Canada is unique compared to the rest of the world in terms of their type of economic system. Canada is considered to have a highly developed mixed market economy that almost doubles as a socialist economic system. It is almost known to be a socialist economic system because of their type of nationwide benefits which includes universal healthcare.
Although they have universal healthcare, their economic system is a highly developed mixed market economy. Our neighboring country is considered this because it blends both the private enterprise system and the planned economic system. This combination creates a mixed market economy that resembles the basis of the United States economic system.
According to the 2018 Index of Economic Freedom, Canada is currently the 10th largest ranked country in terms of their gross domestic product (GDP) for 2018. Their current GDP is $1.7 trillion with an annual GDP growth rate of 1.9% according to Trading Economics “Economic Indicators”. Canada’s current population is about 36.2 million people and they are the world’s second largest country in terms of land mass. The average personal income (per capita) is a converted $51,316 US dollars annually.
Canada is a county with relatively minimal debt to GDP compared to the United States. Canada’s estimated debt to GDP as of December 2017 was 89.6%, compared to the United States’ debt to GDP which was 105% as of December 2017. Canada’s monetary policy according to the Bank of Canada (2018) is designed to “preserve the value of money by keeping inflation low, stable and predictable” (p. Core Functions). Canada’s national debt to gross domestic product is however measured annually and is subject to change come this December.
Canada is important to the trade industry because of their unique natural recourses and amount of land mass. According to Trading Economics (2018), studies in 2017 found that mineral fuels, oils, and distillation products account for 20% of Canada’s total exports. This percentage equates to about 84.77 billion US dollars. Vehicles other than railways or tramways make up 15% of their exports, which equals 62.46 billion US dollars. Canada’s third largest export is machinery, nuclear reactors, and boilers which is equivalent to 32.39 billion US dollars.
Canada is extremely important to the United States, and likewise for the US to Canada because the United States accounts for 76% of their total exports which equates to about 319.52 billion US dollars. On the other hand, Canada’s largest imports are vehicles other than railways or tramways which accounts for 17% of their total imports. This percentage converts to about 74.35 billion US dollars. Their second largest import is machinery, nuclear reactors, and boilers which accounts for 15% of their total imports and equates to roughly 63.38 billion US dollars.
Lastly their third largest import is electrical and electronic equipment that totals to be about 9.9% of their imports and converts to be 42.79 billion US dollars. Overall Canada has a relatively balanced trade system however their imports do outweigh their exports. Although they have a trade deficit, that deficit was at an all-time low in July 2018 with their exports being 0.08% and their imports down to 0.04% narrowing their current account deficit (CAD) to a converted 15.88 billion US dollars.
In numerous governments and different economies, many share common threads. One of the most predominant threads would be a countries competitive issues. These issues are evident on all levels of a countries economy, whether that is at the small business level or at the corporate level. According to The Canadian Chamber of Commerce (2016) some of Canada’s bigger competitive issues include “Public policies block small companies from becoming bigger”, or “Canada’s brand does not support business competitiveness” (P.4-5).
The competitive issue regarding how Canada’s public policies are blocking small companies from becoming larger companies deals mostly with Canada’s enhanced taxation. Due to Canada’s specific type of government and economy, they have considerably greater taxing. This taxation can and does prevent small and medium sized businesses from developing into larger businesses.
According to The Canadian Chamber of Commerce (2016), “Companies are penalized when their incomes reach $500,000. They must jump from the 11% small business rate to the 15% corporate rate. Add in provincial tax rates, and the jump is from 15% to 27%” (p. 7). These high tax rates make it especially difficult for small family businesses to transfer ownership from generation to generation, which is why Canada has seen a 17% decrease in medium sized businesses from 2006 to 2010. On top of that decrease Canada also experienced a 14% change of medium sized businesses into small business, while only 1.4% developed into large corporations (p.7, 2016).
The decrease of medium sized businesses is so crucial to Canada because medium sized businesses account for 12% of their total GDP and 18% of their total exports. The most important fact for readers is that the medium and small business types employ over 70% of Canada’s workforce and if they continue to decrease Canada will see an increased unemployment rate. Canada’s unemployment rate is considerably higher than that of the United States. As of August 2018, the unemployment rate in Canada had risen to 6% from July’s posted 5.8%. The United States on the other hand has an unemployment rate of 3.9% (2018).
National brands are vital to a country because they are the face or image people think about when asked about that country. A country’s image is everything to it because it defines what that country is to the people. Canada’s brand, in turn prevents the promotion of competitive business. When talking about Canada, its national brand would be “livability”. This is great for Canada’s social perception; however, this means nothing regarding its competitive perception. From a business perspective Canada is not viewed as optimal. Canada’s business environment is overshadowed by its social perception of “livability”. This is bad for Canada because it pushes away foreign investors and foreign entrepreneurs from investing or generating business in Canada.
Overall, Canada has a very prosperous, well valued, and maintained economic system. Even though they have high tax rates that may hinder the development of small and medium sized businesses, the high tax rates are designed to create a more level economic platform that caters to equalizing the middle and lower classes. The United States and Canada have a symbiotic relationship when it comes to importing and exporting goods which benefits both of our economic systems in the end. Without Canada’s stable economy the United States would not be the country that it is today.