Canada Trade & FDI
Canada is a major participant in international agricultural trade. In 2015, Canada’s total agri-food and seafood exports to all countries equaled just over $48.0 billion, and corresponding imports approached $36.8 billion, according to Canadian statistics. The United States is Canada's largest agricultural trading partner, buying 53 percent of Canadian exports and supplying 59 percent of Canadian imports. In addition, Canada is the leading agricultural trade partner of the United States, when exports and imports are combined. In 2015, Canada accounted for 16 percent of U.S. agricultural exports and 19 percent of imports, as defined and categorized by USDA.
The heightened level of integration between the U.S. and Canadian agricultural sectors is due in part to the Canada-U.S. Free Trade Agreement (CUSTA), which was implemented in 1989 and subsumed by the North American Free Trade Agreement (NAFTA) in 1994. From 1989 to 1998, CUSTA and NAFTA dismantled virtually all tariff and quota barriers to Canada-U.S. agricultural trade, with a few notable exceptions: U.S. imports of dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products and Canadian imports of dairy products, poultry, eggs, and margarine. During the CUSTA-NAFTA period, Canada-U.S. agricultural trade has expanded almost without interruption. Between 1988 (the last year prior to CUSTA’s implementation) and 2015, U.S. agricultural exports to Canada expanded at a compound annual rate of 7.0 percent, while agricultural imports from Canada grew at a rate of 8.4 percent. The major exceptions to this pattern of growth occurred in 2009, following the economic downturn of 2007-09, and in 2015, due to a decline in many commodity prices.
Much of Canada-U.S. agricultural trade consists of intra-industry trade, meaning that each country exports products to the other within certain sectors. In grains and feeds, intra-industry trade encompasses numerous processed products, including dog and cat food for retail sale; mixes and doughs; pastries, cake, bread, and pudding; breakfast cereal; and uncooked pastas. Beef and pork are prominent examples of intra-industry trade outside the grains and feeds sector.
Grains, fruit, vegetables, meat, and related products accounted for about 61 percent of U.S. agricultural exports to Canada in 2015. Among the leading exports were: beef and veal ($1.1 billion), pork ($787 million), dog or cat food for retail sale ($602 million), coffee, roasted, not decaffeinated ($499 million), and lettuce ($458 million).
Roughly 63 percent of U.S. agricultural imports from Canada in 2015 consisted of meat, grains, vegetables, fruit, and related products. The leading agricultural import in 2015 was biscuits and wafers ($1.8 billion), followed by rapeseed oil ($1.4 billion), cocoa and cocoa preparations ($1.3 billion), live cattle and calves ($1.3 billion), and beef and beef variety meats ($1.3 billion).
Selected U.S. agricultural exports to Canada
To view more detailed U.S.-Canada agricultural trade statistics, go to USDA Foreign Agricultural Service's Global Agricultural Trade System.
Foreign Direct Investment Into Canada
Foreign direct investment (FDI)—defined by the United Nations as “investment made to acquire a lasting interest in or effective control over an enterprise operating outside of the economy of the investor”—is another type of economic linkage that binds the agricultural, food, and beverage sectors of Canada and the United States. According to FDI data from the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA), Canada was the fifth largest destination for U.S. direct investment abroad at the end of 2016, and the United States’ direct investment position in all sectors of the Canadian economy totaled about $364 billion on a historical cost basis. (BEA defines “direct investment position at historical cost” as a “measure of the value of direct investors’ equity in, and net outstanding loans to, their affiliates in which the direct investors’ investment is valued at book value. It largely reflects prices at the time of the investment rather than prices of the current period and is not ordinarily adjusted to reflect the changes in the current costs or the replacement costs of tangible assets or in stock market valuations of firms.”)
U.S. direct investment in Canada's food and beverage industries is also substantial. At the end of 2016, Canada was the largest destination for U.S. direct investment in the food industry and the second largest in the beverage industry. The U.S. direct investment position in Canada's food and beverage industries in 2016 was $13.1 billion and $6.6 billion, respectively. Mergers and acquisitions involving large firms sometimes result in large year-to-year changes in the U.S. direct investment position in Canada's food and beverage industries. In contrast, there is relatively little U.S. direct investment in Canada’s agricultural production ($647 million) or tobacco sector ($6 million).
The U.S. direct investment position in the Canadian beverage industry has expanded over the past 27 years, with a compound annual growth rate of 16 percent between 1989 and 2016. Much of this growth took place between 2004 and 2005, when the U.S. direct investment position in Canada's beverage industry increased by roughly $5 billion, in part due to the merger of prominent breweries from each country. Compared with the beverage industry, U.S. direct investment in the Canadian food industry has also has experienced substantial growth, increasing at a compound annual rate of 7 percent between 1989 and 2016.
Of the total U.S. direct investment position in Canada's food, beverage, tobacco, and agricultural sectors in 2016, the beverage industry accounted for 48.0 percent and the food industry 47.3 percent. Subsectors within the Canadian food industry that are major recipients of U.S. direct investment include grain/oilseed milling and sugar/confectionery products, with 20.0 percent and 4.8 percent of the total, respectively. Agricultural production accounted for 4.7 percent of the total.
The proportion of investment going to the beverage industry has risen from about one-third of the total for the food, beverage, and tobacco industries in 1999 to consistently over one-half in the most recent years where data are available. There is no clear trend in the sectoral composition of U.S. direct investment. The shares associated with animal foods and grain and oilseed milling, for instance, do not exhibit a clear upward or downward trend, and much of the investment in the food industry falls in the category of "other food products." The U.S. direct investment position in Canadian animal production has increased over the past decade from negligible levels to $83 million in 2009.
Canadian Direct Investment in the United States
Canada is also an important source of FDI for the U.S. food industry. At the end of 2016, Canada's direct investment position in the U.S. food industry equaled about $4.9 billion on a historical cost basis, which makes Canada the third largest foreign investor in the U.S. food industry. After fluctuating during 1997-2008, Canada’s direct investment position in the U.S. food industry increased steadily, growing at a compound annual rate of 22.2 percent between 2008 and 2016. As with U.S. direct investment in Canada's food and beverage industries, mergers and acquisitions involving large firms can result in substantial year-to-year changes in the Canadian direct investment position in the U.S. food industry.