists, business advisors and professionals have continued to debate against the controversy behind the comparative advantage enjoyed by nations such as Canada. Heroux and Hammoutene (2012) indicate that the applicability of the principle of comparative advantage in the international forum is yet to be fully realized (Mafi-Kreft, 2012).
There is no particular explanation of how some nations have managed to achieve much more compared to others. It is worth noting that the perception of studying comparative advantage without total reliance on concrete models leads to most reliable results. The analysis of the comparative advantage in Canada is therefore an analysis of the potential for its business success.
It is evident that given the general nature of comparative advantage, a country like Canada is expected to positioned itself well after doing a series of evaluations. The prediction of the variety of circumstances which were expected in the market helped this nation to bring together its effort (Gregg, 2001).
A deep analysis of the international business has offered Canada an opportunity to establish very important pillars for achieving success in business. These include the establishment of highly dependable economic policies and the use of internal mechanisms to gauge the achievement of the nation at large (Viju & Kerr, 2011).
In reference to the latter, Canada has a strategic plan of achieving higher competitive advantages against its trade partners. Literature on international trade explains how Canada has a great focus on competitive advantage. It is keen to gain this advantage especially when exporting its products to Mexico, China and Japan (Heroux & Hammoutene, 2012).
Comparative advantage
To start with, is the exercise of a relatively stable technological superiority which is exercised over the trade partners. Canada aims at gaining an absolute advantage in the area of technology. This has been achieved through production of goods and services using advanced technology.
Canada’s engagements in international trade are therefore clearly mastered to make sure that it does not lose this competitive power (Heroux & Hammoutene, 2012). The nation uses predetermined prices which are not changed by the actual terms of trading with China and Mexico.
On a different note, economies of scale have been identified to be a source of comparative advantage for Canada. External economies shift the cost of production downwards following a realization of large scale dominance of the market. Besides, specialization in large scale production plays a proactive role in boosting production. The nation enjoys large market both domestically and across its borders.
Canada has grown to a point whereby it faces relatively less negative impacts that arise from market imperfections (Viju & Kerr, 2011). In comparison to the other trading partners, Canada had an earlier start in the cycle for producing export products. (Mafi-Kreft, 2012). This has allowed it to enjoy a wide international market for its products. The large market is coupled with quality recognition. It is evident that consumers are likely going for goods made in Canada given the fact that they are used to them (Krugman & Obstfeld, 2009).
It is also evident that Canada has a consistency in proper management of the dynamics of international trade operations. It has been able to practice prolific allocation of resources (Gregg, 2001). Canada has been able to achieve a superb transformation of raw materials and consumption goods into capital goods. This is a very basic factor which is not common among most of Canada’s trading partners.
Factors of globalization that provide comparative advantage
Despite the fact that economic findings still provide that globalization inhibit economic progress in some nations, Canada has been able to benefit from it. Synergy has been created in the field of trading with different nations. This has led to increased share of markets for this nation (Krugman & Obstfeld, 2009). There has been remarked achievement in terms of acquisition of market stability.
Through its participation in the global economy, Canada has managed to become more competitive. It has experienced an augmentation of its business abilities. Canada has also been able to develop close relations with its consumer nations through the use international collaboration. Indeed, this nation has been able to enjoy its participation in the large and well regulated international market.
References
Gregg, B. (2001). New database to link Pa., Canadian firms. Eastern Pennsylvania Business Journal, 6(16), 3-5.
Hamid, Y. (2011). Culture and international trade: evidence from Canada. International Journal of Commerce & Management, 21(4), 381-393.
Heroux, L., & Hammoutene, A. (2012). Relationship Marketing in the American and Canadian Export Sectors: A Matter of Trust. Journal of American Academy of Business, Cambridge, 18(1), 39-46.
Krugman, P. & Obstfeld, M. (2009). International Economics. Texas: Pearson.
Mafi-Kreft, E. (2012). International Outlook for 2012. Indiana Business Review, 86(4), 23.
PRLog. (2011). Canada’s Most Important Trading Partners FAQ. Web.
Salvatore, D. (2010). International Economic. California: John Wiley & Sons.
Viju, C.& Kerr, W. (2011). Agriculture in the Canada-EU economic and trade agreement. International Journal, 66(3), 677-694.