The Canada-U.S. trade relationship is the largest ever to exist between two nations. Two-way trade in goods and services between Canada and the United States during 2000 was estimated at approximately C$700 billion, or almost C$2.0 billion per day. Of Canada's 2000 imports, 74 percent came from the U.S., while 86 percent of Canada's total exports were shipped to the United States. The volume of Canada-U.S. trade last year was far greater than the total amount of Canada's trade with all of its other trading partners combined.

Canada and the United States have long been very active trading partners. In historical terms, Canada has been the leading foreign export market for U.S. goods since 1946, while the United States has been the number one destination for Canadian exports since 1942.

The implementation in 1965 of the Auto Pact, which established free trade in automobiles between Canada and the United States, served to promote the already strong economic ties between the two countries. The historic signing in 1989 of the U.S.-Canada Free Trade Agreement (FTA), which established tariff-free trade on a multi-sectoral basis, set the stage for an enormous increase in the amount of bilateral commerce between Canada and the United States. In 1994, the fundamental principles of trade liberalization established by the FTA were further expanded, both in terms of scope and coverage, under the North American Free Trade Agreement, which added Mexico to the regime. These trade agreements have helped fuel unparalleled economic growth, with bilateral trade between Canada and the United States nearly tripling during the past twelve years.

In addition to the FTA and NAFTA, various other factors have contributed to the remarkable expansion of bilateral commerce between Canada and the United States. Geographic proximity, congruent time zones, a common language, and cultural and historical ties have played a key role in the huge increases in
two-way trade, as have the similarities in the business environments of Canada and the United States. Canada is the ideal export and investment destination for American companies looking for a marketplace most similar to their own, and, conversely, the US is the perfect market for Canadian exporters.

Economic Impact

It is difficult to overstate the impact of international trade on the economies of Canada and the United States. In 2000, 43 percent of Canada's gross domestic product was comprised of exports and over 30 percent of total employment in the country was supported by exports. With 86 percent of all Canadian exports last year destined for the US, it is clear that trade with the United States creates an enormous number of jobs for Canadians.

Though the United States is not as export-oriented as is Canada, international trade does contribute significantly to the US economy. Last year, U.S. exports of goods and services comprised roughly 12 percent of the United States' GDP. (Exports to Canada accounted for roughly 20 percent of all US exports.) It has been estimated that nearly two million jobs in the United States are supported by US exports to Canada.