The Canadian population is about one tenth the size of the U.S. population or roughly the size of California. Its economy, ranked tenth largest in the world is about ten percent of the size of the U.S. economy. The two countries have been each other’s largest trading partners for many years. The 2008-2009 recession had a dramatic impact on U.S. – Canada trade as cross-border activity dropped by 30%.

The two economies did not experience the same impact from the recession. “Canada experienced a short, sharp recession,” Mark Carney, governor of the Bank of Canada, told the Winnipeg Chamber of Commerce in February. “Domestic demand, fixed capital investment and employment in Canada all held up substantially better than in the U.S.”

A number of factors are reshaping trade and freight flows between the two countries. Canada did not experience the U.S. housing bubble and banking crisis. The Conference Board of Canada’s Consumer Confidence Index hit 96.6 in January, well beyond the 55.9 confidence rating in a similar U.S. measure and the highest the board has measured in 23 months. The Canadian dollar has appreciated against the U.S. dollar over the past twelve months from $0.80 to par.

The Canadian dollar is likely to continue its ascent. This week the Bank of Canada signalled that it will increase interest rates (ahead of the United States).

A faster Canadian recovery bolstered by the fast rising dollar and more confident consumers are causing Canadians to speed up their purchases of U.S. goods. February’s trade data provided evidence that manufacturers, who export half of what they produce, are using the currency’s effect on import prices to buy new equipment that will help them become more efficient. Imports rose to $32.6 billion as volumes increased, mostly for machinery and equipment.

Last year, Canadian companies bought more assets abroad than they sold for the first time since 2004. In a report prepared by the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison, they showed that the value of Canadian cross-border deals jumped by 94 percent last year to $U.S. 37.1 billion, the largest proportional gain of any of the 10 countries the firm looked at, including the U.S., Britain and China.

Anecdotal evidence is also suggesting that Canadians are taking advantage of the currency increase to purchase winter homes in U.S. Sunbelt locations. One client this week indicated that his company is shifting some production from their Canadian operations to their U.S. plants to better serve their U.S. clients and take advantage of the lower cost base, specifically the lower freight costs that are a by-product of manufacturing goods closer to their U.S.-based consumers.

These impacts are being seen by truckers in the cross-border freight flows. Ernie Valdez, director of international solutions at Tennessee based Averitt Express, a member of the Reliance Network that links to Canadian carriers Epic Express and Canadian Freightways, reported that he saw a “decline in less-than-truckload business domestically, but we actually saw an increase on the export side. . . Toward the end of the year we saw a 13 to 14 percent increase in shipment count.”

To capitalize on the business upturn, UPS Freight is extending its reach across the U.S.-Canadian border by shortening transit times between major Canadian cities and U.S. markets. The company opened a $30 million, 145,000 square foot distribution centre in Calgary, Alberta that is close to the FedEx operation at the Calgary International Airport. Much of that cross-border business is moving north, said Joe Picone, vice president of eastern U.S. and Canadian operations at the Virginia based arm of UPS.

Historically, this type of swing in the value of the currency would spell doom for Canada’s highly export driven economy. This time things are different. February marked the fifth straight monthly surplus, which eclipsed analysts’ expectations by widening to $1.4 billion from $754 million in January. Canada’s exporters are pushing deeper into diverse markets as global trade rebounds. The increase in exports outpaced import gains three-to-one, even as the currency moved toward par with the U.S. dollar.

Exports to the U.S. rose 2 percent to $4.4 billion on demand for autos. But companies are reducing their dependence on the damaged U.S. market. Exports to countries other than the U.S. rose by 5.2 percent as sales to Germany, Mexico, the U.K., Turkey, Ghana, Hong Kong, Australia and Brazil were up from year ago levels.

So Canada seems to benefitting on two fronts. The stronger dollar and the quick economic turnaround are causing Canadian companies to increase their purchases of American goods and companies. The recovering Global markets are allowing Canadian companies to increase their exports to a diversity of countries.

This is also a very positive scenario for the U.S. A fast recovering Canadian economy is helping pull the U.S. into a quicker recovery. Strong international markets are keeping Canadian companies in good financial health, propelling them to buy more American goods.