Trade and economic integration dominants in North America countries’ interaction

Abstract

Under the conditions of deepening economic globalization and changes in regional integration unions functioning, formation and support of mutually beneficial and effective cooperation between countries is an important issue. Despite geographic proximity, cultural similarities and high efficiency of economic interactions, current state of the US-Canada trade cooperation worsens due to the ambitions of the USA as a global economic leader, alongside with unresolved trade disputes and increasing deficit of trade in goods and services. According to the analysis of the US-Canada external trade, it was concluded that due to long-lasting trade, the related supply chains have become highly integrated. The USA buys mostly raw materials and semi-finished products which are then used in finished products designated for internal and external markets. A lot of them even are sold back to Canada. However, there is a controversy in the USA and Canada interests. The USA seeks, first of all, to keep the world leading economic positions, to expand duty-free market available for the sales of domestic producers etc. Canada intends to get rid of protectionist restrictions presumed in American legislation and, thus, to increase the competitiveness of its producers' of goods at the US markets. Estimating the coefficient of trade connectivity, which is bigger than 1, it was evidenced that both countries, in case of trade relations’ worsening or break, will be hardly reoriented on other partners. Our regression analysis shows that Canada’s GDP positively depends on Canadian exports to the USA, while the subsequent permanent increase in Canada’s exports to the USA is forecasted. However, it had been argued that the perspectives of future cooperation hardly depend on the results of negotiation regarding NAFTA reforming which turned into USMCA. Despite the positive conclusion of negotiations on NAFTA's reform and its transformation into USMCA/CUSMA, Canada still has to come up with a more rational policy in order not to become the fifty-first state of the US within the currency and, then, political union.