	The Economies of the United States and Canada

The economies of the United States and Canada are highly integrated, a process that has been accelerated by the bilateral U.S.-Canada free trade agreement (FTA) of 1989 and the North American Free Trade Agreement (NAFTA) of 1994. Both are affluent industrialized economies, with similar (though not identical) standards of living. However, the economies of the two countries diverge in numerous ways. The persistent per capita income gap has proven worrisome to Canadian policymakers as it raises questions about Canadian productivity and competitiveness. Agriculture makes up the remaining 1.9% of the Canadian economy and 1.2% of the U.S. economy. The Trade and Investment Relationship

Canada is the largest single nation trading partner of the United States. In 2010, total merchandise trade with Canada was $481.5 billion (a 12.1% increase from 2009), consisting of $275.5 billion in imports and $206.0 billion in exports resulting in a trade deficit of $69.5 billion. While Canada is an important trading partner for the United States, the United States is the dominant trade partner for Canada. Trade is a dominant feature of the Canadian economy. In 2009, Canada's merchandise trade balance fell into deficit for the first time since 1975 and this deficit persisted in 2010. This integration has been assisted by trade liberalization over the past 40 years, beginning with the Automotive Agreement of 1965 (which eliminated tariffs on shipments of autos and auto parts between the two countries), through the Canada-U.S. Free Trade Agreement of 1989 (FTA), and NAFTA. Canada is also highly dependent on FDI. Both are signatories to the World Trade Organization (WTO) and are bound together by the North American Free Trade Agreement. Intellectual Property Rights

In 2011, the U.S. Trade Representative again listed Canada on its Special 301 report on intellectual property rights protections to the priority watch list for intellectual property rights protections. Security and Trade

The aftermath of the terrorist attacks on the United States on September 11, 2001, has increased scrutiny of the Canadian border as a possible point of entry for terrorists or for weapons of mass destruction. While concerns in the United States over the U.S.-Canada border are focused primarily on border security and immigration issues, the debate in Canada has become much broader, encompassing such issues as the nature of sovereignty, the desirability and feasibility of further economic integration with the United States, and even the adoption of the U.S. dollar. In addition, since the 2001 terror attacks there has been a perception by some in Canada and Mexico that continued economic access to the U.S. market is dependent on greater security cooperation with the United States.
The United States and Canada conduct the world's largest bilateral trade relationship, with total merchandise trade (exports and imports) exceeding $429.7 billion in 2009. The U.S.-Canadian relationship revolves around the themes of integration and asymmetry: integration from successive trade liberalization from the U.S.-Canada Auto Pact of 1965 leading to North American Free Trade Agreement (NAFTA), and asymmetry resulting from Canadian dependence on the U.S. market and from the disparate size of the two economies.
The economies of the United States and Canada are highly integrated, a process that has been accelerated by the bilateral U.S.-Canada free trade agreement (FTA) of 1988 and the NAFTA of 1994. Both are affluent industrialized economies, with similar standards of living and industrial structure. However, the two economies diverge in size, per capita income, productivity and net savings.
Canada is the largest single-country trading partner of the United States. In 2009, total merchandise trade with Canada consisted of $224.9 billion in imports and $204.7 billion in exports. In 2007, China displaced Canada as the largest source for U.S. imports for the first time, a trend that has continued since then. While Canada is an important trading partner for the United States, the United States is the dominant trade partner for Canada, and trade is a dominant feature of the Canadian economy. Automobiles and auto parts, a sector which has become highly integrated due to free trade, make up the largest sector of traded products. Canada is also the largest exporter of energy to the United States. Like the United States, the Canadian economy is affected by the transformation of China into an economic superpower. The United States and Canada also have significant stakes in each other's economy through foreign direct investment.
Both countries are members of the World Trade Organization (WTO) and both are partners with Mexico in the NAFTA. While most trade is conducted smoothly, several disputes remain contentious. Disputes concerning the 2006 softwood lumber agreement are under arbitration, and Canada has sought WTO consultations over country-of-origin-labeling requirements. In addition, the United States has placed Canada on its Special 301 priority watch list over intellectual property rights enforcement issues. Canada has also vigorously protested the implementation of the "Buy American" provisions of the economic stimulus package.
The terrorist attacks of 2001 focused attention on the U.S.-Canadian border. Several bilateral initiatives have been undertaken to minimize disruption to commerce from added border security. The focus on the border has renewed interest in some quarters in greater economic integration, either through incremental measures such as greater regulatory cooperation or potentially larger goals such as a customs or monetary union. Congressional interest has focused mostly on trade disputes, and also on the ability of the two nations to continue their traditional volume of trade with heightened security on the border.