Canadian Economy

Canadian Economy

The service sector has become the engine that drives the growth of the Canadian economy. The service industries do not produce goods; instead they distribute them, finance them, or provide services for business or consumers. Service activities include trade (wholesale and retail), financial services (banks, insurance companies, etc.), business services (accountants, consultants, etc.), leisure services (restaurants and recreation), personal services (dry cleaners, travel agents, etc.), and public services (education, health and government). All together these economic sectors employed almost nine million people in the year 1996.
As services grow, the economy grows; where they locate - be they law firms or fast food outlets - determine the kinds of jobs that are available for Canadians. Since services now contribute such a large proportion of jobs in the Canadian economy even slight changes in the amount or location of service activity or modest shifts in the specialization in services have major economic impacts on many communities.

Characteristics of Markets
While the size of the market, as measured by population, is by far the most important element in a city's attraction for commercial services, such as retail, finance and recreation; two other economic characteristics of markets can modify this attraction: the level of income and the centrality. Centrality is the location advantage enjoyed by a city which serves other nearby cities or surrounding rural areas with goods or services. The commercial activity index is a final summary measure of the varying attraction of urban places as locations for commercial activity. The index compares the actual commercial employment to the employment predicted on the basis of population.

Foreign Trade and Economic Policy
Canada is a multiethnic and multicultural society. As the second largest country of the world in terms of size, it has thirty million inhabitants and comprises 10 provinces and 3 administrative and political territories each of which has its own Parliament and Government. It has rather narrowly specialized and high quality federal and province programs for development of individual branches of the country’s economy. Even though Canada is one of the most heavily indebted countries in the world with net indebtedness amounting to CAD 580 billion, and paying CAD 42 billion annually as interest, such fact is not being over dramatized. Moreover, the size of its population is only five times of that of Slovakia so that the debt might seem endless. However, Canada records regular year-to-year economic growth, the inflation rate oscillates between one to three per cent and the unemployment rate has been brought down to below seven per cent.
The country’s representatives give a great importance to the foreign trade which generates more than 50 per cent of the country’s GDP. Foreign trade is managed by the Minister of International Trade who heads, together with the Minister of Foreign Affairs the dual Ministry of International Trade and International Affairs. Canadian representatives solve many matters in a rather practical and original way as it only fits the Canadian type of economy and society.

Trade, taxes and wages
The most important foreign trade partners of Canada are the US, EU countries and Japan. Approximately 80% of foreign trade covers the exchange of goods and services with the US. Together with Mexico and USA, Canada is a member of the North American Free Trade Agreement (NAFTA). However, Canada has free trade agreements also with Chile and Israel. Currently, negotiations are underway with the aim to seek the signature of a free trade agreement with EFTA countries. Canada can be called a driving force behind such negotiations whose aim is to establish a free trade zone of the Americas.
Income tax is collected by the Federal Government, Provinces and Territories. Combined tax, depending on the place of residence, may vary between 44 to 50 per cent. Citizens are obliged to tax all their income, including that earned abroad. The amount of sales tax for goods and services, comparable with VAT, is 7 per cent Canada-wide. Depending on the decision of the representatives of Provinces, the Province tax may vary between 7 to 12 per cent.
Canada has an elaborated social policy and trade unions have immense power. Roughly 80 per cent of Canadians have such an average income that they can spend on goods and services. The average yearly income is around CAD 30 thousand; approximately 30 per cent of families have income between CAD 30 to 50 thousand, and 20 per cent of families have an income exceeding CAD 70 thousand. It can be said than the Canadians are industrious and they usually have a supplementary job along with their principal job. Elementary education is free of charge, however, studies at the University are not a cheap matter for a family. Tuition fees amount to CAD 4 to 5 thousand per year, and the costs of accommodation in a dormitory and meals amount to approximately CAD 10 thousand pre year. However, Canada has a well elaborated system of scholarships and allowances for university studies.
The services sector, including government services, makes up almost 2/3 of Canadian economic activity. Thereof, the services provided among exporters make about 50% and were the most important growth element in the services sector in past decades.
Most significant manufacturing industries: food and beverages, means of transport, pulp and paper, metal production, wood products, electrical and electronic products, chemical and mineral fuels, research, in particular development and use of fiber optics.
Manufacture maintains its share in GDP well below 20 %. The state to private sector ratio is 5:95 %.
Since 1935, the banking system is under the supervision of the Bank of Canada through the Federal Minister of Finance. All Canadian banks must keep very strict reporting requirements set by the Federal Government.
The banking system is organised through a nation-wide chain of branches of the following 7 major financial institutions:
• Bank of Montreal, Montreal
• Bank of Nova Scotia, Toronto
• Canadian Imperial Bank of Commerce, Toronto
• Canadian Western Bank, Edmonton
• National Bank of Canada, Montreal
• Royal Bank of Canada, Montreal
• Toronto Dominion Bank, Toronto
Trade Regulation System
Special regimes apply only to the import of weapons, ammunition and strategic material. The import of all other products and services is subject to business regulations implied by the Canadian membership in economic and trade associations and organisations, tariff and non-tariff measures, as well as by the requirements of Canadian institutions for identification and quality of goods. In addition to general business rules, Canada applies a variety of regulations related to a specific product.

