The main factors influencing the economic system of Canada: the neighborhood of the United States and the constant development of economic integration between the two countries; vast territory and relatively small population; wealth of natural resources; the special role of capital imports and immigration in economic development.
According to businesscarriers, the formation of a regional economic complex in North America accelerated after the entry into force in 1989 of the Free Trade Agreement between Canada and the United States. Since 1994, the North American Free Trade Agreement (NAF-TA) with the participation of the United States, Canada and Mexico began to operate. The parties undertook obligations to facilitate trade in every possible way, to facilitate the access of foreign investors to the domestic market, expanding the rights of all investors and limiting state regulation of the economy.
The liberalization of the trade and investment regime has a multifaceted impact on economic development and state policy. With a relatively small domestic market, growing ties with the US economy mean growing influence on their part. In 2000-2003, the US accounted for approx. 83% of Canada’s merchandise exports and 60% of Canada’s foreign direct investment. In turn, 67% of the accumulated foreign direct investment in the Canadian economy is American capital. American multinationals are very strong in a number of key industries. In 2002, the share of enterprises controlled by foreign, mainly American, capital accounted for 53% of the volume of sales of manufacturing products (in the automotive industry – over 85%), more than 40% of oil production, and 60% of the total turnover in wholesale trade.
Integration stimulates intensive restructuring. The sharply increased level of openness to foreign investors has created a tougher competitive environment in most sectors of the economy. In the 1990s OK. 90% of all companies carried out restructuring, i.e. changed the scale and specialization of the business, invested in updating technologies, product range and management methods. And in the 1st floor. 1990s total investment in the business sector of the economy increased very slowly, and the reforms were accompanied by a reduction in employment.
In 1990-96, the development of the economy was unstable, the GDP growth rate was 1.8% on average annually. Then the investment process in the business sector noticeably intensified, there was a revival of consumer demand and a rise in housing construction began. In 1997-2000, real GDP growth in Canada, like in the United States, was 4% per year or more, and in terms of economic development rates, both countries significantly outperformed the states of Western Europe and Japan. The slowdown in business activity in the US in 2001-02 also affected Canada, but still real GDP growth was 3.3% in 2002, about twice the OECD average.
The volume of Canada’s GDP at current prices in 2003 reached 1228.9 billion Canadian dollars (927 billion US dollars), per capita – approx. 28.9 thousand US dollars, taking into account the purchasing power parity of currencies – approx. 30 thousand dollars.
In January 2004, there were 15,914,000 employed people in the country (of which 46.4% were women) and 1,266,000 unemployed (of which 43% were women). 89% of men and 72.3% of women work full-time. The average salary in the IV quarter. 2003 ok. CAD 700 per week. The average annual salary in 2002 was CAD 37.5 thousand for men and approx. 24 thousand in women. Unemployment was a very acute problem in the 1st half. 1990s, when its level reached 10-11%. In 1997-2003, employment growth accelerated markedly, approx. 3 million new jobs. The unemployment rate in 2003 is 7.6%, the situation in the labor market in Canada remains more prosperous than in many other industrialized countries.
Inflation has hovered around 2% per year since 1993. In 2003, the price index for consumer goods and services rose by only 1.5%.
The structure of the Canadian economy is typical of highly developed industrial countries. The sphere of material production in 2003 accounted for 30.7% of GDP and 25.6% of employees. The share of manufacturing in GDP was 16.9%, construction – 5.2%, mining (including oil and gas) – 3.7%, electricity and utilities – 2.8%, agriculture, forestry and fishing – 2.0%.
The service industries generated 69.3% of GDP and employed 74.4% of all working Canadians. Financial, insurance and real estate services accounted for 20.0% of GDP, wholesale trade 6.0%, health and welfare 5.8, retail 5.7, and transport services 4..6%, for information services and culture – 4.6%, for educational services – 4.6%, for scientific, technical and other specialist services – 4.6%. In con. 1990s official statistics in Canada switched to industry classification standards that are the same as those of the United States.
