Canada's State of Trade: Trade and Investment Update – 2009

V. Key Developments in Canadian Merchandise Trade in 2008

The previous chapter painted the broad picture for Canadian trade. Energy products, with their huge fluctuations in prices over the year, brought about significant changes in Canada's bilateral and regional trade performance. Likewise, high prices for metals and agricultural commodities influenced the shifts in trade for these products. The economic recession in the United States and the ongoing slowdown in U.S. housing activity severely affected automotive and forestry-related trade. The effects were reflected in the contraction of trade for these products and in the pattern of provincial trade performance.

This chapter examines in greater detail the developments in Canada's merchandise trade in 2008—across trading partners, commodities, and provinces—using Canadian trade statistics that are prepared at the detailed commodity and individual country levels.12

Canadian merchandise exports reached $484.4 billion in 2008, while merchandise imports were $433.2 billion. Much of this trade was concentrated in a small number of countries. In 2008, six countries—the United States, the United Kingdom, Japan, China, Mexico, and Germany—accounted for nearly seven of every eight dollars of merchandise exports and six of every eight dollars of merchandise imports. Of particular note, Japan regained third position in the ranking of Canadian export destinations, and China moved back to fourth position, while South Korea moved up three places to become Canada's seventh-largest export destination.

In terms of specific products driving Canadian trade performance in 2008, crude oil, non-crude oil, and other petroleum gases (primarily natural gas) dominated Canada's trade in energy products, accounting for much of the growth in both trade levels and in the trade surplus. Trade with the United States was the driver behind the growth for much of the 2008 energy trade; however, for coal, it was strong demand from Asia due to regional supply difficulties. In the automotive and automotive-related sectors, again it was trade with the United States driving the changes; however, in this case, trade was contracting and trade balances were deteriorating sharply for passenger cars and motor trucks.

Outside of energy products, other resource products that influenced Canadian trade considerably included wheat and canola. In this case, strong price increases and good harvests in Canada in conjunction with poor harvests elsewhere helped boost export levels, but strong prices also raised import values. Gold enjoyed a banner year, as prices reached record highs and demand was strong, boosting both exports and imports. Sulfur exports also boosted mineral and metal exports overall. Exports of potash rose significantly, driven by demand in the United States and in major emerging economies, while uranium exports fell sharply to Europe.

Within advanced manufacturing, telephone equipment and parts experienced a sharp decline in exports and strong growth in imports. Both exports and imports of aircraft fell in response to declining demand in both the United States and Canada. However, both exports and imports of gas turbines, largely used in the aircraft sector, expanded strongly, mainly due to heightened trade with the United States.

Trade by Top Ten Partners

Merchandise Exports

Canadian merchandise exports to the world expanded by 7.5 percent to $484.4 billion in 2008, an increase of $33.7 billion.

The United States was the largest destination for Canadian merchandise exports, accounting for slightly over three quarters of total exports. Despite slumping demand,13 exports to the United States were up $20.4 billion (5.7 percent) in 2008 to $376.3 billion, largely due to commodity price increases in the first part of the year. Energy products, in particular crude oil, up $25.8 billion (62.0 percent), and natural gas, up $5.2 billion (18.2 percent), accounted for the bulk of the gains, while exports of automotive products fell sharply. Exports of trucks fell $6.1 billion (63.8 percent), while exports of passenger automobiles fell $5.9 billion (14.9 percent). Exports of automotive parts were down $2.8 billion (22.0 percent).

The United Kingdom ranked second, receiving $13.1 billion (2.7 percent) of Canada's total exports. A severe downturn in the UK economy limited Canadian export opportunities to that country hence exports increased by only 2.0 percent. Gold exports contributed to the advance, rising 52.5 percent on account of the strong increase in the price of gold mentioned in the previous chapter. The value of diamond exports more than doubled, reaching almost $1.4 billion. Heightened demand for gold and diamonds for investment purposes was likely behind the increased exports of these products since the financial crisis hit the United Kingdom hard in 2008.

