V.

Economy

Canada has an advanced economy, and the majority of its citizens enjoy a high quality of life by world standards. Historically, much of this wealth has been generated through the extraction and processing of natural resources, especially fish, furs, timber, minerals, and farm produce. Increasingly, however, manufacturing and service activities have been added, and Canada now has one of the most complex economies in the world. Canada is also highly integrated into the global economy through trade, with more than a third of its GDP dedicated to exports.

The Canadian economy has grown more rapidly than those of most other developed countries since the recession of the early 1990s. This success is due to several factors, including low inflation, low interest rates, and a low Canadian dollar (with respect to other major currencies), all of which helped exports to grow. However, this growth has not generated as many jobs as analysts expected. Canadian businesses have found ways to increase their output by introducing more-efficient methods of production rather than hiring more workers. Also, the role of government in the Canadian economy has declined, and with it the number of jobs in the public sector. In early 2006 Canada’s unemployment rate was 6.6 percent.

From 1990 to 2003 the Canadian economy grew an average of 3.28 percent per year, reaching a GDP of C$857 billion, which represented a per-capita income of C$27,080. By 2003 Canada had achieved the second highest budget surplus and the lowest debt-to-GDP ratio of any Group of Eight (G-8) nation. The proportion of GDP accounted for by federal government expenditure decreased from 15.7 percent in 1994 to 11.5 percent in 2003. Employment growth in Canada’s manufacturing industries began to slow in the late 1990s, while employment in the service industry saw a strong increase. By 2003 three out of four Canadians worked in service industries, including the fields of health care and public administration.

A.

Labor

The Canadian civilian labor force numbered 17.3 million in 2005. The participation rate of men in the labor force reached a postwar high in 1981 of 78.7 percent and declined to 72.9 percent by 2005. The participation rate of women, on the other hand, has risen steadily to about 62 percent in 2005. In part, the shift toward a more gender-balanced labor force is the outcome of the women’s movement, but it is also a reflection of wider economic change, especially the growth of the services sector. The vast majority of workers in goods-producing industries continue to be men, while women outnumber men in finance, business, and community and personal services; the numbers of men and women in trade and public administration are roughly equal. In general, women work fewer hours than men (women hold almost 70 percent of all part-time jobs) and are paid less; in 2003 men in full-time, full-year employment earned C$39,100 on average, while women averaged less than two-thirds that amount (C$24,800).

In 1999 the Canadian government and the Public Service Alliance of Canada (PSAC), one of Canada’s largest unions, reached a pay-equity settlement to end a 16-year dispute. The settlement was one of the largest in North American history. In the dispute, the PSAC accused the federal government of discriminating against women by paying lower salaries for female-dominated jobs, including secretaries and librarians, than for male-dominated jobs of “equal value,” involving comparable education, demands, and responsibility. The federal government agreed to distribute about $C3.6 billion in back pay among some 230,000 past and present public service workers, primarily women.

The number of self-employed Canadians has risen substantially in recent decades, from 7 percent of the labor force in the 1970s to more than 14 percent in 2005. Many choose self-employment as a way to achieve greater independence; for some, however, it is a last resort when opportunities for regular employment are scarce.

Jurisdiction over labor matters is split between the federal and provincial governments, and legislation therefore varies across the country. Minimum standards are established by the Canada Labour Code, but provinces enact further rules. Canada also has federal and provincial laws that prohibit child employment, provide for maternity leave, guarantee the right to collective bargaining, require paid holidays, and require equal pay for men and women.

Labor unions have existed in Canada since at least 1827. There have been several periods when labor problems were acute, notably a period after World War I (1914-1918) that culminated in more than 300 strikes during 1919. The most famous of these, the Winnipeg General Strike, brought that city to a halt for six weeks and ended in bloodshed as the police fired live ammunition into a crowd of demonstrators.

Until recently, union membership in Canada had been highest in goods-producing industries; this has changed with the growth of the services sector. In 2004, 30.5 percent of all paid workers and 75.5 percent of public sector employees were members of unions, about twice the rates of the United States. There is a central coordinating body, the Canadian Labour Congress, that represents most unions at the national level. Many Canadian unions are linked to larger international groups, especially the American Federation of Labor and Congress of Industrial Organizations. See also Labor Unions in Canada.

B.

