Economy

A trading nation

Canada has always been a trading nation. Commerce with other countries remains the engine of its economic growth.

Without trade, Canadians could not maintain their standard of living. Canada has one of the ten largest economies in the world.

Key points

• Canada has always been a trading nation.
• Commerce (trade) remains the engine of Canada’s economic growth.
• Canadians could not maintain their standard of living without trade with other nations.
• Today Canadians enjoy one of the world’s highest standards of living, kept up by hard work and by trade, especially with the United States.
• Canada has one of the ten largest economies in the world.

Practice questions: How does Canada’s economy rank in size? · According to Discover Canada, what remains the engine of Canada’s economic growth? · Why is trade with other countries important to Canada?

Free trade, NAFTA and the G7

Canada enacted free trade with the United States in 1988. Mexico became a partner in 1994 in the broader North American Free Trade Agreement (NAFTA). Since July 1, 2020, NAFTA has been replaced by the Canada-United States-Mexico Agreement (CUSMA).

Canada is also a member of the G7 group of leading industrialized countries.

Key points

• 1988: Canada enacted free trade with the United States.
• 1994: Mexico joined, in the broader North American Free Trade Agreement (NAFTA).
• 2020: CUSMA replaced NAFTA.
• Canada is a member of the G7 group of leading industrialized countries.
• G7 members: Canada, the United States, the United Kingdom, France, Germany, Italy and Japan. Discover Canada says G8 because Russia was a member until 2014.
• After the Second World War, trade treaties such as the General Agreement on Tariffs and Trade (GATT), now the World Trade Organization (WTO), opened up world trade.

Practice questions: Which group of leading industrialized countries is Canada a member of? · In what year did Canada enact free trade with the United States? · Which country joined Canada and the US in the North American Free Trade Agreement in 1994?

Three main types of industries

Canada’s economy has three main types of industries: service, manufacturing and natural resources.

Services employ by far the most people. Manufacturing makes goods for Canada and the world. Natural resources industries include forestry, fishing, agriculture, mining and energy.

Key points

• The three main types of industries are service, manufacturing and natural resources.
• More than 75% of working Canadians have jobs in service industries.
• Service examples: transportation, education, health care, construction, banking, communications, retail, tourism and government.
• Manufacturing makes products to sell in Canada and around the world.
• Manufacturing examples: paper, high technology equipment, aerospace technology, automobiles, machinery, food and clothing.
• Natural resources industries: forestry, fishing, agriculture, mining and energy.
• Tip: health care and banking are services; mining and fishing are natural resources; cars and aerospace are manufacturing.

Practice questions: What are the three main types of industries in Canada? · In which type of industry do most Canadians work? · Which of the following is an example of a service industry? · Which of the following is an example of a manufacturing industry? · Which of the following are natural resources industries?

Natural resources, past and present

Natural resources have played an important part in Canada’s history and development. For centuries the economy rested mainly on farming and on exporting fur, fish and timber.

Resources still matter today. Many regions depend on them, and a large share of Canada’s exports are natural resource commodities.

Key points

• For centuries Canada’s economy was based mainly on farming and exporting natural resources such as fur, fish and timber.
• These goods moved by roads, lakes, rivers and canals.
• The first companies in Canada competed for the fur trade; the Hudson’s Bay Company came to dominate it in the northwest.
• Natural resources industries played an important part in Canada’s history and development.
• The economy of many areas still depends on developing natural resources.
• A large percentage of Canada’s exports are natural resources commodities.
• The discovery of oil in Alberta in 1947 began Canada’s modern energy industry.

Practice questions: For centuries, what was Canada’s economy based mainly on? · What makes up a large share of Canada’s exports even today?

Regional resource strengths

Different provinces are known for different resources. The regions chapter describes the main industries of each province.

Key points

• Alberta is the largest producer of oil and gas; the oil sands in northern Alberta are being developed as a major energy source.
• Quebec’s huge supply of fresh water makes it Canada’s largest producer of hydro-electricity.
• Quebec is also Canada’s main producer of pulp and paper and has forestry, energy and mining industries based on the Canadian Shield.
• About half of all goods produced in British Columbia are forestry products (lumber, newsprint, pulp and paper), the most valuable forestry industry in Canada.
• The Port of Vancouver is Canada’s largest and busiest port and its gateway to the Asia-Pacific.
• Saskatchewan has the world’s richest deposits of uranium and potash (used in fertilizer).

Practice questions: Which province is Canada’s largest producer of oil and gas? · Which province is Canada’s largest producer of hydro-electricity? · Which industry is a major part of British Columbia’s economy?

Canada and the United States

Canada and the United States are each other’s largest trading partner. Together they have the biggest two-way trading relationship in the world.

The two countries enjoy close relations, and millions of people cross the border safely every year.

Key points

• The United States is Canada’s largest international trading partner, and each country is the other’s largest trading partner.
• About 72% of Canadian exports went to the United States in 2025.
• Canada and the U.S. have the biggest bilateral trading relationship in the world.
• Integrated Canada–U.S. supply chains compete with the rest of the world.
• Canada exports billions of dollars worth of energy products, industrial goods, machinery, equipment, automotive, agricultural, fishing and forestry products, and consumer goods.
• The border is traditionally called “the world’s longest undefended border.”
• The Peace Arch at Blaine, Washington, inscribed “children of a common mother” and “brethren dwelling together in unity,” symbolizes the two countries’ close ties and common interests.

Practice questions: Who is Canada’s largest trading partner? · About what share of Canada’s exports go to the United States? · What is the Canada–United States border traditionally called?