Economic relations between Canada and the United States
In January 1989, Canada and the US implemented the USA-Canada free trade agreement that marked a major increase in trade among them. Their commerce forms the largest bilateral trading relationship in the world. As a result of the free trade agreement, the economic relationship between them has succeeded and the two economies have become highly interconnected. In 1994, this agreement was partially altered and broadened to include Mexico in
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In 2008, Canada’s trade surplus with the USA was of $148 billion, which amounts to 9 percent of Canada’s GDP. The recent global financial crisis has had a huge negative effect in US’ economy, characterized by recession and an almost two-digit unemployment rate. Canada has been affected by reduced consumption levels from the USA, which has hurt many Canadian industries. Frictions in the economic relationship arise from ongoing trade disputes, such as softwood lumber, agricultural policies and intellectual property rights (McKinney 2010).
Canada as an energy supplier to the USA
These disagreements with regards to some trade issues did not impact the energy supply from North to South. Canada has been providing energy for the USA in a very large scale. In fact, Canada is the largest foreign source of US energy imports, oil included. The International Energy Agency (IEA) estimated that the oil sands are composed of 1.7 trillion barrels of oil. As of January 2008, proven oil sands reserves were projected to exceed 170 billion barrels, which ranks Canada as the second biggest oil producer second only to Saudi Arabia (Levi 2009). In 2010, the IHS Cambridge Energy Research Associates, Inc.'s (IHS CERA) Canadian Oil Sands Dialogue stated that Canadian oil sands became the main source of crude imports by the US.
Canada has emerged as the largest external source of oil to the US mainly due to the growth in