Business and the economy in
Canada
Definition Structure and functioning of the
Canadian economy, including the production
and distribution of goods, services, and incomes
and related public policies
As a full-fledged member of the developed world, Canada
shared with the rest of that world the economic ups and
downs that marked the 1980’s. In particular, the Cana-
dian service economy expanded significantly, and the agri-
cultural sector lagged behind most others in recovering from
the recession that began the decade.
During the 1980’s, Canada continued the process be-
gun after World War II, when it started to diverge
from the colonial economy that had characterized
the country up to that time. The nation’s primary sec-
tor—agriculture, forestry, and fishing—shrank fur-
ther as a proportion of the Canadian gross domestic
product (GDP), as did the manufacturing sector. The
mining and especially the service sectors grew. The
primary sector fell from representing 4.3 percent of
the GDP in 1980 to representing 2.5 percent in 1990.
Mining and quarrying increased slightly from 5.2 per-
cent to 5.6 percent, but manufacturing fell from
21 percent to 19 percent. Construction advanced
slightly, from 6.4 percent to 7.8 percent, but the great
change occurred in the non-business sector, which
more than doubled, from 7.7 percent to 15.9 percent.
“Other,” according to Statistics Canada, fell slightly,
from 55.3 percent to 49 percent.
During the 1980’s, the GDP doubled, from just
over 3 billion Canadian dollars in 1980 to 6.5 billion
Canadian dollars in 1989. Most of this growth oc-
curred in the years after 1983, as in the early 1980’s
Canada responded to the second oil shock of 1979
with a deep recession, one of the worst since the
Great Depression of the 1930’s. Even the years after
1983 were a bumpy ride, as the economic recovery
was accompanied by significant inflation. Recovery
was most pronounced in central Canada, especially
in Ontario, where much of Canada’s manufacturing
was located. Recovery was slower in the far west,
where much activity was resource-based, and in the
east, whose Atlantic provinces never recovered to
their prior level of prosperity.
Investment After dropping precipitously in the re-
cession of 1981-1982, investment rebounded during
the latter part of the decade. A significant portion of
that investment came from outside the country, as
foreign investors accounted for almost 50 percent of
the investment in Canada’s manufacturing indus-
tries. Canadian investors were more prominent in
the oil and gas sectors, supplying close to 70 percent
of the investment funds in those sectors and nearly as
much in mining and smelting. In utilities, almost all
of the investments were locally generated, because
nearly all Canadian utilities were publicly owned at
that time.
The availability of investment capital did not
guarantee success, and the Canadian economy ex-
perienced a significant number of business failures
during the 1980’s. Two banks in western Canada, the
Canadian Commercial Bank of Edmonton and the
Northland Bank, collapsed. The government had to
bail out a number of small, local banks. Dome Petro-
leum failed, Chrysler Canada required a govern-
ment bail-out, and the large agricultural equipment
maker Massey-Ferguson had to be reconstituted un-
der a new name, Varity. Several large retail firms sold
out, notably Hudson’s Bay Company.Foreign Trade Canada’s economy is heavily depen-
dent on foreign trade, most particularly with the
United States; some 30 percent of Canada’s income
generally comes from foreign trade. By the end of
the 1980’s, 80 percent of Canada’s foreign trade
was with the United States, mostly in the form of
automobiles and automotive parts, thanks to the
Autopact of 1965, which made it possible to ship cars
and parts across the Canadian-U.S. border without
triggering import duties. These benefits were ex-
tended to other products in the Canada-United
States Free Trade Agreement, signed on October 3,- Under this agreement, duties on most manu-
factured products were progressively lowered on
both sides of the border.
The friendly terms on which most Canadian-U.S.
trade took place did not, however, extend to the
field of softwood lumber, the lumber used in most
States Canada and the United
States. Canada supplies about one-third of the soft-
wood lumber sold in the United States in the form of
two-by-fours and similar pieces. In 1982, the Coali-
tion for Fair Lumber Imports, a group of U.S. lum-
ber producers mostly on the West Coast, claimed
that Canadian lumber was effectively subsidized, be-
cause the price Canadian loggers were paying land-156 Business and the economy in Canada The Eighties in America