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Oil and Oldsmobiles: How we’re connected to our Northern Neighbor

By Rob Starr, Big4.com Content Manager

When you ask any American who lives near the Canadian border, they will more than likely tell you about some kind of connection with a Canadian industry or service. Much has been written in the news lately about auto parts that cross the international border between Michigan and Ontario several times before cars are completed, and of course there is a connection that is both economic and cultural between New York State and the province of Ontario.

Still, there are other even larger factors to consider:

  • The American relationship with Canada when it comes to trade can’t be understated. In fact, as of 2015, America’s second largest trading partner in the world is our neighbor to the north second only behind China. Although the Trump Administration has been banging the drums about unfair trade practices, the numbers show the United States almost has a balance with our northern neighbor when it comes to this important metric. As of January 2016, the exports to Canada totaled $19,628.3 million dollars U.S., while the imports made up $ 22,164.3 million dollars.
  • The relationship between the two countries appears to be getting more intertwined on some levels while in danger in others. For example, the Trump administration has gotten on flagboard with the Keystone XL pipeline which will be a huge boost to crude oil and petroleum which is Canada’s biggest export to the United States.

Here’s just a few more interesting facts about the flow of oil back and forth across our borders.

Spin-off  Industries

The oil sands in Canada which have been much aligned are also responsible for a large impact on the American economy to the tune of $520 billion dollars. Of course that’s the big picture but there is also a smaller perspective when it comes to innovation and other industries that need to be considered as well. For example, entrepreneurs in areas that work with the natural gas and oil industry will be affected as spin-off industries on both sides of the border.

For example, home filter delivery is just one subset that could see a substantial change when the pipeline goes through and finally becomes operational. It’s important to consider that the United States has the third-largest natural gas field in the world and increased U.S.  production has lessened the need to import any of this natural resource from Canada as well.

There are other important areas to consider where our two economies intertwine. There’s been so much written about the Keystone XL pipeline, people forget about the fact that crude oil and petroleum is also a major export from the United States to Canada in other locations.  Because the country is so large, it’s cheaper for people who live in Eastern Canada to import their oil from the eastern seaboard of the U.S. rather than go cross country to the western part of their home.

Cars, Parts and NAFTA

Then, there’s the part of the trading arrangement between Canada and the United States that’s drawing a lot of focus these days through NAFTA and that’s cars, trucks and car parts.  There can be no mistaking the fact this is the largest part of the trade relationship between the two countries when you’re considering the American side.

Everything from large to medium-size trucks and cars as well as body parts and gearboxes plus the whole host of other important elements cross the northern border checkpoints on a daily basis.

Although exactly what Trump wants to do pertaining to NAFTA isn’t clear in relation to the auto industry, there are a few major focuses around Mexico which has shipped $100 billion in auto-parts to the United States in 2015 alone. In relation, United States companies made  $30 billion in 2015 by shipping auto parts to Mexico.

Border Taxes?

Trump has promised large border taxes on companies that move away from America making the future unclear. What this will mean to the tremendous amount of parts and millions of dollars worth of goods and services that flow between the Canadian and American borders on any given day is also less than certain.

Consider the fact that recent reputable reports in Canadian media state that both Canadian and American car sales hit records in 2016. North American automakers sold almost  two million vehicles of all types north of the border and the numbers in the United States were an astounding 17.539 million.

Physical Goods

It’s also important to keep in mind that the interdependence between northern states and Canadian provinces isn’t just about items relating to the auto industry. By some estimates, approximately $500 million in goods and services  crosses across the Ambassador Bridge between Ontario and Detroit on a daily basis. Once again, it’s important to consider the spin-off industries between our two countries and what would happen if our borders became clogged up with additional  tariffs and duties imposed by a breakdown in trade agreements like NAFTA.

Implications cut a wide swath across both economies. When you consider that something as large as an entire auto industry or as small as one online cash for gold buyer service located in Rochester, NY, could be affected, it’s easy to see why everyone involved needs to tread carefully.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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