Canada - Economic development

Basically, Canada has a free-enterprise economy. However, the government has intervened in times of economic crisis and to accomplish specific social or economic goals. For example, in October 1963, the Canadian government announced a plan, involving tariff rebates, designed to induce US automobile companies to increase the export of vehicles and parts from their plants in Canada; subsequently, US companies markedly increased the scale of their Canadian operations. To dampen speculative buying of the Canadian dollar, the government permitted the dollar to float in the foreign exchange markets as of 31 May 1970; the government's intent was also to make imports cheaper in terms of Canadian dollars, and thereby to dampen domestic inflation. Another attempt at economic intervention, the Canada Anti-Inflation Act, became effective on 16 December 1975. This legislation established an Anti-Inflation Board and an Anti-Inflation Appeal Tribunal to monitor wage and price guidelines, which are mandatory for key sectors of the economy. The act was part of a government program to limit the growth of public expenditures and public service employment, to allow the money supply to increase at a rate consistent with moderate real growth, and to establish new agencies and policies to deal with energy, food, and housing.

A recurrent problem for Canada has been the dominant position of US corporations and investors. Attempts to limit US influence have included tightened tax policies, the Foreign Investment Review Act, and, in 1980, the National Energy Program (NEP), which aimed at reducing foreign ownership of Canada's oil and gas industry, principally through assisting Canadian companies to take over foreign holdings. One beneficiary of the NEP was the government-owned Petro-Canada, created in the mid-1970s; by the end of 1985, Petro-Canada had become the country's second-largest oil company, ranked by assets. However, much of the NEP was eliminated in the mid-1980s by the Conservative government, which sought to encourage foreign investment and to privatize government-owned enterprises. Between 1984 and 1991, the government sold or dissolved over 20 federal corporations, deregulated much of the energy, transportation, and financial sectors, and removed many controls on foreign investment.

In 2000, after more than 10 years of the bilateral trade agreement with the United States, and six years under the North American Free Trade Agreement (NAFTA), Canada's economy was growing at a comfortable pace, unemployment was falling, and inflation was low; but nationals were still dissatisfied with the size of the Canadian economy as compared to US affluence. The economic downturn that began in the United States in 2001 negatively impacted the Canadian economy. In addition, the 2003 outbreak of Severe Acute Respiratory Syndrome (SARS) worldwide harmed tourism and exports in Canada, as Toronto was struck by the worst outbreak of the disease outside Asia. In addition, a cow in Alberta was diagnosed with mad-cow disease (bovine spongiform encephalophathy) in May 2003, and the United States and four other countries placed a ban on the import of Canadian beef. (Canada is the world's third-largest exporter of beef, after Australia and the United States.) In June 2003, the Bank of Canada revised its forecasts for gross domestic product (GDP) growth downwards. The Canadian dollar appreciated against the American dollar in 2003, which harmed exports. Nevertheless, Canada had the highest rate of GDP growth among the G-7 nations in 2003.