Japan reclaimed third position (from China) in 2008, as exports jumped 20.2 percent to $11.1 billion. Coal exports more than doubled, to $2.3 billion, as a direct result of disruptions in the region's coal supply from traditional suppliers such as China (affected by snowstorms) and Australia (affected by torrential rains and floods). Exports of canola and wheat also increased due to bumper harvests in Canada and tightened supplies from other countries due to hot and dry weather. Exports of canola were up 56.3 percent to $1.4 billion, while those for wheat jumped up by 76.0 percent, to $551 million.

China slipped to fourth spot even though Canadian exports to that country were up by $10.4 billion (9.2 percent). Sulfur exports to China nearly tripled, rising by $544.1 million to $819.6 million. As with Japan, Canadian exports of coal increased to China, advancing by $158 million, which was twelve times as great as in 2007. Exports of canola seed increased $451 million to $781.9 million, while exports of canola oil fell $75.6 million to $172.9 million. Results for nickel products were also mixed: exports of unwrought nickel fell $322.7 million, while exports of nickel mattes and other intermediate products rose by $166.3 million.

Mexico was Canada's fifth-largest export trading partner in 2008. Exports to Mexico were valued at $5.8 billion, up $887.2 million (17.9 percent) from 2007. Leading the gains were canola exports, up $365.7 million (80.3 percent), and coal exports, up $127.3 million (593.0 percent). Other notable advances were recorded for electronic integrated circuits and machinery parts, up $259.1 million and $140.0 million, respectively.

Germany ranked sixth in 2008, up from seventh spot in 2007. Exports to Germany were up $594.1 million (15.3 percent) to $4.5 billion. Three products were largely responsible for this increase: iron ore, up $423.7 million (96.2 percent); coal, up $104.8 million (56.3 percent); and copper ore, up $99.7 million (66.2 percent).

South Korea ranked seventh in 2008, up from tenth position in 2007. Exports to South Korea were up $812.7 million (27.0 percent) to $3.8 billion. Coal exports accounted for the bulk of the increase, up $717.9 million (129.3 percent).

The Netherlands ranked eighth in 2008, with exports falling $344.7 million (8.5 percent) to $3.7 billion. Plunging exports of uranium and other radioactive elements and isotopes, down $453.7 million (84.8 percent), accounted for much of the decline. Other notable declines occurred for exports of unwrought nickel and unwrought aluminum, which fell by $185.1 million and $111.0 million, respectively. Partially offsetting the losses was a $666.8 million increase in exports of heavy petroleum oil preparations.

Belgium ranked ninth in 2008, up from eleventh spot in 2007. Exports to Belgium rose $435.6 million (14.7 percent) to $3.4 billion. The increase was mostly due to heavy petroleum oil preparations and linseed, which advanced by $185.7 million and $134.7 million, respectively.

Rounding out Canada's top ten export markets was France, in tenth spot. Canadian exports to France increased 3.7 percent to $3.2 billion.

In addition to the increase in exports to China noted above, merchandise exports to the other so-called BRIC countries grew strongly, led by Brazil (up $1.1 billion, or 70.7 percent), then India (up $625.9 million, or 34.9 percent), and finally Russia (up $348.2 million, or 30.3 percent).

Canadian Exporters: Selling More Products to More Markets

At the firm level, Canadian exporters have become steadily more diversified both in the number of markets they serve and the number of products they export. In past editions of the State of Trade, analysis of Exporter Registry data has shown that the number of firms serving the U.S. market alone has declined, while the number of firms exporting to the U.S. and other markets, or only to non-U.S. markets, has increased. This year's analysis confirms that the average number of markets per exporter has increased, and that the number of multi-market exporters has grown by almost 40 percent, according to the five most recent years of data. In terms of product diversification, outside the North American market, the number of Canadian exporters selling more than one product has grown dramatically.