Agriculture

Agriculture is not as important to the Canadian economy as it was in the 19th century, but it continues to be the mainstay of several regions and is a significant source of export income. In early 2006 there were 229,400 farms in Canada, averaging 295 hectares (729 acres) in size. Some 340,000 men and women worked in agricultural jobs in 2005, representing 2.1 percent of the total labor force. This is down from 430,000 and 3.2 percent in 1995. The annual value of farm output amounted to C$38.3 billion in 2001. Because of Canada’s abundant production and relatively small population, it is a leading exporter of food products; these account for 16.7 percent of goods exported, compared with 0.5 percent for Japan, 5.5 percent for Mexico, and 7.3 percent for the United States.

Farm life is changing considerably as farmers adjust to new trends. One trend is consumer preference for foods with lower fat content, which has changed demand for specific products. For example, there is less demand for cream and more demand for vegetables. Also, government has reduced its subsidies to the industry, making it necessary for farmers to introduce more profitable crops and more livestock production, which is generally more profitable. These changes have contributed to the decline of full-time farming, as more and more the majority of family-farm income comes from sources off the farm.

Farms in Canada are about equally divided between crop raising and livestock production. Wheat is the most important single crop, and the Prairie provinces of Alberta, Manitoba, and Saskatchewan form one of the greatest wheat-growing areas of the world. As of 2003 Canada was the seventh largest producer of wheat in the world. One-half of Canada’s wheat is grown in Saskatchewan. Total wheat production in 2006 was 27.3 million metric tons. In recent years, prairie farmers have sought to diversify their crops to minimize the effects of bad crop years or reductions in the price of wheat. Thus they have increasingly shifted from wheat to other grains and oilseeds. After wheat, the largest cash receipts from field crops are obtained from canola, vegetables, barley, maize, potatoes, fruits, tobacco, and soybeans.

Canada’s agricultural sector is in two major parts. The first, dominated by grains and livestock, is geared to the export market, and farmers receive international prices. The second is sold within a protected Canadian market. These products, mainly dairy products and poultry, are regulated by provincial marketing boards that allocate quotas to individual farmers to preserve the farming sector and to match supply with demand. As a result, Canadian consumers pay a premium for poultry and dairy products. The future of marketing boards is in doubt, however, due to a recent agreement of the member countries of the General Agreement on Tariffs and Trade (GATT), which included Canada, to open agricultural markets to full global competition. GATT, now succeeded by the World Trade Organization, was an international body that promoted and enforced trade laws and regulations. It worked to minimize preferential trade agreements between countries and other barriers to international trade.

Livestock and livestock products are growing in importance within the Canadian economy. Beef cattle ranching is a specialized industry in the west, especially in the dry grasslands of southern Alberta and Saskatchewan. In 2006 Canada had 14.8 million cattle, compared to 97 million in the United States.

In 2003 the Canadian cattle industry was damaged when a cow in Alberta tested positive for bovine spongiform encephalopathy (BSE), also known as mad cow disease. The discovery caused several nations, including Japan and the United States, to ban the importing of Canadian cattle. The ban was finally lifted in mid-2005, but not before costing the industry an estimated C$7 billion in lost sales.

In 2004 Canada had 14.7 million hogs and 919,000 sheep. Ontario and Québec ranked highest in dairy products, poultry farming, and egg production. Québec produced the vast majority of the maple products, and Ontario produced most of the nation’s tobacco crop. Fruit farming is primarily found in Ontario, British Columbia, and Québec.

C.

Forestry

Forest products contribute significantly to regional and rural economies. The forest industry as a whole employs about 360,000 people directly and supports around 1 million jobs overall. It is estimated that the full range of forestry activities—from logging, through manufacturing, to trade in wood products—generates roughly 1 in 15 Canadian jobs. It is Canada’s largest nonurban employer, with activities concentrated in British Columbia, Québec, and Ontario. The industry accounted for about 3 percent of Canada’s GDP and 11 percent of all goods exported in 2003.

Canada’s forests make up about 10 percent of the world’s total forest area. Despite heavy harvesting by early settlers, forests, mainly coniferous, still cover 31 percent of the country’s land area. A national forest inventory is conducted every five years by Forestry Canada, the federal forestry agency, in cooperation with provincial and territorial agencies. Most of the forestland is owned and managed by the provincial and federal governments.

Canadian wood products are among the finest in the world: Canadian softwood lumber is made up of long fibers that provide a high strength-to-weight ratio, and Canadian pulp is known for strong, light-colored paper products. Canada is the world’s largest producer of newsprint and exports the vast majority of it. The United States is the world’s second largest producer but uses nearly all of its output domestically. Canada is also the world’s second largest producer of pulp, the third largest producer of sawn lumber, and the world’s largest exporter of softwood lumber.

