Posted 01.01.2010
The Economist
Our good friends next door
By Tucker Hart AdamsIn all the talk of globalization and the new world economic order, it's easy to overlook our good friends to the north. They are so like us in language (although they do spell a little funny), their commitment to democracy and their willingness to fight alongside us when required that it is easy to forget they are a foreign country and our major economic partner.
Recently, Dale Eisler, the Canadian Consul General in Denver, had me moderate a fascinating panel discussion on the challenge of reducing the fiscal and monetary stimulus that have been poured into the world's economy to keep the Great Recession from turning into another Great Depression. The keynote speaker was David Dodge, former governor of the Bank of Canada (the Canadian Alan Greenspan or Paul Volker), and the other panelists ranged the gamut from a radical Krugman Keynesian to a conservative Friedman monetarist. We managed to solve most of the world's problems in a little more than two hours, not only how to reduce economic stimulus without causing another recession, but also health care and Social Security.
There is good reason to listen to what Canada has to say. It has survived the economic crisis in better shape than the U.S. and most of Europe, with lower unemployment and fewer job losses proportionate to its size. As its prime minister stated, "We are usually polite, quiet and self-effacing. But this is no time for Canadians to hide our light under a bushel."
One of the most interesting things to me as I prepared for the discussion was to be reminded of Canada's importance to the U.S. economy. We share the longest nonmilitarized border in the world - 5,525 miles. Canada still doesn't require a passport from American visitors, although we have imposed a passport requirement for both Americans and Canadians to enter the U.S.
When I lived in New England 50 years ago, we frequently traveled to Canada - the closest thing to a foreign vacation we would afford for our young family. I remember driving from Canada into Maine late one night, through an open border crossing where we simply signed a ledger, without a human being in sight on either side. When we drove from Colorado to Alaska in 1973, I was surprised to see a neatly maintained boundary clear of brush and vegetation for about 20 feet between our two countries, defining the boundary just like it is on a map.
Trade with Canada is the largest, most important economic relationship between any two countries in the world. In 2008 our total exports to Canada were $358.6 billion; we received $308.2 billion for the goods and services we sold and $50.4 billion from the assets we own there. Our imports totaled $394 billion, $368 billion of that goods and services, for a small negative trade balance of $59.8 billion.
Mexico, our second largest partner, purchased $175.2 billion of our exports and sold us $235.8 billion of theirs. China, which has been the recent focus of attention, purchased only $85.4 billion, while selling us $347.8 billion. Canada is Colorado's No. 1 export market.
I had forgotten that Canada is our major energy supplier. According to the U.S. Energy Information Administration, through August we imported almost 2.5 million barrels a day of petroleum from Canada, almost twice the 1.27 million barrels from our second largest supplier, Mexico, and far more than the 1.51 million barrels from Saudi Arabia and Iraq combined.
The Canadians invest about the same amount in the U.S. that we do in Canada - $222 billion of direct investment flowing this way versus $227 billion that we invest in Canada. They are also a major contributor to our tourist economy, annually sending us almost 26 million tourists, who spend about $12 billion here. In contrast, we send Canada only a bit more than 12 million tourists, who spend about $6 billion.
And, all of this occurs with a country that has a population only a tenth the size of ours - 33.9 million versus the U.S. population of 308 million - and a gross domestic product that is smaller than our federal budget deficit. Imagine a world where all bilateral relationships were as peaceful and mutually profitable!
Tucker Hart Adams, president of the Adams Group, monitored and analyzed the Colorado economy for 30 years. She can be reached via her website, coloradoeconomy.com.
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