9 minute read
Cross border economic activity: Canada/US Trade
Editor’s Message
Cross border economic activity Canada & U.S. Trade
Arif Ghaffur, PQS
S
pecific to construction, ongoing economic indicators in the United States, based on management and investment consultancy FMI Corporation, are predicting that total engineering and construction spending in 2018 will increase
7%, nearly double the 4% rise seen in 2017.
This increase in the 2018 spending growth is being primarily driven by residential improvements, single-family residential and office construction, accompanied by healthcare, education, transportation and communication projects.
Whilst many have been looking forward to benefitting from a strong increase in infrastructure improvements, a pre-election priority of President Trump, changing interest rates could discourage public-private-partnerships and lead to a decline in the spending predicted for this sector.
Further, new tariffs and international cross border trade could affect spending growth in manufacturing and power, although the industry expects the resulting increase in steel and aluminum prices to affect any construction project using those materials.
Beyond construction, there is no doubt that the trade between the United States and Canada is deep-rooted with relationships spanning many decades. The infographic (courtesy of Mr. Jeff Desjardins, Editor-in-Chief of Visual Capitalist) below shows some very interesting statistics around the following: 1. Power & Energy Exchange 2. Integration in Aerospace 3. Exports between each other and others 4. Close Ties 5. Synergies & History 6. Export by Commodity 7. Trade Examples and Integration
Power & Energy Exchange
Is the largest foreign crude oil supplier (43%) to the USA, reducing reliance on the Middle East/OPEC
Sells $20 billion of energy products in Canada each year, including refined oil
Canada
Exports approx. 9% of its electricity to the U.S., which accounts for 2% of U.S. consumption
61% of Canada’s electricity is generated from clean, low cost hydropower
97% of natural gas exports go to U.S. to provide for 10% of total gas needs
Buys Canadian heavy oil at a 20-30% discount – and many U.S. refiners use this to their advantage to produce cheaper end products
Relies on Canada to be its primary foreign supplier of uranium
Sells about 10 TWh of electricity to Canada each year
USA
Integration in Aerospace
Like automobile manufacturing, aerospace is another industry
There is no doubt that the trade 54% between the
Supply Chain
United States and Canada is deep-rooted
50% Engines with relationships spanning many decades.
with heavy integration between U.S. and Canadian suppliers.
of Canada’s aerospace sales are exports, and the majority of
2015
80% Aerospace these go to the U.S.
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Exports
16%Avionics
Cana
61% of Canada’s electricity is generated from clean, low cost hydropower
97% of natural gas exports go to U.S. to provide for 10% of total gas needs
Relies on Canada to be its primary foreign supplier of uranium
Sells about 10 TWh of electricity to Canada each year
Editor’s Message
SA
Integration in Aerospace
Like automobile manufacturing, aerospace is another industry with heavy integration between U.S. and Canadian suppliers.
54%
Supply Chain
80%
of Canada’s aerospace sales are exports, and the majority of these go to the U.S.
2015
Aerospace Exports
50%
16%
Engines
Avionics
The bulk of these exports are supply-chain related.
Aircraft parts are often bought by U.S. companies like Cessna, Boeing, or Lockheed Martin.
3% Simulators
43% Airplanes/Rotorcraft13%
21%
Landing Gear
Other
But trade goes both ways.
Canadian company Bombardier, the third-largest aerospace company in the world, buys from over 2,000 U.S. suppliers, including:
Close Ties
Bombardier builds Learjets in Wichita, Kansas, and the company also has 3,700 of their aircraft being used by major U.S. airlines for regional routes around the country.
USA CANADA TRADE
(Boeing is not a competitor in the regional market)
For many decades, the trade relationship between Canada and The U.S. exports more to Canada the than United States has been the most prosperous Heavy in the Traffic world.
any other country, and vice versa.
The trade across Ambassador Bridge, between
And it’s for good reason...
Windsor, Ontario and Detroit, Michigan, alone is equal Much of the time, the U.S. is buying raw materials and intermediate to all trade between the United States and Japan. goods, which get used in final products destined for domestic and global markets. USA’s biggest customer is
Exports between each other and others
Many of those even get sold directly back to Canada.
Understanding the Relationship
Canada
18%
Canada’s biggest customer is
USA
76%
$5
Few countries in the world have this kind of economic interdependence and history.
USA Exports 2016
Mexico 16%
Canada Exports 2016
ear
Belgium 2%
Hong Kong 3%Netherlands 3% S. Korea 3%
Germany 3%
Japan 4%
UK 4%
China 8%
Belgium 1%
France 1% India 1%
Germany 1% S. Korea 1%
Mexico 1% Japan 2%
UK 3%
China 4%CLICK HERE to return to Table of Contents
But why are the two nations such a Summer good fit 2018 together? | www.ciqs.org | CONSTRUCTION ECONOMIST | 9
hita, 3,700 of .S. airlines ntry.
A
ines
onics
ding Gear
er
For many decades, the trade relationship between Aircraft parts are often bought by U.S. companies like Cessna,
43% Canada Airplanes/Rotorcraft and
The bulk these exports are supply-chain related. the United States has been the most prosperous in the world.
Boeing, or Aircraft Lockheed parts Martin. are often bought by U.S. companies like Cessna, Boeing, or Lockheed Martin.
And it’s for good reason...
But trade goes both ways.
Editor’s Message
Canadian But company trade Bombardier, goes both ways. USA’s biggest the third-largest customer aerospace is company
in the world, Canadian buys company from over Bombardier, 2,000 U.S. suppliers, the third-largest including: aerospace company in the world, buys from over 2,000 U.S. suppliers, including:
Close Ties Close Ties
The U.S. The exports U.S. exports more to more Canada to Canada than than any other any country, other country, and vice and versa. vice versa.
