Canada

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Thermal Power

Thermoelectric energy—electricity produced by heat or burning—remains an important source of power in Canada. A large portion of this type of energy is generated in Alberta, which has extensive coal, oil, and natural gas resources. The second largest share is generated in Ontario, mainly using coal imported from the United States. The remainder is principally generated in Saskatchewan and British Columbia, using local coal supplies. Due to environmental concerns, most plants are introducing methods to reduce pollution. The chief pollution problem has been acid rain, in which airborne byproducts of the burning combine with moisture in the air to form toxic sulfuric and nitric acids, which then rain down on and destroy vegetation. Another serious environmental concern is this industry’s growing production of greenhouse gases, a major contributor to global warming. From 1990 to 2001, Canada’s greenhouse gas emissions rose 18 percent. See also Fossil Fuels; Greenhouse Effect.

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Foreign Trade

Canada has just 0.6 percent of the world’s population, but accounts for 4 percent of total exports in world trade. Exports have always been important to Canada’s economy. In the early colonial period, the leading Canadian items of export were fish and furs. During the 19th century, timber became the staple export item. With the improvement of railway lines early in the 20th century and settlement of the prairies, wheat became the chief item of export. The contribution of mineral products to Canadian exports also accelerated in the early 20th century as metal resources in the Laurentian and Canadian Cordilleran regions were exploited. Gradually, manufacturing industries emerged and now produce more than three-quarters of Canada’s exports.

Most of Canada’s foreign trade is with the United States, which typically buys about four-fifths of Canada’s exports and supplies about three-quarters of its imports. A large portion of this trade is made up of motor vehicles and motor vehicle parts. Because so many corporations operate on both sides of the Canada-U.S. border, much of the trade between the two nations actually consists of transfers within firms. Trade between Canada and Mexico is growing rapidly, but the total amount is still quite small.

Canada also has significant export trade with other countries, including the United Kingdom, Germany, South Korea, the Netherlands, and China. Canada’s major export commodities are transportation equipment, machinery, mineral fuels, wood products, electrical equipment, metals, and agricultural and fishing products. Leading imports include machinery, transportation equipment, communications and office equipment (especially computers), and other consumer goods.

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Trade between Canada and the United States is the largest bi-national flow in the world. In 1989 the Canada-United States Free Trade Agreement (FTA) came into effect, a pact that removed the trade barriers between the two countries. In 1994 the FTA was expanded into the North American Free Trade Agreement (NAFTA), which included Mexico in this free trade zone. The effects of NAFTA on the Canadian economy have been hotly debated since its passage. Manufacturing employment grew in the late 1990s but then declined in the early 21st century. In a large, developed economy such as Canada’s it is difficult to attribute these types of economic changes to a single factor, such as trade policy.

Since World War II (1939-1945) Canada has been at the forefront of the movement to reduce tariff barriers. Canada emerged from the war with the industrial capacity to supply consumer products that the world needed; another incentive was the feeling that trade barriers had partly contributed to both world wars. Canada was a founding member of the General Agreement on Tariffs and Trade in 1948 (reorganized as the World Trade Organization in 1996) and has since helped initiate other agreements with nations from around the world. The most important are the Caribbean Agreement of 1986; the FTA, 1988; the Asia-Pacific Economic Cooperation (APEC) group of 1989; and NAFTA, 1994. See also Foreign Trade; Free Trade; Globalization.

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Currency and Banking

The unit of currency in Canada is the Canadian dollar, which consists of 100 cents (C$1.20 equals US$1, 2005 average). The Bank of Canada, which was founded in 1935 and is owned by the federal government, has the sole right to issue paper money for circulation.

Most foreign-owned and major domestic banks in Canada have their head offices in Toronto, and a few are based in Montréal. Trust and mortgage loan companies, provincial savings banks, and credit unions also provide banking services. Securities exchanges operate in Toronto, Montréal, Winnipeg, Calgary, and Vancouver. See also Banking; Money.

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Transportation

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Water Transport

Since the earliest explorations, water travel has been important to Canada. The St. Lawrence-Great Lakes navigation system extends 3,769 km (2,342 mi) from the Gulf of St. Lawrence into the center of the continent. The opening of the St. Lawrence Seaway in 1959 contributed greatly to industrial expansion, but the seaway is declining in significance with the growth of intermodal transport, which integrates water, rail, and road shipments. Vancouver and Halifax especially have capitalized on intermodal shipment and are the seaway’s strongest competitors. The ports of Vancouver, Sept-Îles, Montréal, Port-Cartier, Québec, Halifax, Saint John, Thunder Bay, Prince Rupert, and Hamilton handle most of the shipping cargo.

Canada does not have a large merchant marine, and the great majority of Canadian overseas trade is carried in ships of other countries. Canadian merchant vessels of 100 gross registered tons (GRT) or more numbered 936 in 2006, with a total GRT of 2.8 million. Most ships of Canadian registry operate along the coast, on the St. Lawrence Seaway, or on the Great Lakes Ships called lake carriers, or “lakers,” are built in eastern Canada specifically for the Seaway-Great Lakes traffic. Typically long and flat, they are sized to the dimensions of the seaway locks and include innovations such as the self-unloading carrier.

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Railroads

Rail transportation has been crucial to the formation of Canada but has declined in recent decades, due chiefly to the popularity of motor vehicles (trucking). The two major railways are the Canadian National (CN), formerly a federally owned corporation, and the Canadian Pacific Railway (CPR). Their declining revenues led Ottawa to create a combined passenger network, VIA Rail, in 1977. However, revenue from passenger service was not sufficient to cover the costs of the service, and in 1990 half the routes were closed. However, the government is legally bound to operate a passenger rail service across western Canada because that was a condition of British Columbia's entry into the Confederation in 1871.

The profitability of freight service has also been declining, although less severely. These problems stem largely from special rate structures legislated by Ottawa in 1897 as part of the Crow’s Nest Pass Agreement and later negotiations. In essence, the CPR received a grant to pay for laying track through Crowsnest Pass in the Rockies, and in return agreed to charge low rates for hauling grain. These rates were intended to remain in effect forever. As the CPR’s costs went up over the years and the so-called Crow rate did not, profits sank and it was difficult to make improvements to the line. The rate limits were partly abrogated in 1983 and fully removed in 1996. At the same time, many of the rules regulating the rail system were relaxed, allowing the railroads to better integrate their operations with marine and truck transportation companies in the emerging intermodal system. See also Railroads.