Manufacturing sector and knowledge-intensive industries. In the 1990s As a result of structural shifts, the number of jobs declined primarily in the Canadian subsidiaries of US companies that produce similar products in both countries. In the clothing, textile and food industries, a large number of jobs have been eliminated due to increased competition from imported products. At the same time, in a number of industries that received expanded access to the US market, there was an increase in production and employment. In 2003, 15.1% of the working population was employed in the manufacturing sector.
Canadian companies have a strong position in such knowledge-intensive sectors of the modern economy as telecommunications, biotechnology, aerospace, the production of instruments and equipment using fiber optics, the production of new types of structural materials and pharmaceutical products. As an aircraft manufacturer, Canada ranks 5th in the world. As a manufacturer of cars and trucks – 7th place. The IT industry accounts for approx. 15% of the total volume of goods and services produced.
At the same time, compared with other leading industrial countries, the structure of the manufacturing sector remains relatively less diversified. In the production and export of finished products, the share of the automotive industry and related industries is very high, while domestic demand for many types of industrial equipment and sophisticated technology is met mainly through imports. In 2002, the automotive industry accounted for approx. 23.4% of all exports, while the US market sold approximately 85% of cars produced in Canada. Workers in this and related industries amounted to approx. 11% of the total employed population. From the 2nd floor. 1990s automotive corporations are reducing capacities in Canada (increasing them in the southern states of the United States and in Mexico), which negatively affects the overall economic situation in the country.
Mining, forestry and oil and gas sectors. Canada is one of the largest producers of mineral raw materials – uranium ore, nickel, zinc, copper, asbestos, platinum group metals, etc. OK. 80% of mineral raw materials and semi-finished products are exported. At the same time, 80% of raw material exports from Canada go to the United States, 11% – to European countries and Japan.
Canada provides its own needs for petroleum products and ranks third in the world in terms of natural gas production. Its exports from Canada cover more than 60% of US import gas needs.
Forests cover approx. 45% of the entire territory of the country. Technologies in the timber industry are among the most advanced in the world. More than half of the products are exported to the USA.
In total, 1.8% of all workers are employed in the sectors of the “resource sector”, while approx. 4% of GDP.
Agriculture is highly efficient. In 2003, it employed 2% of employees and produced approx. 2% of GDP. Compared to 1996, the number of farms has decreased by 10%. Canadian agricultural producers are under increasing pressure from US competitors. In terms of exports of industry products, Canada ranks third in the world after the United States and France. The main export product is wheat; vegetable oil, meat and dairy products are also supplied to foreign markets.
The construction industry (5.2% of GDP and 5.7% of employees) is also highly efficient. The materials and technologies used in Canada for industrial and residential construction in the conditions of the northern climate have become widely known in the world.
In the service sector, the share of wholesale and retail trade is the highest in the total number of employees (15.8% in total), as well as social sectors: health care and social security (10.4%), education (6.6%). Approximately 6% of the employed account for the group of financial and insurance services and the group of scientific, technical and expert services. The share of employees employed in public administration is 5%.
In the field of wholesale and retail trade in the 1990s. sharply intensified the struggle between large Canadian and American corporations. Mergers and acquisitions were in full swing as American network giants bought up existing businesses and created new businesses, while Canadian trading companies grew larger through mergers and partnerships with various service businesses to face competition. The competitive environment in the field of trade has also become tougher due to the development of “electronic commerce”. The share of foreign companies in the total amount of sales in 2002 was 36% in retail trade and St. 60% – in wholesale. The top 5 retail corporations account for 97% of sales.
Before the beginning 1990s in transport and communications, as well as in the energy and public utilities sectors, the share of state ownership was high. Rail transport, passenger air transportation, international communications with countries outside North America were mainly owned by federal corporations. From Ser. 1990s after mass privatization, almost all transport and communications enterprises are privately owned. Sea and river ports, airports, canals, etc. transferred under the management of mixed, public-private consortiums. The system of subsidizing road transport, rail and water transport has been eliminated.
Road transport plays a leading role in the transportation of passengers and goods in Canada. In 2002, they transported approx. 54% of commercial cargo (by value), 70% of trade with the USA is provided. The railways accounted for approx. 20% of cargo transportation, for pipelines – less than 20%, for water transport – approx. 5%.