Customs Regulations and Tariff Lists
Canadian tariff lists authorise the Canadian government to levy import duties. The duty may be only levied by the federal government, the constitution abolish this for provincial governments.
Every goods entering Canada must be reported to the customs office. In the federal government organisation, the Customs Canada is a part of the Department of Revenue. Declaration of goods is usually made at the border crossing by the importer’s customs.
Many branches of Canadian industry are controlled by a few large companies. One of the ways how to achieve the desired success on the Canadian market is through the following scheme: Participating in exhibition, fair, business mission or individual trip, or indirectly gain a partner (customer, dealer or representative) who will ensure establishment of the relevant goods and foreign company in the Canadian market.
To achieve this goal, one should have:
• staff with sound professional (foreign trade) and language (English, French) skills,
• sufficient amount of good quality promotion material in English and French (leaflets, catalogues, annual reports) and good quality promotional items,
• funds for trade start-up (business trips, lease of premises for showroom, costs of any market surveys and co-operating staff in Canada).
Multiple requirements for the imported goods, and the provided service, must be met. Establishment of a foreign affiliation in Canada is a better and more efficient form.
Business Environment
Entire net revenues are concentrated in four most significant firms for each of the following industry:
• steel,
• construction machines,
• mining and metal mining,
• food processing,
• wood and paper products,
• financial services.
Some industrial goods, in particular when the volume or value of shipment are significant, are bought directly by the customer. Smaller orders and purchase of cheaper equipment and industrial supplies are often organised through representatives or wholesalers. The most important distribution centres for goods are Toronto and Montreal. From these points, distributors often cover the eastern part of Canada (Ontario, Quebec and Atlantic Canada). Distributors in Calgary or Vancouver cover the western Canada (Manitoba, Saskatchewan, Alberta, British Columbia).

Public Tenders
Terms and conditions of a public tender are set by a governmental body called Treasury Board of Canada, that publishes them in the Treasury Board Manual, available from the Government Book Store, Sparks Street, Ottawa, Ontario and the Internet, at the federal government website under "What´s new on this site" and "Key TBS Publications".
All public tenders are published in the "Government Business Opportunities", which appears 2-3 times per week. This is published by the Minister of Supply and Services.

The task to organize and manage international trading from the Federal Government's aspect has been delegated to the Department of Foreign Affairs and International Trade (DFAIT). This Department is responsible for the Canadian international trade and for the growth of exports.
Specialized Institutions
• Business Council on National Issues, Ottawa
• C. D. Howe Institute, Toronto
• Canadian Chamber of Commerce, Ottawa
• Trade Facilitation Office Canada (TFOC), Ottawa
• Canadian International Development Agency / Agence canadienne de développement international (CIDA/ACDI), Hull, Quebec
• Canadian Standards Association, Rexdale, Ontario
• Conference Board of Canada, Ottawa
Business Associations
• Canadian Manufacturers Association, Etobicoke, Ontario (11 Regional Offices)
• Canadian Importers Association, Dundas, Ontario
• Canadian Exporters Association, Ottawa
• Canadian Federation of Independent Business, Willowdale, Ontario
Institutions providing State support to Canadian exporters
• Export Development Corporation (EDC), Ottawa
• Federal Business Development Bank, Ottawa - Toronto
• Canadian Commercial Corporation, Ottaw
Canada & the European Union
In June 2000, Canada and the EU adopted their respective Northern Dimension policies. Both the EU's Northern Dimension Action Plan (NDAP) and the Northern Dimension of Canada's Foreign Policy recognize the importance of pursuing cooperation throughout the circumpolar north while noting the special concerns facing the Russian Federation.
The EU's Second Northern Dimension Action Plan (NDAP), emphasizes the need for synergy among all Northern Dimension partners, including Canada. Adopted by Heads of State of the European Council in October 2003, the NDAP remains geographically focussed on Russia and the Baltics, but recognises the Arctic as a region with needs that cut across the plan's 5 priority areas:
• business, economy and infrastructure;
• human resources, education, scientific research and health;
• the environment, nuclear safety and natural resources;
• cross border cooperation and regional development; and
• justice and home affairs.
Under this plan, the Canadian approach is highlighted as a model for cooperation between the European EU and non-EU Member States in the North.
The EU actively participates in the work of the three most important regional bodies in the North: the Council of Baltic Sea States (CBSS), the Arctic Council (AC), and the Barents Euro Arctic Council (BEAC).

Canada's Approach
Canada is committed to the successful implementation of the 1999 Canada-EU Joint Statement on Northern Cooperation. The Joint Statement is a demonstration of commitment at the highest political level to promote cooperation between Canada and the EU in the North through information exchange, expert level dialogue and joint projects on issues such as sustainable development, Indigenous peoples, climate change and pollutants, eco-friendly technology, northern children and youth, and higher education.
Some recent examples of implementation include:
• In August 2003, the Canadian Minister of Indian and Northern Affairs, visited Brussels to discuss areas where Canada and the EU could be working together on issues of mutual interest in Northern Russia. These include issues of the environment, destruction of weapons of mass destruction through the G8 Global Partnership and Indigenous peoples.
• In October 2003, Canada became a founding partner in the Northern Dimension Partnership for Public Health and Social Well being. The main objective of the Partnership is to tackle health and social problems that cross the boundaries of the Northern countries including, unhealthy lifestyles, homelessness, communicable diseases and illicit drugs.
• Three Canada-EU Progress Reports on Northern Cooperation have been completed.
• Canada-EU Symposium titled Climate Change and Environmental Assessment Processes: Impacts on the Arctic was held in Brussels, March 2004. This symposium is considered to be one of the thematic workshops under the theme Sustainable Development as called for in the December 2002 Canada-EU Joint Statement on Science and Technology.

Economic Development
Overcoming Trade Barriers
It is also important to acknowledge the barriers to economic development, such as the lack of infrastructure, the need to increase capacity and understanding about how the North fits into the larger economy, and trade barriers that prevent northern products from reaching potential markets. In this area Foreign Affairs Canada works in close cooperation with domestic programs that support sustainable economic development and promote international trade, in other federal departments and in territorial and provincial governments. The Department also works with northern communities and Indigenous peoples organizations in order to achieve results.