Canada has the seventh largest economy in the world (measured in US dollars at market exchange rates), is one of the world's wealthiest nations, and a member of the Organization for Economic Co-operation and Development (OECD) and Group of Seven (G7). As with other developed nations, the Canadian economy is dominated by the service industry, which employs about three quarters of Canadians. Canada is unusual among developed countries in the importance of the primary sector, with the logging and oil industries being two of Canada's most important. Canada also has a sizable manufacturing sector, centred in Central Canada, with the automobile industry especially important.
International trade makes up a large part of the Canadian economy, particularly of its natural resources. The United States is by far its largest trading partner, accounting for about 76% of exports and 65% of imports as of 2007. Canada's combined exports and imports ranked 8th among all nations in 2006.
Canada has considerable natural resources spread across its varied regions. In British Columbia, the forestry industry is of great importance, while the oil industry is important in Alberta and Newfoundland and Labrador. Northern Ontario is home to a wide array of mines, while the fishing industry has long been central to the character of the Atlantic provinces, though it has recently been in steep decline.
These industries are increasingly becoming less important to the overall economy. Only some 4% of Canadians are employed in these fields, and they account for less than 6% of GDP. They are still paramount in many parts of the country. Many, if not most, towns in northern Canada, where agriculture is difficult, exist because of a nearby mine or source of timber. Canada is a world leader in the production of many natural resources such as gold, nickel, uranium, diamonds and lead. Several of Canada's largest companies are based in natural resource industries, such as EnCana, Cameco, Goldcorp, and Barrick Gold. The vast majority of these products are exported, mainly to the United States. There are also many secondary and service industries that are directly linked to primary ones. For instance one of Canada's largest manufacturing industries is the pulp and paper sector, which is directly linked to the logging industry.
The relatively large reliance on natural resources has several effects on the Canadian economy and Canadian society. While manufacturing and service industries are easy to standardize, natural resources vary greatly by region. This ensures that differing economic structures developed in each region of Canada, contributing to Canada's strong regionalism. At the same time the vast majority of these resources are exported, integrating Canada closely into the international economy.
Such industries also raise important questions of sustainability. Despite many decades as a leading producer, there is little risk of depletion. Large discoveries continue to be made, such as the massive nickel find at Voisey's Bay. Moreover the far north remains largely undeveloped as producers await higher prices or new technologies as many operations in this region are not yet cost effective. In recent decades Canadians have become less willing to accept the environmental destruction associated with exploiting natural resources. High wages and Aboriginal land claims have also curbed expansion. Instead many Canadian companies have focused their exploration and expansion activities overseas where prices are lower and governments more accommodating. Canadian companies are increasingly playing important roles in Latin America, Southeast Asia, and Africa.
It is the renewable resources that have raised some of the greatest concerns. After decades of escalating overexploitation the cod fishery all but collapsed in the 1990s, and the Pacific salmon industry also suffered greatly. The logging industry, after many years of activism, have in recent years moved to a more sustainable model.
Canada is one of the few developed nations that is a net exporter of energy. Most important are the large oil and gas resources centred in Alberta and the Northern Territories, but also present in neighbouring British Columbia and Saskatchewan. The vast Athabasca Tar Sands give Canada the world's second largest reserves of oil after Saudi Arabia according to USGS. In British Columbia and Quebec, as well as Ontario, Saskatchewan and Manitoba, hydroelectric power is an inexpensive and relatively environmentally friendly source of abundant energy. In part because of this, Canada is also one of the world's highest per capita consumers of energy. Cheap energy has enabled the creation of several important industries, such as the large aluminum industry in Quebec, Alberta and British Columbia.
Historically, an important issue in Canadian politics is that while Western Canada is one of the world's richest sources of energy, the industrial heartland of Southern Ontario has fewer native sources of power. It is, however, cheaper for Alberta to ship its oil to the western United States than to eastern Canada. The eastern Canadian ports thus import significant quantities of oil from overseas, and Ontario makes significant use of nuclear power.
In times of high oil prices this means that the majority of Canada's population suffers, while the West benefits. The National Energy Policy of the early 1980s attempted to force Alberta to sell low priced oil to eastern Canada. This policy proved deeply divisive, and quickly lost its importance as oil prices collapsed in the mid-1980s. One of the most controversial sections of the Canada-United States Free Trade Agreement of 1988 was a promise that Canada would never charge the United States more for energy than fellow Canadians.
Canada is also one of the world's largest suppliers of agricultural products, particularly of wheat and other grains. Canada is a major exporter of agricultural products, to the United States but also to Europe and East Asia. As with all other developed nations the proportion of the population and GDP devoted to agriculture fell dramatically over the 20th century.
As with other developed nations, the Canadian agriculture industry receives significant government subsidies and supports. However, Canada has been a strong supporter of reducing market influencing subsidies through the World Trade Organization. In 2000, Canada spent approximately CDN$4.6 billion on supports for the industry. Of this, $2.32 billion was classified under the WTO designation of "green box" support, meaning it did not directly influence the market, such as money for research or disaster relief. All but $848.2 million were subsidies worth less than 5% of the value of the crops they were provided for, which is the WTO threshold. Consequently, Canada used only $848.2 million of its $4.3 billion subsidy allowance granted by the WTO.
The general pattern of development for wealthy nations was a transition from a primary industry based economy to a manufacturing based one, and then to a service based economy. Canada did not follow this pattern; manufacturing has always been secondary, though certainly not unimportant. Partly because of this, Canada did not suffer as greatly from the pains of deindustrialization in the 1970s and 1980s.
Central Canada is home to branch plants to all the major American and Japanese automobile makers and many parts factories owned by Canadian firms such as Magna International and Linamar Corporation. Central Canada today produces more vehicles each year than the neighboring U.S. state of Michigan, the heart of the American automobile industry. Manufacturers have been attracted to Canada due to the highly educated population with lower labour costs than the United States. Canada's publicly funded health care system is also an important attraction, as it exempts companies from the high health insurance costs they must pay in the United States.
Much of the Canadian manufacturing industry consists of branch plants of United States firms, though there are some important domestic manufacturers, such as Bombardier. This has raised several concerns for Canadians. Branch plants provide mainly blue collar jobs, with research and executive positions confined to the United States