Much of the Much time, of the the time, U.S. the is buying U.S. is buying raw materials raw 2016 materials and and intermediate
Mexico 16% goods, which goods, get which used get in used final in products final products destined destined for domestic for domestic and and global markets. global markets.
Many of Many those of even those get even sold get directly sold directly back back to Canada. to Canada.
Belgium 2%Hong Kong 3%
Netherlands 3% S. Korea 3%
USA Exports
Canada
18%
Belgium 1% France 1%
India 1%
Few Few countries countries in in the the world
world Germany 1% have have this this
S. Korea kind kind
China 8% of economic interdependence Mexico 1%
of economic interdependence and
Japan and 1% history.
2% history.
Germany 3%
Synergies & History
Japan 4%
UK 4%
21%
Other
21%
Other
Bombardier builds Learjets in Wichita,
USA
Kansas, Bombardier and the builds company Learjets also in Wichita, has 3,700 of
their Kansas, aircraft and the being company used by also major has 3,700
U.S. airlines of their aircraft being used by major U.S.
76% airlines for regional routes around the country. for regional routes around the country.
(Boeing is not competitor in the regional market) (Boeing is not a competitor in the regional market)
Canada’s biggest customer is
Heavy Traffic
The The Canada trade across Ambassador
Exports
Bridge, between
Windsor, Ontario and 2016
Detroit, Michigan, alone is is equal to to all all trade between the United States and Japan.
UK 3%
But why are the two nations such a good fit together?
China 4%
$56k $56G
Per
arket)
n is equal pan.
Close Cooperation in National Security
Geographical Proximity
Share the Longest International Border
USA
$56k GDP
Per Capita
Canada
$43k GDP
Per Capita
Similar Levels of Wealth and Standards of Living
On top of that, the nations have been a part of NAFTA since 1994, which has reduced tariffs to zero for most goods.
In 2016, $1.7 billion in goods or services made their way across the border each day.
China
China
Switzerland
Mexico
Shared Language and Culture
UK
Mexico
Shared Historical and Cultural Heritage
Canada is the top customer for 36 states:
Brazil
Mexico
Canada
China
France
UK UAE
Tan
But w betw supp
For the
In 201 and ke F-150 “milita
China
AustraliaMexico
China
Alumi reduc efficieTop 10 Canada Exports To The USA
Top 10 Canada Exports To The USA
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Canada
Editor’s Message
Export by Commodity
Top 10 Canada Exports To The USA
The USA buys more raw materials from Canada...
78% of Canadian exports to the USA are raw materials, parts and components, and services used to create other goods in the USA.
Top 10 Canada Exports To The USA
...and Canada buys more value-added manufactured goods from the USA.
Vehicles / Auto Parts
$60.1 billion
$4.9 billionFurniture / Lighting / Signs
Mineral Fuels (including oil)
$57.6 billion
$5.5 billionIron / Steel Products
Machinery
$22.3 billion$7.4 billion
Aircraft / Spacecraft
Other Commodities
$18.9 billion
$8.1 billionMedical / Tech Equipment
Plastics
$10.9 billion$9 billion
Other Commodities
Wood
$10.1 billion$12.3 billion
PlasticsElectronic Equipment
$9.4 billion
$15.5 billionMineral Fuels (including oil)
Gems / Precious Metals
$7.3 billion
$23.9 billionElectronic Equipment
Aluminum
$7 billion$40 billion
MachineryPaper
$6.1 billion$48.1 billion
Vehicles / Auto Parts
The USA buys more raw materials from Canada and Canada buys more value-added manufactured goods from the USA.
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Editor’s Message
10 SA
ded SA.
Trade Examples and IntegrationTangible Examples
But what are some tangible examples of trade between the two nations? How are the countries’ supply chains integrated?
Ford-150: Leading the Shift to Aluminum
In 2015, Ford indicated the body and key components of the new F-150 truck would be made with “military grade” aluminum.
Aluminum is light, strong and corrosion resistant. Utilizing aluminum reduces the weight of each truck by 700 lbs. This improves fuel efficiency and reduces CO 2 emissions.
A Greener MetalThe use of 1 lb of aluminum (to replace heavier materials) in a car or light truck can save a net 20 lbs of carbon dioxide over the life of a vehicle.
Laying it on the Line The F-150 is one of Ford’s most important products:
35
Years
40
Years
820k per year
90%
Best-selling vehicle in USA for 35 years
Best-selling truck in USA for 40 years
Sells 820,000 per year (F-series)
Accounts for 90% of company’s global profits
Ford has even started exporting F-150s to China
A Short Trip
Detroit manufacturers get Canadian aluminum from as nearby as Quebec.
e / / Signs
el s
Who does the globally competitive USA auto sector turn to for aluminum? Canada, for a few reasons...
5x
/ aft
70%
/ ipment
dities
Canada currently has 70% of North American aluminum smelting capacity.
Renewable hydro-powered Canadian smelters have supplied North American manufacturers with cost-competitive aluminum for over 100 years.
Canadian aluminum made with hydro is also greener - the carbon footprint of aluminum made with coal is 5x higher!
A close geographic proximity means aluminum supply can arrive on a “just-in-time” basis.
Fuels g oil)
ic nt
ry
/ rts
In other words, Canadian aluminum gives the USA auto sector a competitive advantage. It’s cheaper, greener, in stable supply, and in close proximity. This makes the end product cheaper for buyers, and generates less CO2 emissions.
Cheaper Energy, Less Reliance on OPEC
Canadian electricity helps keep the lights on in Manhattan.
The United States and Canada share an extremely close energy relationship.
They have integrated grids, pipeline systems, and have been electricity trading partners for over 100 years.
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