Discover Canada study notes: Canada's Economy
This chapter explains how Canada earns its living: through trade, three main types of industry and a close partnership with the United States. Here are the key ideas and facts to study for the citizenship test.
A trading nation
Trade with other countries has always been important to Canada. Buying and selling goods and services abroad helps the economy grow, and Canadians could not keep their high standard of living without it.
Two key steps in Canada's trade history are often tested:
- In 1988, Canada signed a free trade agreement with the United States.
- In 1994, Mexico joined, creating the North American Free Trade Agreement (NAFTA). (NAFTA was replaced in 2020 by the Canada–United States–Mexico Agreement, CUSMA.) The guide says this trade area had more than 444 million people and over $1 trillion in merchandise trade in 2008.
Canada has one of the ten largest economies in the world. The guide lists Canada as a member of the G8 (today this group is the G7: Russia was suspended in 2014), a group of leading industrialized countries that it names as the United States, Germany, the United Kingdom, Italy, France, Japan and Russia, together with Canada.
The three main types of industry
The guide divides Canada's economy into three main kinds of industry. Learn all three and an example of each.
1. Service industries
Service industries provide thousands of different jobs. Examples include transportation, education, health care, construction, banking, communications, retail, tourism and government. This is the biggest group: more than 75% of working Canadians have jobs in services.
2. Manufacturing industries
Manufacturing industries make products to sell in Canada and around the world. Examples are paper, high-technology equipment, aerospace technology, cars, machinery, food and clothing. The guide notes that the United States is Canada's largest international trading partner.
3. Natural resources industries
Natural resources industries include forestry, fishing, agriculture, mining and energy. These industries played a central role in Canada's history and development. Many regions of Canada still depend on them, and resource products make up a large share of what Canada sells to other countries.
Canada and the United States
Canada and the United States have a very close relationship. Each country is the other's largest trading partner, and more than three-quarters of Canada's exports go to the United States. The guide describes this as the biggest two-country (bilateral) trading relationship in the world. The two economies are closely linked through shared supply chains, and together they compete with the rest of the world.
Canada sells many things to the United States, including:
- energy products
- industrial goods, machinery and equipment
- automotive products
- agricultural, fishing and forestry products
- consumer goods
Every year, millions of people travel safely across the border between the two countries. The guide calls it "the world's longest undefended border." At Blaine, in Washington State, the Peace Arch stands on the border. Its words celebrate the two countries as family and neighbours, and it is a symbol of their close ties and shared interests.
Examples shown in the guide
The photos in this chapter give useful examples of Canadian industries. They include oil pumps in southern Alberta, Atlantic lobster, a hydro-electric dam on the Saguenay River in Quebec, a lumber truck, a car factory in Oakville, Ontario, the Port of Vancouver, a research laboratory, and ice wine grapes in the Niagara Region of Ontario. These examples connect to the next chapter on Canada's regions, where you will learn which industries are important in each province.
How to study this chapter
This is a short chapter, but test questions about it are common. Focus on the years of the trade agreements, the three industry types, the share of workers in services, and the share of exports that go to the United States. Try saying each one out loud in a full sentence, for example: "More than 75% of working Canadians work in service industries."
Key facts to remember
- Trade is a key driver of Canada's economic growth.
- Free trade with the United States began in 1988.
- Mexico joined in 1994, creating NAFTA (North American Free Trade Agreement).
- Canada has one of the world's ten largest economies.
- The guide lists Canada as a member of the G8 group of leading industrialized countries.
- Three main types of industry: service, manufacturing and natural resources.
- More than 75% of working Canadians work in service industries.
- Natural resources: forestry, fishing, agriculture, mining and energy.
- The United States is Canada's largest trading partner.
- More than three-quarters of Canadian exports go to the United States.
- The Canada–U.S. border is called "the world's longest undefended border."
- The Peace Arch (Blaine, Washington) symbolizes Canada–U.S. friendship.