The latest data indicate that the average number of destinations per Canadian exporter increased from 1.8 in 2001 to 2.5 in 2006. While the number of single-market exporters remains much higher than multi-market exporters—over 32,000 versus fewer than 12,000 (Table 1)—nevertheless, the number of multi-market exporters increased 38 percent between 2001 and 2006. This gain was all the more impressive as the total number of exporters decreased by 8 percent over this period. Indeed, 3,000 more enterprises became multi-market exporters while the number of single-market exporters decreased by over 7,000. This decrease was partly attributable to single-market exporters becoming multi-market exporters.

Table 1
Canadian Exporters (2001-2006)
 20012006Absolute ChangePercent Change
Total number of exporters48,14044,127-4,013-8.3%
Average value of exports$7,500,000$8,600,000$1,200,00016.0%
Average number of destinations1.82.50.738.8%
Single-market exporters35,59132,296-7,295-18.4%
Multi-market exporters8,54911,8313,28238.4%
Single-product exporters19,21716,969-2,248-11.7%
Multi-product exporters28,92327,158-1,765-6.1%

This growth in multi-market exporters was completely accounted for by SMEs. The number of SMEs exporting to more than one destination increased 48 percent from 7,046 in 2001 to 10,406 in 2006. During this period, the number of SMEs exporting to Asia and Europe increased significantly, by 56 percent and 42 percent, respectively, while the number of SMEs exporting to the United States declined.1

Canadian exporters are diversifying their product lines as well as their markets. Although the total number of multi-product exporters decreased by 6 percent, the proportion of multi-product exporters with respect to the total exporter population rose. Further, there has been a notable increase in product diversification outside North American markets. Although the number of multi-product exporters decreased, both in total and to North America, as seen in,2 all other regions experienced very high increases in the number of multi-product exporters; this is especially true for Oceania and Africa, where the number of Canadian multi-product exporters doubled.

Diversification, of both markets and products, was likely a major contributor to an increase in the average value of exports per enterprise, which rose from $7.5 million in 2001 to $8.6 million in 2006. This trend is particularly strong for SME exporters who saw their average export value rise from $2.4 million in 2001 to $3.2 million in 2006.

1. The Exporter Registry is a database compiled by Statistics Canada comprising data on exporters at the enterprise and establishment level. Data utilized for analysis in this section of the State of Trade are at the enterprise level. As of writing, the latest data available are for 2006. Note that data used in last year's edition of the State of Trade applied only to exporters with sales above $30,000, whereas data for all exporters have been included in this year's edition.

2. For the purpose of this analysis SME (small medium sized enterprise) is defined as an enterprise with less than 200 employees.

Merchandise Imports

The United States was Canada's largest source of merchandise imports, accounting for slightly over half of our total imports. Imports from the United States were valued at $226.9 billion in 2008, up $6.4 billion (2.9 percent) over 2007. As with exports, increases in commodity prices affected import trade values. Energy products registered notable gains (up 56.8 percent) led by heavy petroleum oil preparations (up $1.8 billion), natural gas (up $1.2 billion), crude petroleum (up $1.2 billion), and gasoline and other fuels (up $833.6 million). Precious metals, principally gold in various forms, also rose by $1.2 billion (44.7 percent). The downturn in the automotive sector curtailed automotive and automotive-related imports, which fell 12.2 percent. Of note, imports of automotive parts fell by $3.0 billion, imports of transportation trucks fell by $2.0 billion, and imports of passenger cars fell by $1.2 billion.

China ranked second as a source of merchandise imports into Canada. Imports from China into Canada were up $4.3 billion (11.3 percent) to $42.6 billion in 2008. Gains were widespread led by telephone equipment (up $515.8 million), computer equipment (up $426.9 million), video games (up $396.8 million), and coke (up $241.5 million).

