IB History Economic and Trading Relations Notes

Canada's Economic and Trading Relations

Trade within the British Empire

1. Britain was Canada's leading early market. Canadian wheat, timber, minerals, and food moved across Atlantic trading networks.
2. Imperial preference reduced some tariffs. The system encouraged trade within the Empire by giving members advantages over outside competitors.
3. Finance reinforced British influence. London supplied investment for railways, government borrowing, and resource development.
4. The National Policy protected Canadian manufacturing. Tariffs introduced from 1879 encouraged firms to produce behind a protected domestic market.
5. Economic links supported imperial identity. Business, migration, and shipping tied Canadian development to Britain as well as to Canadian politics.
6. Regional interests differed. Prairie farmers often opposed protective tariffs because they raised machinery prices and restricted export options.
7. Imperial trade never eliminated continental forces. Geography and an expanding American economy steadily pulled Canada toward the United States.

The Rise of United States Investment

1. American capital expanded after 1900. Investors entered mining, pulp and paper, manufacturing, oil, and transportation.
2. Branch plants crossed the tariff wall. United States companies built Canadian factories to sell inside the protected market.
3. Ontario became a manufacturing centre. Automobiles, machinery, electrical goods, and consumer products linked the province to American supply chains.
4. Resource exports moved south. Hydroelectricity, minerals, timber, and newsprint supplied fast-growing American cities and industries.
5. Ownership created concern. Critics feared that decisions affecting Canadian employment and resources were being made in American head offices.
6. Supporters emphasized growth. Foreign investment provided technology, capital, jobs, and access to a much larger market.
7. Continental integration had political consequences. Trade patterns increasingly complicated claims that Canada's natural economic future lay only within the Empire.

Reciprocity and the 1911 Election

1. Prime Minister Wilfrid Laurier negotiated reciprocity. The 1911 agreement proposed lower tariffs on many natural products traded with the United States.
2. Western farmers supported the plan. They expected improved access for grain and cheaper goods through greater competition.
3. Manufacturers and Conservatives opposed it. They warned that closer trade could weaken protected industries and Canadian sovereignty.
4. Robert Borden framed reciprocity as annexation risk. The campaign connected economic policy to fear of absorption by the United States.
5. Imperial sentiment strengthened opposition. Many English Canadians preferred closer ties to Britain over continental free trade.
6. Laurier lost the election. The agreement was never implemented after the Conservative victory in September 1911.
7. The debate revealed competing national visions. One emphasized continental markets, while another linked economic independence to tariffs and Empire.

War and the Interwar Shift

1. The First World War expanded production. Demand for food, metals, shells, and transport equipment increased Canadian industrial capacity.
2. Britain's financial position weakened. War debts and reconstruction reduced its ability to dominate Canadian investment and trade.
3. The United States became Canada's principal partner. By the 1920s it led in investment, imports, and many export markets.
4. Automobile production became integrated. Canadian plants depended on American designs, components, ownership, and continental market planning.
5. Canada still sought diversified trade. Governments used imperial conferences and bilateral agreements to avoid excessive dependence on one market.
6. The 1920s boom was uneven. Central Canadian manufacturing grew while agriculture and some resource regions faced unstable prices.
7. Economic orientation affected diplomacy. Closer American ties encouraged direct bilateral relations and a more North American foreign-policy outlook.

The Great Depression and Imperial Preference

1. The Depression collapsed trade. Commodity prices, investment, employment, and government revenues fell sharply after 1929.
2. Tariffs rose across major markets. Protectionism reduced demand and intensified the problems of export-dependent economies such as Canada.
3. R. B. Bennett sought imperial solutions. He hosted the 1932 Imperial Economic Conference in Ottawa.
4. The Ottawa Agreements expanded preference. Empire members granted tariff advantages to one another in an effort to revive internal trade.
5. The policy brought limited relief. British demand could not fully replace lost markets or overcome the depth of the global crisis.
6. Regional distress persisted. Prairie agriculture faced drought and low prices, while industrial centres suffered unemployment.
7. The Depression weakened economic nationalism. Recovery increasingly required access to both British and American markets rather than reliance on one bloc.

