Monday, April 15, 2024

The Role of Geography in the Canadian Economy

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From British Columbia’s rocky mountains to the fertile plains of Saskatchewan, Canada’s geography is both diverse and complex, and this impacts its economy. Each region’s unique geographical features play a role, and so does the fact that the country shares a border with the world’s biggest economy.

Geography and Regional Economic Activity

Thanks to its geography, Canada is rich in natural resources. For example, Alberta is a region rich in oil sands, and British Columbia is home to vast forests that are used for timber production. These resources not only help to sustain local economies, but they also contribute significantly to national wealth and global trade.

Geography similarly influences industrial growth across Canada. Industries often spring up where they can best exploit the local natural resources or capitalize on unique geographical advantages. In coastal regions like Nova Scotia and Newfoundland, you’ll find fishing industries with strong histories thanks to the abundant marine life in the ocean.

A prime example of geography influencing economic activity is agriculture in the Prairie provinces — Alberta, Saskatchewan, and Manitoba. This region is often referred to as Canada’s “breadbasket” and its flat terrain and fertile soil are conducive to growing crops like wheat and canola. Long summer days provide plenty of sunlight for crop nourishment, and this advantage stems purely from the area’s northern latitude.

As well as leveraging their geography, Canadians also focus on sustaining it. Due to the close proximity of Canadian manufacturing hubs and the Great Lakes, water conservation practices are taken seriously. The risk of potential pollution by heavy industry activities is always a concern.

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Proximity to the United States

Canada’s economy is significantly influenced by sharing a border with the United States. Being right next to the world’s largest economy presents many opportunities, and it also poses some challenges.

The first way that this geographical closeness impacts Canada’s economy is through trade dynamics between the two countries. Transportation costs are low, and delivery of goods and services is both timely and reliable, and this is great for trade.

To emphasize just how great, Canada was the United States’ largest trading partner in 2022, and the amount of goods and services crossing the border each day was over $3 billion. As well as the ease of access, the cultural similarities and familiar laws are another reason this partnership works so well.

One downside of the close proximity is that Canada’s economy is deeply affected by what takes place in the US. The ES futures — an instrument that allows traders to speculate on the future of the S&P 500 index — is a good example of this. Given it compares the top 500 companies in the US, the S&P 500 is a proxy for the strength of the US economy, and if traders are betting on a downturn, the same could be true of Canada.

It’s clear that geography significantly shapes Canada’s economy in a number of ways. The country’s water conservation efforts and strong relationship with the US are good examples of thinking ahead and how Canada is positioning itself for sustainable economic growth long into the future.

Leon Motley
Leon Motley
"Typical beer trailblazer. Hipster-friendly web buff. Certified alcohol fanatic. Internetaholic. Infuriatingly humble zombie lover."
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