The FRED® Blog

Measuring an economy’s openness

Comparing global trade for Canada, Mexico, and the U.S.

The more an economy trades with the rest of the world, the more open it is. Another way to put it: The more integrated an economy is in the world economy, the more open it is. So how do you measure openness? One way is to look at the ratio of imports plus exports to GDP.

By the way, the size of the economy matters. The U.S. is a large and well-diversified economy, so it doesn’t need to trade that much. The Bahamas are much smaller and much less diversified, and so it needs to trade more.

The FRED graph above shows what our measure of openness looks like for the three North American trading partners: Canada in blue, Mexico in green, and the U.S. in red. The vertical lines correspond to the Canada-U.S. free trade agreement in 1989 and NAFTA in 1994.

For a more nuanced (and complicated) graph, we could examine trade  among just these three countries and not their trade with the entire world. But looking at our particular measure here and considering our assertions above, it’s not surprising that the openness of the U.S. economy is lower than that of its neighbors. We also see that there’s a general trend of increasing openness, which we can associate with the general trend of globalization more than the impact of any particular trade agreements.

How this graph was created: Search FRED for “Canada exports” and take the nominal measure. From the “Edit Graph” panel, add the series for Canadian imports and GDP and apply formula (a+b)/c*100 (to get percentages). From the “Add Line” tab, repeat for the U.S. and Mexico. For the horizontal lines, use the “Add Line” tab again, but this time add 2 “user-defined” lines: the first with values 0.1 and 89.9 in 1989-01-01 and the second in 1994-01-01.

Suggested by Christian Zimmermann.

What’s different for working women in Canada?

For Canada Day, the FRED Blog compares OECD data on women in the U.S. and Canadian workforces

Part of the “My favorite FRED graph” guest post series.

Today is Canada Day, a good opportunity to compare the U.S. with its neighbor to the north. In many ways, the Canadian and U.S. economies are similar, foremost from the fact that they’re so intertwined. But there are also some stark differences. One difference that’s received a good amount of attention is women in the labor force.

The FRED graph above tracks the labor participation rate of Canadian and American women. In both countries, it has increased since the 1960s, thanks to household technology and emancipation. In 1998, it stalled in the U.S. but it has continued to progress in Canada to this date. The gap between the two countries is now almost 9 percentage points, and it’s back to pre-pandemic levels in Canada while still lagging in the U.S.

What’s going on? We can speculate here about some institutional differences that would impact the willingness and ability of women to work. Canada has several provisions for job-protected parental leave and supporting children in the tax code, as well as substantial child care subsidies in some provinces. U.S. support for working families is more limited.

For more on this topic, see the work of Francine Blau and Lawrence Kahn as well as this report from Statistics Canada, which examines the trends in participation for Canadian and U.S. women.

How this graph was created: Search FRED for “activity rate female” and click on the Canadian series. From the “Edit Graph” panel, use the “Add Line” tab to search for and select the U.S. series. Finally, start the graph on 1995-01-01.

Suggested by Tammy Schirle.