Reciprocal Trade with the United States

1. Mackenzie King returned to office in 1935. His government pursued lower trade barriers with President Franklin D. Roosevelt.
2. The 1935 trade agreement reduced selected tariffs. It reopened markets for agricultural and resource exports during a slow recovery.
3. A broader agreement followed in 1938. Further concessions increased bilateral trade before the Second World War.
4. Trade agreements reflected practical geography. The United States was Canada's nearest large market and primary source of many manufactured imports.
5. Critics still feared dependence. American ownership and market power could limit Canadian control over industrial policy.
6. Supporters stressed mutual recovery. Lower barriers offered producers demand that imperial preference alone could not provide.
7. The agreements anticipated wartime integration. They created habits of bilateral negotiation later used for defence production and resource allocation.

Wartime Economic Integration

1. The Ogdensburg Agreement was signed in 1940. Canada and the United States created the Permanent Joint Board on Defence.
2. The Hyde Park Declaration followed in 1941. Roosevelt and King coordinated production so Canadian factories could supply American defence orders.
3. Wartime trade solved a currency problem. American purchases helped Canada earn the United States dollars needed for essential imports.
4. Industry expanded on a continental scale. Vehicles, aircraft, aluminum, ships, and munitions moved through integrated supply networks.
5. Canada also financed Britain. Mutual aid and wartime credits helped sustain British purchases after British reserves declined.
6. C. D. Howe directed industrial mobilization. Crown corporations and private firms expanded capacity under federal coordination.
7. The war fixed a new economic balance. Britain remained important, but the United States became central to Canadian trade, defence, and production.

Federal Responses to Depression-Era Economic Strain

1. R. B. Bennett attempted a Canadian New Deal. In 1935, his Conservative government proposed unemployment insurance, minimum wages, and market regulation modeled on Roosevelt's reforms, but much of it was later ruled unconstitutional as provincial jurisdiction.
2. The Canadian Wheat Board stabilized grain marketing. Created in 1935, it gave the federal government a central role in selling prairie wheat after years of collapsing prices had devastated farm incomes.
3. The Rowell-Sirois Commission examined federal-provincial finance. Appointed in 1937, it investigated how the Depression had exposed unequal fiscal capacity between richer and poorer provinces and proposed a stronger federal role in taxation and social spending.
4. Provincial politics complicated national economic policy. Premiers such as Ontario's Mitchell Hepburn resisted federal intervention and used labour disputes, including a major 1937 General Motors strike in Oshawa, to assert provincial authority.
5. Canadian National and Canadian Pacific competed for a shrinking market. Rivalry between the publicly owned CN and the private CP railway strained both companies' finances during the Depression, prompting debate over rail consolidation.
6. Economic historians disagree on how much the Depression changed Canadian federalism. Some argue it permanently shifted expectations toward federal responsibility for economic security, while others stress how much provincial resistance limited that shift until the war.

Historical Assessment

1. Canada shifted from Atlantic to continental orientation. The change was gradual and reflected markets, investment, geography, and two world wars.
2. Economic dependence changed form. British financial influence declined as American ownership and demand became dominant.
3. Canadian governments retained room to choose. Tariffs, imperial preference, reciprocal agreements, and wartime bargains were used to manage external pressures.
4. Regional interests shaped policy. Prairie exporters, central manufacturers, Atlantic ports, and resource regions wanted different trade arrangements.
5. Ian Drummond emphasizes policy choices. His work shows how tariffs, preference, and negotiation responded to changing economic conditions.
6. Michael Bliss highlights continental capitalism. This view stresses the power of American markets, firms, and technology in Canadian development.
7. Robert Bothwell and Stephen Azzi connect economics to autonomy. They show that closer United States relations strengthened capacity while creating new forms of dependence.