Merchandise imports from Mexico, which continued to be Canada's third-largest source, increased $727.9 million (4.2 percent) to $17.9 billion in 2008. Imports of passenger automobiles led the gains, rising $418.7 million, in contrast to an overall decline in automobile imports in 2008. Televisions, cellular telephones, crude oil, and gold also reported notable gains of $342.7 million, $260.8 million, $249.3 million, and $163.1 million, respectively. Fewer imports of transportation trucks (down $206.1 million), motor vehicle parts (down $121.7 million) and insulated wire and cables (down $121.6 million) offset the gains.

Japan, which ranked fourth, was the only one of our top ten import sources which supplied fewer imports to Canada in 2008 than in 2007: imports fell $166.8 million (1.1 percent) to $15.3 billion. Automotive parts experienced the largest decline, falling $181.3 million, as smaller gains and losses in other products and commodities effectively cancelled each other out.

Imports from Germany, Canada's fifth-largest source, were up $1.2 billion (10.2 percent) to $12.7 billion. Passenger automobiles, which accounted for about one quarter of the increase, were up by $307.0 million. Next in importance were boats, up $118.3 million, followed by medicaments, which were up by $110.2 million.

Imports from the United Kingdom, which ranked sixth, were up $1.1 billion (9.4 percent) to $12.6 billion. Energy products accounted for the increase as imports of crude petroleum were up by $812.5 million, imports of gasoline and other fuels more than doubled (up $169.3 million), and imports of heavy petroleum oil preparations were up $69.1 million.

Imports from Algeria, which moved from tenth place to seventh in 2008, increased by $2.6 billion (51.8 percent) to $7.7 billion in 2008. The increase was entirely due to crude petroleum, which accounted for 99.97 percent of Canada's imports from Algeria.

Imports from Norway, which slipped to eighth place in 2008, increased by a total of $853.2 million (15.9 percent) to $6.2 billion. The increase was partly due to a $868.6 million increase in crude petroleum imports. A $118.6 million decline in imports of gasoline and other fuels was largely offset by a $85.8 million increase in iron alloys and an aggregate net increase in all other imports from Norway.

Imports from South Korea, which ranked ninth, were up $638.6 million (11.9 percent) to $6.0 billion in 2008. Advances were widespread, led by electronic integrated circuits (up $256.0 million), telephone sets (up $111.4 million), gasoline and other fuels (up $70.7 million), and heavy petroleum oil preparations (up $64.9 million).

Imports from France, which ranked tenth, were up $845.9 million (16.6 percent) to $5.9 billion. Gains were widespread, led by gasoline and other fuels (up $101.3 million), and blood products (up $76.4 million).

Merchandise imports from the BRIC countries, except for China which is reported above, were up for Russia (by $582.8 million, or 38.9 percent) and India (by $222.4 million, or 11.2 percent), while they fell from Brazil (by $675.6 million, or 20.1 percent).

Merchandise Trade by Top Products

Canadian trade is dominated by a few products, more so on the export side than on the import side:14 28 products accounted for over half of Canadian merchandise exports in 2008, nearly 40 percent of merchandise imports, and all of Canada's merchandise trade surplus. As shown in Table 5-1, these top products fall into two broad categories: trade surplus products and trade deficit products. Within each category, trade can be further subdivided into trade that is substantially two-way and trade that is primarily one-way.15

