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Economic Ties between US & Canada

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How intertwined are the US and Canadian economies? How valuable is this trading relationship to BC's various sectors? The Business Council of BC takes a look at some key economic connections between the two countries, and with the province of British Columbia.

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Economic Ties between US & Canada

  1. 1. S O M E K E Y E C O N O M I C T I E S B E T W E E N B R I T I S H C O L U M B I A , C A N A D A A N D T H E U N I T E D S TAT E S FEBRUARY 9, 2017 JOCK FINLAYSON Executive Vice President and Chief Policy Officer
  2. 2. AMERICA’S HUGE ECONOMY MATTERS! 2 • Equivalent to $23 trillion (CDN) of nominal GDP (~22% of global total), versus $2 trillion for Canada, based on market exchange rates • American consumer spending = more than one-fifth of world total • Consider the size of these US metro areas, compared to the paired countries (annual GDP): Metro New York > Australia Greater Atlanta > Malaysia LA/Long Beach/Anaheim > Netherlands Seattle/Tacoma/Bellevue > Singapore Metro Chicago > Nigeria Miami/Fort Lauderdale > Israel Greater Houston* > Taiwan Greater Detroit > Greece Dallas-Fort Worth > Norway Metro Minneapolis > Portugal Washington/Arlington > Austria Denver/Aurora > Vietnam San Francisco/Oakland > Ireland Portland/Vancouver WA > Hungary Boston/Cambridge > Colombia (* Also 2.5x bigger than the BC economy!) Source: American Enterprise Institute.
  3. 3. SOME ECONOMIC IMPLICATIONS OF THE TRUMP (AND REPUBLICAN) VICTORY…FOR CANADA 3 Positive • Faster US economic growth due to stepped-up infrastructure and defense spending, plus big tax cuts, should increase the demand for Canadian exports and boost our tourism sector • More skilled immigrants may be attracted to Canada if the US becomes less welcoming • Revival of the Keystone pipeline = improved access to the US for Canadian oil; plus, under President Trump, America may come to favour oil imports from ‘friendly’ nations Negative • Renegotiation of NAFTA – downside risks for Canada • Prospect of protectionist wave if US slaps tariffs on China and others – who then retaliate • Potential US ‘border tax adjustment’ would hurt Canada (unless exempted) • Sharp decline in Canadian tax competitiveness under Trump/Republican plan (federal corporate tax rate drops from 35% to 15-20%, top personal tax rate goes from 39.6% to 33%) • US rejection of Paris accord and national carbon pricing will put Canada at an ever growing disadvantage in energy costs
  4. 4. WIDESPREAD LONG-TERM DECLINE IN MANUFACTURING JOBS, 1990-2014 (%) 4 Source: The Economist, December 10, 2016. UK -49% Japan -34% Sweden -33% France -33% US -31% Germany -26% Italy -24% S. Korea -1% Taiwan +10%
  5. 5. PRESIDENT TRUMP, WE SHARE YOUR PAIN! CUMULATIVE CHANGE IN MANUFACTURING EMPLOYMENT SINCE 2000 (% DECREASE) 5 Source: Conference Board of Canada. -26% -24% -22% -20% -18% -16% -14% -12% -10% -8% -6% -4% -2% 0% US Canada
  6. 6. 6 Source: National Bank Financial Markets, “Canada’s Trade Prospects Amidst Changing US Trade Policy,” January 30, 2017. SHARE OF US GOODS TRADE DEFICIT ATTRIBUTED TO INDIVIDUAL TRADING PARTNERS ( % O F T O TA L T R AD E D E F I C I T, 2 0 1 6 ) 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Canada Indonesia Taiwan Switzerland France Thailand Malaysia India Italy S. Korea Vietnam Ireland Mexico Germany Japan China
