Another important element of our monetary policy regimes is a flexible exchange rate. In both the United States and Canada, monetary policy is focused on meeting the needs of our domestic economies. But the flexible exchange rate is especially important to Canada's more open economy.
Movements in our currency during the 1990s and over the past couple of years highlight one important distinction between Canada and the United States—our very different economic structures. Canada is a net exporter of commodities, while the U.S. is a net importer. As a result, fluctuations in commodity prices affect our countries in different ways. Canada benefits when commodity prices rise, and suffers when they fall. The reverse is true for the United States. Considering that commodities account for more than 10 per cent of Canadian GDP and for 35 per cent of our merchandise exports, this is no small factor. And when one takes into account our net position in merchandise exports, then commodities assume even greater importance.
Similarly, in Canada we have a smaller high-tech sector than in the United States. This worked in our favour during the bursting of the "tech bubble" in 2001-02.
Canada also has a significantly larger proportion of small- and medium-sized companies than the United States. Because the most recent global economic slowdown in 2001 had a bigger impact on large multinational firms, the Canadian economy was less affected. This aspect of our economic structure also has implications for the structure of our capital markets.
Another important difference between our two countries lies in the economic and social policy choices that we have made, and the fiscal implications of those choices. Canadians appear to be willing to pay higher taxes than their neighbours to the south, in exchange for higher levels of public services. However, they are no longer willing to have their governments run sizeable deficits.
For more than a decade now, all levels of government in Canada have been striving to reduce fiscal deficits. As a result, Canada has consistently posted surpluses each year since 1995. And the total government debt-to-GDP ratio has dropped from over 100 per cent to about 73 per cent in 2004, a trend we are committed to continuing. In addition, Canada's public pension plans have been overhauled, so as to make them self-financing in the decades ahead. This involved some restructuring of benefits and an increase in contribution rates. As well, contributions are now being invested in markets—with due prudence—in order to bring the best possible returns over the long term.
This completes my brief review of some of the differences between our two countries with respect to economic policy and structure. It's certainly important that we understand those differences. But what's even more important is that we both share the fundamental belief that competition and open capital markets foster innovation, productivity, and economic growth—all of which are essential for improving the living standards of our citizens over time.