Table 5-1a
Trade Surplus Sectors: Large Exports and Large Imports, 2008
 ExportsExport GrowthImportsImport GrowthBalanceBalance Change
Crude Oil$67,439,000,00061.2%$34,107,000,00041.4%$33,332,000,000$15,628,000,000
Petroleum Gases$37,203,000,00018.7%$4,819,000,00034.9%$32,384,000,000$4,604,000,000
Passenger Cars (Persons)$34,514,000,000-14.7%$26,959,000,000-1.1%$7,555,000,000-$5,632,000,000
Oil (Not Crude)$17,913,000,00035.1%$10,475,000,00046.6%$7,437,000,000$1,320,000,000
Gold$8,157,000,00038.2%$3,788,000,00028.4%$4,370,000,000$1,418,000,000
Aircraft, Powered$6,900,000,000-14.0%$3,556,000,000-14.6%$3,344,000,000-$517,000,000
Gas Turbines$5,213,000,00019.0%$4,355,000,00014.5%$858,000,000$281,000,000
Sub-total$177,339,000,00022.1%$88,059,000,00020.6%$89,280,000,000$17,103,000,000
Table 5-1b
Trade Surplus Sectors: Large Exports and Small Imports, 2008
 ExportsExport GrowthImportsImport GrowthBalanceBalance Change
Aluminum, Unwrought$7,360,000,000-1.9%$342,000,000-9.7%$7,018,000,000-$105,000,000
Wheat And Meslin$7,089,000,00050.9%$12,000,00066.2%$7,077,000,000$2,386,000,000
Potash$6,311,000,000109.2%$21,000,00020.6%$6,290,000,000$3,291,000,000
Coal$6,176,000,000111.1%$1,335,000,00022.7%$4,841,000,000$3,003,000,000
Sawn Lumber$5,370,000,000-28.2%$507,000,000-12.5%$4,863,000,000-$2,037,000,000
Chemical Woodpulp$5,226,000,000-5.3%$173,000,00014.7%$5,053,000,000-$316,000,000
Newsprint, In Rolls Or Sheets$4,264,000,0006.6%$59,000,00047.8%$4,205,000,000$245,000,000
Canola (Seeds)$3,882,000,00071.2%$104,000,00028.2%$3,778,000,000$1,591,000,000
Polymers Of Ethylene, In Primary Forms$4,571,000,0009.4%$1,352,000,00011.4%$3,219,000,000$256,000,000
Sub-total$50,250,000,00020.8%$3,906,000,0009.8%$43,125,000,000$8,060,000,000
Table 5-1c
Trade Deficit Sectors: Large Exports, Large Imports, 2008
 ExportsExport GrowthImportsImport GrowthBalanceBalance Change
Auto Parts & Accessories$11,131,000,000-22.4%$18,931,000,000-14.9%-$7,800,000,000$111,000,000
Medicaments, In Dosage Form$5,234,000,000-3.0%$8,309,000,0000.1%-$3,076,000,000-$171,000,000
Telephone Equipment & Parts$4,745,000,000-19.0%$6,203,000,00011.9%-$1,458,000,000-$1,775,000,000
Vehicles For Transport Of Goods$3,681,000,000-62.8%$9,229,000,000-19.7%-$5,549,000,000-$3,935,000,000
Piston Engines$2,497,000,000-24.0%$5,375,000,000-12.0%-$2,878,000,000-$59,000,000
Computers and Peripherals$2,435,000,0002.7%$8,525,000,0002.3%-$6,090,000,000-$125,000,000
Integrated Circuits & Parts$2,784,000,00022.4%$3,691,000,0001.5%-$907,000,000$456,000,000
Aircraft Parts$2,409,000,0005.2%$3,703,000,00013.6%-$1,293,000,000-$324,000,000
Sub-total$34,916,000,000-23.6%$63,966,000,000-7.2%-$29,050,000,000-$5,821,000,000
Table 5-1d
Trade Deficit Sectors: Small Exports, Large Imports, 2008
 ExportsExport GrowthImportsImport GrowthBalanceBalance Change
Insulated Cable and Wire$977,000,000-8.2%$3,009,000,000-3.6%-$2,032,000,000$24,000,000
Bulldozers, Graders, Scrapers Etc$475,000,000-14.5%$3,437,000,0008.5%-$2,962,000,000-$348,000,000
TV Receivers, Incl Video Monitors & Projectors$349,000,00015.3%$4,332,000,0009.3%-$3,983,000,000-$321,000,000
Seats (Non-Professional), And Parts$1,679,000,000-18.5%$3,083,000,000-6.7%-$1,405,000,000-$159,000,000
Sub-total$3,480,000,000-6.3%$13,862,000,0005.1%-$10,382,000,000-$803,000,000
Total of Above$265,985,000,00012.8%$169,793,000,0007.0%$92,972,000,000$18,538,000,000
World Total$484,369,000,0007.5%$433,242,000,0006.5%$51,127,000,000$7,416,000,000

Products for which there was substantial two-way trade (i.e., with both large exports and large imports) and for which Canada reported a trade surplus include energy products, passenger cars, gold and aircraft. The resource-based products within this group experienced strong growth for both exports and imports because of the price effects already noted. The declines in trade of the manufactured items—cars and airplanes—were linked with the economic downturn, although trade in gas turbines expanded.