  7. 7. CANADA FAR MORE RELIANT ON BOTH BILATERAL AND TOTAL TRADE THAN THE UNITED STATES 7 Source: TD Economics, January 2017. 0% 10% 20% 30% 40% 50% 60% 70% United States Canada Exports plus Imports as % of GDP, 2015 Total trade ex-bilateral Bilateral trade
  8. 8. SOURCES OF AMERICAN OIL AND NATURAL GAS IMPORTS, 2015 8 Source: Credit Suisse. Oil (millions of barrels per day) Canada 3.169 Mexico 0.688 Saudi Arabia 1.052 Iraq 0.229 Kuwait 0.204 Venezuela 0.776 Colombia 0.373 Ecuador 0.225 Brazil 0.190 Angola 0.124 Natural Gas (bcf/day) Canada 7.193 Trinidad 0.196 Norway (LNG) 0.033 Yemen (LNG) 0.020 Mexico (pipeline) 0.003
  9. 9. 9 Source: Deutsch Bank Market Research. GLOBAL ECONOMIC IMPACT OF 20% US BORDER TAX ( D E C L I N E I N N AT I O N A L G D P D U E T O I M PAC T O N N E T T R AD E F L O W S ) -7% -6% -5% -4% -3% -2% -1% 0% Eurozone UK Japan Philippines China Chile S. Korea Switzerland Colombia Singapore Taiwan Thailand Israel Malaysia Canada Vietnam Mexico
  10. 10. BC EXPORTS* BY DESTINATION (2015) 10 * Goods exports only US 52%Pacific Rim (includes Japan) 38% Rest of the world 10%
  11. 11. BC’S MAIN TRADED INDUSTRIES – VALUE OF EXPORTS 2015 11 Source: BC Stats * merchandise exports Forestry Others (cont’d) Wood products $8.5 billion Natural gas $1.4 billion Pulp and paper $4.4 billion Agrifood products $2.7 billion Total forestry $12.9 billion Fabricated metals $1.1 billion Forestry as % of total exports* 36% Fish products $1.1 billion Others Chemical products $1.1 billion Metallic minerals $4.4 billion Plastics $426 million Machinery and equipment $4.8 billion Apparel etc. $124 million Coal $3.1 billion Total BC goods exports: $35.8 billion BC also has service industry clusters that engage in international trade, of which the most important are tourism (~$4 billion of exports), transportation, communications (incl. software), education, engineering, and technical/scientific/environmental services
  12. 12. BC EXPORTS REBOUNDED LAST YEAR 12 Latest: November 2016 Source: BC Stats. 900 1100 1300 1500 1700 1900 2100 2010 2011 2012 2013 2014 2015 2016 Thousands BC int. merchandise exports, millions $ US rest of world 0 5 10 15 China Japan South Korea US India Total Export growth (Jan-Nov) by country, annual % chng
  13. 13. TOP 20 BC-ORIGIN MERCHANDISE EXPORTS TO THE UNITED STATES (BY VALUE) 13 Source: BC Stats. 5 Electrical and electronic communication products 1 Lumber 2 Natural gas 3 Zinc 4 Chemical products 6 Selected value added wood products 7 Paper and paperboard 8 Electricity 9 Whole salmon 10 Pulp 11 Plastics 12 Motor vehicles and parts 13 Scientific and measuring equipment 14 Other panel products 15 Plywood and veneer 16 Fruit and nuts 17 Vegetables 18 Bread, pastry, cereals, pasta, etc. 19 Aircraft and parts 20 Lead
  14. 14. THE BUSINESS COUNCIL OF BRITISH COLUMBIA BCBC.COM The Bus i ne s s Counc i l of Br i t i s h Col um bi a i s a non - pa r t i s a n or ga ni z a t i on m a de up of 2 5 0 l e a di ng c om pa ni e s , pos t - s e c onda r y i ns t i t ut i ons a nd or ga ni z a t i ons f r om a c r os s BC’s di ve r s e e c onom y w hi c h s uppor t hundr e ds of t hous a nds of j obs a c r os s t he pr ovi nc e . The c ounc i l pr ovi de s t i m e l y a nd e x c e pt i ona l publ i c - pol i c y r e s e a r c h a nd a dvi c e on i s s ue s t o e nha nc e BC’s c om pe t i t i ve ne s s a nd pr os pe r i t y. F a e b o o k . c o m / B u s i n e s s C o u n c i l B C Tw i t t e r. c o m / B i z C o u n c i l B C L i n k e d I n . c o m / c o m p a n y / B u s i n e s s - C o u n c i l - o f - B r i t i s h - C o l u m b i a 14

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