In the first part of this look at the Canadian economy, I focused primarily on how, since 1995, the country has been catapulted from being an "honorary member of the Third World" into a new position as a relative financial powerhouse. Let's now take a look at its specific strengths, along with how it relates to much of the rest of the world.

Today, Canada's economy benefits significantly from its array of natural resources, obviously including Alberta's bituminous oil sands. That major resource is partly responsible for the nation's 175 billion barrels of oil reserves, ranking it third globally behind just Saudi Arabia and Venezuela. The country also sports a solid group of oil and gas producers -- most of which are headquartered in Calgary, the country's Houston. Canada is also home to PotashCorp (NYSE: POT), the world's largest producer of a key mineral used in satisfying mankind's exploding demand for fertilizers.

As you likely know, for now, the U.S. garners the largest percentage of its crude imports from Canada -- about 2.2 million barrels a day, nearly twice what we receive from Saudi Arabia. "For now" relates to our senselessness relative to blocking approval of the full Keystone XL pipeline. That decision could ultimately have our neighbor's oil heading to the East, after first going west. If that confuses you, I'll clarify it in a minute.

Show me the numbers
First, however, it's worth quickly specifying Canada's economic strength through a look at some key comparisons to our own metrics. For instance, that country's gross domestic product growth was recently chugging along at nearly 3.1%, compared to our own level near 2.75%. Even more astounding was its debt, which weighed in at about a third of its GDP, versus our own level, which was approaching a smothering 103% of U.S. GDP and was headed up at a rate that'd exceed even John Glenn's tolerance for space flight. Canada's deficit, also as a percentage of GDP, was a tad under 2% and heading lower. That put it at less than a quarter of our own relative rate.

That's not to say that everything is completely hunky-dory for folks north of the border. For instance, European environmentalists have been pushing to have Canadian tar sands crude labeled as "highly polluting." As you remember, much as is the case with Venezuelan crude, Alberta's tar sands yield a gooey bitumen that is effectively mined, rather than extracted by drilling.

Canada is, of course, less than amused by the prospect of the unflattering -- and potentially costly -- label being attached to its oil. As a result, the country has threatened a trade war with the European Union. And while it has obtained a degree of support from a few countries where big companies with substantial assets in Canada are headquartered, an EU vote in February left the issue unresolved. But it's clearly destined to return far less than amicably.

This pipeline should head south
And then there's the aforementioned Keystone XL pipeline, potentially a $7 billion structure that TransCanada (NYSE: TRP) would like to construct. The line would begin close to Alberta's oil sands, allow for the pickup of crude from North Dakota's Bakken formation, and ultimately conclude near a group of Texas Gulf Coast refineries. In January, the project was blocked by our president, largely on environmental reasons. TransCanada has proposed an ostensibly more environmentally palatable route for Keystone. Nevertheless, it's difficult to envision the project being approved summarily, at least by our current administration.

That simple fact could redound far more to our detriment than to Canada's. You see, Chinese entities have become far more than casual factors in the Canadian economy of late. For instance, a few years ago, China Petroleum & Chemical Corp., aka, Sinopec (NYSE: SNP), forked over nearly $10 billion for a pair of Canadian companies, Tanganyika Oil and Addax Petroleum, both of which operated largely outside their home country.

And just last fall, the same Chinese company agreed to spring for $2.1 billion to buy Daylight Energy, an oil and natural gas producer in British Columbia and Alberta. At about the same time, China's Cnooc (NYSE: CEO) bought OPTI Canada, a bankrupt developer of oil sands.

But it might go west
I could continue with other recent examples of acquisitions of Canadian energy, and other natural resources assets by Chinese entities. Probably the bigger story from our perspective, however, lies in the willingness of a couple of pipeline companies, including Houston's Kinder Morgan Energy Partners (NYSE: KMP), to build or expand transportation capacity from Alberta to Vancouver on Canada's West Coast. Why? Simply to facilitate the sale of Canadian crude to China, a completely logical approach in the event that we continue to turn up our collective noses at a Keystone expansion. Hence my earlier reference to Canadian crude potentially going east by first heading west.  

There appear to be two salient lessons to be derived by those of us in the U.S. from this two-part look at Canada's economic metamorphosis and its current status: First, we'd be well-advised to emulate at least some of the approaches taken by our neighbors in reversing the path of their previously plunging economy. Second, we might recognize that, while Canada has long been our staunch ally, its leaders, companies, and citizens are hardly obligated to indulge in time-killing hand-wringing while we arrive at our senses regarding the likely benefits of a Keystone Pipeline expansion.

Most of the second part of this look at Canada deals with the country's all-important energy industry. If you'd like to examine another approach to this sector, I'd suggest you obtain a free copy of The Motley Fool's report "The Only Energy Stock You'll Ever Need."