Canada is among the countries that occupy leading positions in the production of telecommunications equipment and the level of development of services in the field of communications and information. In 2003 they provided 4.9% of GDP. All educational institutions, libraries and remote settlements are connected to the Internet.
Financial, insurance and real estate services provided in 2003 approx. 20% of GDP (6% of all employed). The financial system is dominated by the “big five” largest commercial banks, they account for 83% of the turnover of all companies in the industry, they also own the largest investment banks.
Accounting and auditing, information and advisory, engineering, computer, legal and other services are developing rapidly. In 2003 they accounted for 4.7% of GDP and 6.5% of employees.
Foreign economic relations have always played an important role in the economic development of Canada, and over time the country has become more and more open to foreign trade and investment. Since 1994, in all provinces of Canada, the export of goods and services has exceeded their supply to other subjects of the federation. In 1999-2003, international experts included Canada among the countries with the most “open” and favorable investment climate.
In 2002, exports of goods amounted to 414.3 billion Canadian dollars, which is below the record level of 2000 – 430.1 billion. Almost 85% of merchandise exports went to the USA, 2.4% to Japan, 1.4% to the UK, other EU countries – 3.7%, to all other countries – 7.7%. Merchandise imports in 2002 were 356.5 billion Canadian dollars compared to 363.4 billion in 2000. Approx. 72% of goods, from Japan – 3.6%, from the UK – 2.9%, from other EU countries – 7.3%, from all other countries – 14.7%. The balance of trade in goods with the United States is traditionally positive, in 2002 it reached 93.7 billion dollars. However, in trade with almost all other partners, imports in Canada exceed its exports. The total positive trade balance in 2002 amounted to 57.8 billion Canadian dollars.
During 1980-2002 there were positive changes in the structure of Canadian exports. The share of machinery and equipment increased from 28.2% to 46.9%, while the share of industrial raw materials, semi-finished products and energy carriers fell from 60.3% to 35.2%. At the same time, the share of machinery and equipment in Canada’s modern imports is 52.5%, and other consumer goods – 13.0%. In general, for these two groups of goods produced by manufacturing industries, Canada remains a large net importer, while a positive balance in foreign trade is provided by large-scale exports of energy, timber products, metals and alloys. Exports of oil, natural gas and electricity (mainly to the USA) increased from $23.8 billion in 1998 to $49.5 billion in 2002.
Beginning in 1995, the outflow of direct investment from Canada began to exceed the inflow. In 2001, their accumulated volume abroad reached 268.6 billion US dollars (of which 53% in the USA). Foreign direct investment in Canada amounted to $221.1 billion, of which 70% came from the United States.
The economic policy of market liberalization leads to radical changes in the system of state regulation. As a result of privatization and deregulation, the scale and methods of state participation in economic life have changed. Government spending to support the infrastructure of transport, communications, agriculture and some manufacturing industries has been sharply reduced. However, after entering the “era of budget surpluses”, the government again increases allocations for the development of scientific and technical potential, education and health care. At the same time, in 2000-04, measures are being taken to ease the tax burden on the population and businesses.
The share of government spending in relation to GDP fell from 55% in 1992 to 43.1% in 2002 (federal spending from 19.7 to 15.7% of GDP).
In 1998-2003, the federal government received large surpluses. In 2000, the total surplus of all levels of government was 3.2% of GDP.
In 2003-04, federal revenues amounted to 188 billion Canadian dollars, expenditures – 178 billion. The size of the federal debt was 507.7 billion dollars (about 42% of GDP).
Established in the 20th century the system of social organization of society is closer to the Western European model than to the American one. Programs in the field of education, health care, social assistance are carried out mainly at the expense of the state and by the state services, on the basis of state educational institutions and medical institutions. At the same time, the current level of social protection of the population is inferior to the standards in force in the countries of Western Europe.
The social sphere is developing on the basis of fiscal federalism: large federal transfers provide the regions with a comparable per capita level of spending on social needs. Transfers are subject to certain binding principles and general standards. At the same time, there is a wide variety of specific forms and mechanisms for the implementation of social policy in the regions.
At the turn of the century, a need arose for a closer linkage of the social and economic components of state policy. As a result, approaches to the organization and financing of many programs have changed, and decentralization has intensified.