In 2002 the United States imposed trade sanctions on softwood purchases from Canada, accusing the government of illegally subsidizing lumber companies and other unfair practices. Although U.S. restrictions and duties were reduced in subsequent years, the dispute cost Canadian lumber producers billions of dollars and damaged relations between the two countries. In April 2006 the two countries announced an agreement resolving the long-running dispute.

The annual allowable cut for a forested area is the amount of timber that can be harvested each year without diminishing the long-term sustainability of the forest. There is uncertainty in many parts of the country over whether the current harvest rates are sustainable. Regional supplies vary considerably, and some local shortages have been identified.

D.

Fisheries

Commercial fishing in Canada dates back nearly 500 years. Fishing occurs in ocean waters, inland lakes, and rivers, and though the industry has declined as the number of fish has decreased, Canada remains one of the world’s largest exporters of fish and seafood. Canada’s fish catch in 2005 was 1.26 million metric tons. Over 75 percent of the catch is exported, which is just over 1 percent of the total value of goods exported. Canadian fish and seafood are sold to many countries, but the primary markets are the United States, Japan, and the European Union. In 2003 exports of Canadian fish to the United States accounted for 72 percent of total fish exported.

Cod, herring, crab, lobster, and scallops have been the most important exports from the Atlantic coast, and halibut and salmon from the Pacific coast. There is also a commercial freshwater fishery in Ontario, focused on Lake Erie. Commercial sport fishing industries have been developed throughout Canada.

Fisheries were a mainstay of economic life in Atlantic Canada. By 1992 the total value of Canada’s Atlantic fisheries reached C$984 million annually. In 1993, however, the Canadian government imposed an unprecedented two-year ban on the commercial fishing of cod in the northern fishery, extending from southern Labrador to the northern Grand Banks, because of a drastic decline in fish stocks. This was formerly one of the richest areas on the Atlantic coast. The fishing ban later was extended indefinitely because of the near-extinction of the fish. Initially the federal government provided emergency assistance payments, in addition to unemployment compensation, to fishers, processing workers, and boat owners. A more comprehensive compensation plan, a voluntary job retraining program, and a regional development program followed.

The causes of the near-extinction of cod have been much debated. Some blame environmental factors. The Canadian government, however, points to the increasing use of larger, more sophisticated boats and foreign intrusion on the fishery. In the century before 1950, fishers worked in small boats using hand-operated equipment and took about 250,000 metric tons a year from the Atlantic waters off Newfoundland and Labrador. After 1950 Canadians increased their catching capacity by using larger, longer-range vessels with new nets, power equipment, and electronic navigation. Modern European vessels also moved in. In 1968 the northern cod catch peaked at 800,000 metric tons.

In 1977 Canada extended its fishing zone to 200 nautical miles (230 mi/370 km) to protect stocks, and for a few years scientists believed that the cod stocks were recovering. However, foreign boats, especially Spanish and Portuguese, began fishing just outside the zone limit in 1986, and by 1991 they accounted for more than a quarter of the cod caught in the region. In 1989 scientists realized that the foreign boats were depleting the northern cod stocks. By 1992 the Canadian government introduced new conservation measures and stricter enforcement to protect small fish and spawning stocks. These measures proved insufficient, however, leading to a total collapse of the fishery and the imposition of the ban. It has yet to recover.

The British Columbia fishery on the Pacific coast is an important economic contributor. Five species of salmon are the mainstay of the fishery. Other fishes caught in Pacific waters are herring, halibut, cod, sole, and a variety of shellfish. In British Columbia and Yukon Territory, indigenous Canadians are eligible to fish as part of their aboriginal rights—rights they retain as the original owners of the land. Some indigenous people also fish in the commercial industry, and what they take there is in addition to what they are allocated under aboriginal rights.

Canada and the United States share the Pacific salmon resource under the 1980 Pacific Salmon Treaty, which took 15 years to negotiate. The treaty’s goals are to conserve stocks and to distribute salmon equitably. Each country is allowed a catch proportional to the share of salmon spawning in its rivers. These proportions are sometimes the subject of disputes between the Canadian and U.S. fishing industries.

E.

Furs

In many ways, the fur industry created Canada. Much of pre-Confederation history revolves around the competition between the French and British for control of the profitable fur trade. But by the late 20th century demand for fur had declined, and the income of indigenous trappers had suffered severely. Canada’s remaining fur farms are mainly concentrated in Ontario, Nova Scotia, Québec, and British Columbia. Trapping is carried on primarily in northern Canada; Ontario, Québec, Alberta, Saskatchewan, and Manitoba are the main producers of wildlife pelts. See also Fur Trade in North America.