Products for which Canada reported large exports and smaller imports were principally non-energy resources, such as wheat, potash and wood products. Several of these products experienced strong gains, based on high commodity prices in 2008; lumber, on the other hand, has been declining on a longer term basis.

Products with substantial two-way trade but for which Canada reported a trade deficit include automotive and aircraft parts, motor trucks, engines, communications equipment, and computers and integrated circuits—all advanced manufacturing products. Exports fell widely across these products. On the other hand, declines in imports of these products were restricted to auto-related products.

Finally, products for which Canada reported large imports and smaller exports fall mostly in the advanced manufacturing sector. Television receivers and video monitors registered strong advances while performance was weaker in the other products.

Merchandise Trade by Major Product Groups

This section examines 2008 trade performance in the following product groupings: energy, vehicles and parts, machinery and mechanical appliances, electrical and electronic machinery, technical and scientific equipment, agricultural and agri-food products, minerals and metals, chemicals, plastics and rubber, wood, pulp and paper, textiles, clothing and leather, consumer and miscellaneous manufactured products, and other transportation equipment.

Energy Products16

As discussed in Chapter 4, energy products played a leading role in the advances of both Canadian exports and imports of goods in 2008, with strong increases in energy prices accounting for most of the gains.

Canadian exports of mineral fuels and oils surged $40.5 billion (43.1 percent) in 2008 to $134.4 billion. Imports of these products increased almost as dramatically, up $15.8 billion (41.8 percent) to $53.7 billion for the year. As a result, the trade surplus for energy products widened by $24.6 billion, from $56.0 billion to $80.6 billion. In 2008, the United States was the destination for 86.0 percent of Canada's energy exports, supplied 38.6 percent of our energy imports, and was responsible for all of the increase in the trade surplus.

Three commodities—crude oil, non-crude oil, and other petroleum gases (primarily natural gas)—make up more than 90 percent of the trade in energy products, for both exports and imports. Crude oil is the dominant commodity, accounting for half of energy exports and nearly two thirds of energy imports. Canada's crude oil exports climbed $25.6 billion to $67.4 billion, with the United States accounting for all of the gains. At the same time, imports rose by $10.0 billion to $34.1 billion. Noticeable gains in our energy imports were registered from Algeria, Angola, the United States, Azerbaijan, and Norway. With the increase in exports exceeding that for imports, Canada's trade surplus in crude oil almost doubled in 2008, rising by $15.6 billion to $33.3 billion.

Petroleum gases accounted for 27.7 percent of energy exports and 9.0 percent of energy imports in 2008. Natural gas in a gaseous state is the predominant commodity in this category, accounting for roughly 90 percent of the trade in either direction, virtually all of which was with the United States. Exports were up just under $5.2 billion while imports increased by $1.2 billion, as the trade surplus in natural gas expanded by $3.9 billion to $29.2 billion.

Heavy petroleum oils accounted for about 60 percent and light petroleum oils (including gasoline) for about 40 percent of non-crude oil trade. Overall exports of non-crude oil increased by nearly $4.7 billion (led by a $2.0 billion increase to the United States), while imports advanced $3.3 billion (imports from the United States alone were up by $2.7 billion) and the trade surplus widened by $1.3 billion. The trade surplus for light petroleum narrowed by $0.4 billion to $2.2 billion while that for heavy oils widened by $1.7 billion to $5.3 billion.