In 2002, the share of spending on education, health care, social security was 23.5% of Canada’s GDP. This figure was higher than in the US, Japan and the UK, but lower than in Germany, France, Italy and the Nordic countries.
The education system in Canada is recognized as one of the best in the world. For these purposes in 2001, 68.3 billion dollars were spent, or approx. 6.9% of GDP. Education at school is obligatory from the age of 5-7, the full course lasts 11-12 years, 94.5% of children study in free public schools. From con. 1960s to ser. 1990s education at universities, colleges and vocational training courses was funded mainly by the state, post-secondary education became widely available and mass. In the 1990s tuition fees in universities grew rapidly. Nevertheless, this source, as well as sponsorship income, in 2001 covered 29% of the current expenses of universities and colleges, and 71% of the funds came from federal and regional budgets. Education in universities is much cheaper for citizens of Canada and foreigners than in American universities.
The educational level of Canadians has risen substantially in less than two decades. The proportion of citizens aged 15 and over with college degrees in 2001 was 14.9% (in 1986 – 10.3%), 18% have incomplete and complete university education (in 1986 – 11.6%). Master’s or PhD degrees have approx. 900 thousand people (434 thousand in 1986).
Health care is built on the principles of universal health insurance, which determines the main differences between the Canadian model of social policy and the American one. Residents of the country are guaranteed free provision of a wide range of medical services. All provinces receive targeted transfers from the federal government, subject to the basic provisions of the federal Health Act. It prohibits private medical institutions from providing services guaranteed by public insurance, and public institutions are not allowed to charge fees for such services.
In 2001, total health spending was $102.5 billion (about 10% of GDP). 68% of financial resources came from public sources, the rest – from private, primarily from the population.
Public spending on social security in 2001 – approx. $101 billion. The federal authorities are in charge of the pension system and unemployment insurance. The provinces are responsible for helping low-income, able-bodied citizens. Support for families with children is a shared responsibility.
Old-age pensions are paid to citizens aged 65 and over, they are included in taxable income and are therefore taken from wealthy elderly citizens. Labor pensions are paid to citizens upon reaching the age of 60, the amount depends on the accumulated insurance premiums and is approximately 25% of the average employee’s earnings for the entire period of employment. OK. 43% of working Canadians save in private pension funds and special savings accounts, which are encouraged by tax incentives.
The provision of benefits to the unemployed depends on their efforts to find employment and acquire professional knowledge and skills. Benefits reimburse 55% of average earnings for the period prior to termination, up to a maximum of CAD 400 per week and a maximum of 45 weeks.
The maximum amount of federal benefits for children in 2002 was $ 2,500 per year, the amount of payments varies in descending order with the income of St. 21.5 thousand dollars per year. The amount of additional payments from the provincial budgets varies significantly.
In con. 20th century Canada’s position in the group of “richest” countries in the world has somewhat weakened. In 1990, Canada ranked 3rd in terms of GDP per capita, by 2002 it moved to 4th place, since real income after taxes decreased in 1990-97 (per capita). The gap in the average level of current money income between Canada and the United States in 2002 was approx. 22%. At the same time, the difference in the average standard of living between the two countries is not so great, since the state in Canada provides citizens with much more free and subsidized services. In Canada itself, a progressive tax system and a set of social programs smooth out income differentiation between the most and least wealthy citizens. As of 1999, average “market” incomes (before taxes and transfers from the state) in the group of 20% of the richest citizens exceeded the average incomes in the group of the poorest by 27 times. After the withdrawal of taxes and the payment of pensions and benefits, the difference decreased to 8.5 times. Contrasts in the distribution of income are further smoothed out by the provision of free and subsidized services.
In 2002, the income of the average Canadian family (2 people or more) was 69.4 thousand Canadian dollars before taxes and mandatory fees and more than 36.5 thousand dollars after they were paid. There is no “poverty line” indicator in Canadian statistics, as it is believed that social policies do not allow the emergence of real poverty. At the same time, indicators of the “low income margin” are determined annually. In 2002, net incomes of approx. 15 thousand dollars a year for a person living in a big city without a family, and approx. 30 thousand dollars per year for a family of 4 people.