F.

Mining

Mining in Canada has a long history of exploration and development. The country is one of the world’s leading producers and exporters of minerals such as uranium, zinc, potash, nickel, elemental sulfur, asbestos, cadmium, platinum, gypsum, copper, lead, cobalt, titanium, and molybdenum. Much exploration and development activity in Canada is now devoted to diamond mining, especially in the Northwest Territories, the Prairie provinces, and the Canadian Shield.

Fuel minerals—oil and natural gas—are also important to Canada’s mining industry. In 2004, 842 million barrels of crude oil and 183 billion cu m (6.5 trillion cu ft) of natural gas were produced, much of which was exported.

Oil and gas production is centered mainly in Alberta. Pipelines transport Alberta’s crude oil and natural gas to the industrial centers of eastern Canada, to British Columbia, and to the northwestern and midwestern United States. In addition, oil and gas are shipped to refining centers throughout Canada and to the United States.

Environmental and social concerns have caused uncertainty for the mining industry. The degradation of water quality by mine wastes, in particular, has led federal and provincial governments to regulate mine operations. In 1992 the Mining Association of Canada responded by establishing the Whitehorse Mining Initiative, a broad agreement to increase the level of environmental responsibility in the industry. The initiative was developed together with indigenous groups, environmentalists, and representatives of labor unions and government.

Another source of uncertainty in the industry is the denial of access to lands where mining claims are staked, or where bodies of ore are known to be located. For example, in British Columbia the creation of new parks, such as Tatshenshini-Alsek near Alaska, has closed large areas to mining. The land issues raised by the indigenous peoples have held up mining operations for years while ownership of the rights is being negotiated or litigated.

G.

Manufacturing

Manufacturing is a key component of the Canadian economy, employing about 15 percent of the country’s workforce and accounting for 17 percent of the GDP and around 75 percent of goods exported. Manufacturing supports many other sectors of the economy by purchasing their outputs and supplying them with products. Manufacturing is highly sensitive to broader economic trends, especially changes in the level of consumer spending.

Early manufacturing in Canada, before the mid-19th century, was localized and was in support of resource production. Boats were built in Atlantic Canada, for example, and farm machinery in southern Ontario. Modern industrialization, in the form of mass production, began on a small scale in mid-19th-century Montréal and gathered momentum in the 1870s. Canadian manufacturing was spurred by rapidly increasing resource production, the introduction of electrical generating capacity, population expansion, and the two world wars. The greatest growth in facilities and output, however, occurred after World War II (1939-1945) as consumer spending increased and most countries reduced their tariffs.

By the beginning of the 21st century, Canada’s manufacturing sector was in the midst of profound technological change. Investment in high-tech machinery and equipment had become essential for businesses to compete in the rapidly changing world economy. The introduction of new, more advanced machines was expected to improve productivity and reduce the number of workers in the manufacturing sector.

G.1.

Transportation Equipment

Canada’s chief manufacturing industry is transportation equipment, especially automobiles and auto parts. This sector makes up almost one-quarter of the total value of the country’s manufacturing output. In recent decades, the transportation equipment industry has evolved toward a single continental market in North America. This is due primarily to Canada’s smaller market, which makes Canadian branch plants inefficient. In the 1960s the governments of Canada and the United States, together with executives of the automobile industry, negotiated the Canada-United States Automotive Products Agreement, which removed Canadian import tariffs as long as automakers produced as many cars in Canada as they sold in Canada. The signing of the North American Free Trade Agreement (NAFTA) in the mid-1990s further unified the market.

The result of these pacts has been a continental integration of auto production, where particular models are built in local plants and distributed throughout North America. This integration has led to a more efficient industry but has also meant that events that occur in one part of the North American auto industry affect the entire continent. A protracted strike at a parts plant in Ontario, for example, can cause the closure of assembly plants in Ohio, and vice versa.

G.2.

Other Manufacturing

Other significant manufacturing sectors include food processing, paper products, chemical products, primary metal processing, petroleum refining, electrical and electronic products, metal fabricating, and wood processing. Many of these manufactures rely on Canada’s vigorous resource industries. Unlike the motor vehicles and other consumer products industries, which are highly localized in the heartland, resource processing is much more widely distributed across the country.

G.3.

U.S. Investment

U.S. involvement in Canadian manufacturing began in the late 19th century, notably in the 1880s after the Canadian government imposed higher trade tariffs. U.S.-owned firms built branch plants to serve the Canadian market and thereby avoid the tariffs involved in exporting their products to Canada. This process accelerated in the 20th century.

Concern over foreign ownership prompted the Canadian government to establish the Foreign Investment Review Agency (FIRA) in 1974. The agency was charged with scrutinizing investment from abroad and ensuring that it benefited Canada. FIRA never turned down an application, but did require modifications in many cases. U.S. interests continue to dominate foreign investment in Canada, making up about two-thirds of the total in the early 21st century.

H.

Energy

As a large country rich in natural resources, Canada’s energy industry is one of the biggest in the world. Each year the country produces much more energy than it consumes, making it a significant exporter of this resource, especially to the United States. In 2003 Canada’s annual output of electricity was 566 billion kilowatt hours, of which 59 percent was provided by hydroelectric plants, 12 percent by nuclear power plants, and 27.28 percent by conventional thermal plants using fossil fuels. Wind-generated energy is the fastest-growing sector of the industry.

H.1.

Hydroelectric Power

Endowed with many fast-flowing rivers, Canada is the world’s leading producer of hydroelectricity, the electrical energy produced by falling or running water. Most of the country’s hydroelectric output is generated in the provinces of Québec, Ontario, Newfoundland and Labrador, and British Columbia. One of the largest hydroelectric complexes in North America is located on La Grande Rivière, near James Bay in Québec. It has three hydroelectric stations, and is owned and operated by the public utility Hydro-Québec. Its total capacity is about 10 million kilowatts. The powerhouses on La Grande Rivière constitute the first phase of a larger planned hydroelectric project (see James Bay Project). Churchill Falls, in the Labrador region of Newfoundland, is another major Canadian hydroelectric facility.

H.2.

Nuclear Power

Since the early 1950s Canada has sought to use its abundant resources of natural uranium to generate electricity through nuclear reactions. The first nuclear power plant, a demonstration station at Rolphton, Ontario, was completed in 1962. A large nuclear energy plant was opened at Pickering, Ontario, in the early 1970s. In addition, a large complex of nuclear facilities on the Bruce Peninsula, in Ontario, is owned and operated by Ontario Power Generation. In 2006 Canada had 18 nuclear facilities; the majority of nuclear generation occurs in Ontario. The proper disposal of spent fuel is a research priority in Canada.

H.3.

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.

I.

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.

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.

J.

Currency and Banking

The unit of currency in Canada is the Canadian dollar, which consists of 100 cents (C$1.10 equals US$1, 2006 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.

K.

Transportation

K.1.

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 927 in 2007, 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.

K.2.

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.

K.3.

Roads

Canada has one of the world’s best highway systems; good roads are essential to a country of such wide spaces, scattered people, and geographic barriers. The increasing use of these roads, however, coupled with reduced government expenditures, has led to a deterioration in their quality.

The national highway system in Canada carries about a third of all road traffic in the country. The Trans-Canada Highway, completed in 1962, stretches from St. John’s, Newfoundland and Labrador, to Victoria, British Columbia. In 2003 there were 561 registered passenger vehicles for every 1,000 Canadians, compared with 441 in Japan, 451 in Britain, and 465 in the United States.

K.4.

Air Transport

Canada’s largest airline, Air Canada, maintains a broad network of domestic and international routes. Air travel is particularly important in the far north because the widely scattered communities of the region are not connected by road or rail and water transport is limited to the brief summer periods. The busiest airports in Canada are Lester B. Pearson International in Toronto, Vancouver International, Trudeau and Mirabel in Montréal, and Calgary International.

L.

Tourism

Canada’s variety of seasons and scenic attractions draws large numbers of tourists from around the world. There are many festivals, including spring blossom festivals in the Annapolis Valley of Nova Scotia and the Okanagan Valley in British Columbia, the Ottawa Festival of Spring, and the Calgary Exhibition and Stampede. The Niagara Grape and Wine Festival and color tours in central Ontario and the Laurentian Mountains of Québec are autumn attractions. Cosmopolitan cities such as Vancouver, Montréal, and Toronto draw millions of visitors annually to their many cultural attractions.

Visitors are also drawn to Canadian wilderness areas. In the winter the abundant snowfall supports a number of world-class skiing centers, especially in the Canadian Cordillera region. Many terrestrial and marine areas have been preserved in their natural state as national parks, and each of the provinces and territories also has set aside land as provincial or territorial parks.

Tens of thousands of Canadian businesses cater to tourists. More than two-thirds of tourist revenues come from Canadians themselves. The vast majority of foreign tourists come from the neighboring United States. U.S. visitors made up about 75 percent of all foreign tourists in Canada in the early 21st century.