Coal exports more than doubled in 2008, up nearly $3.3 billion, on strong demand from Asia. With a $246.9 million rise in imports, the trade surplus in coal widened by $3.0 billion for the year.

Vehicles and Parts17

In 2008, exports of vehicles and parts fell $14.8 billion (21.6 percent) to $53.8 billion. The decline was almost entirely accounted for by a $14.4 billion decrease in exports of these products to the United States. Three products—cars with cylinder capacity of more than 3000 cc, light trucks, and auto parts—were behind the losses, as their exports to the United States fell by $5.6 billion, $5.6 billion, and $2.8 billion, respectively.

Vehicle imports also fell in 2008, by $5.5 billion (8.0 percent) to $63.3 billion. Accounting for the decline were falling imports from the United States, which fell slightly more than the total, by $6.1 billion. Imports from Germany rose by $349.1 million and those from Mexico rose by $119.0 million. As was the case for exports, cars with cylinder capacity of more than 3000 cc, light trucks, and auto parts were behind the losses, with imports of these three products from the United States falling by $1.1 billion, $1.2 billion, and $3.0 billion, respectively. In addition, imports from the United States of certain other trucks18 requiring compression ignition fell $1.1 billion.

With exports falling more than imports, the trade deficit for vehicles and parts widened from a near-balance position in 2007 to almost $9.5 billion in 2008. The increase in the trade deficit with the U.S. accounted for nearly 90 percent of the decline ($8.3 billion). The deterioration in the trade deficit was centred on passenger cars and motor trucks, for which trade balances fell by $5.6 billion and $3.9 billion, respectively. The trade balance for automotive parts improved slightly, with the deficit narrowing by $111.3 million: exports of automotive parts fell $3.2 billion, but imports fell even more ($3.3 billion).

Mechanical Machinery and Appliances19

Mechanical machinery and appliances (hereafter machinery) comprises a single chapter in the HS classification system. It is also one of the largest categories of goods in Canada's trade. In 2008, machinery surpassed vehicles as the largest import category, at $63.6 billion; it is also the third-largest export category, at $36.6 billion, behind energy products and vehicles.

Machinery exports increased by $0.6 billion (1.6 percent) in 2008. Gas turbines, mainly for aircraft, led the gains as these exports increased by $833.8 million, mainly to the United States (up $356.4 million) and France (up $138.7 million). Parts for a variety of moving machinery such as elevators, cranes, and graders also advanced, by $483.7 million. Principal destinations were Mexico (up $140.0 million) and the United States (up $123.6 million). Exports also increased for non-domestic dryers and temperature-changing apparatus, up $195.2 million in total, mainly to the United States (up $55.3 million), Kazakhstan (up $25.8 million), and China (up $23.4 million). Notable declines were registered for piston engines, driven by declines in the automotive sector (down $789.9 million) and office machinery parts (down $279.0 million)—in both cases, smaller exports to the United States accounted for the reductions.

Overall, gains in machinery exports were strongest to Mexico (up $173.3 million), France (up $131.9 million), China (up $109.3 million), and South Korea (up $100.7 million), while exports to the United Kingdom and the United States fell by $115.8 million and $773.4 million, respectively.

Machinery imports advanced by $1.1 billion (1.7 percent) in 2008. The increase was led by China ($583.6 million, mainly in computers and components), Austria ($256.6 million, mainly in piston engines), Germany ($143.6 million), and Mexico ($132.4 million), while notable declines were registered for South Africa (down $165.4 million) and Japan (down $139.3 million). Among products, gas turbines posted the largest increase, at $552.7 million, led by the United States (up $328.9 million) and Poland and the United Kingdom (each up by $56.6 million), followed by self-propelled earth-moving equipment, such as bulldozers, graders, and mechanical excavating machinery, up $267.8 million, and agricultural machinery associated with harvesting, up $256.4 million. For both earth-moving equipment and agricultural harvesting equipment, the increased imports were mainly from the United States and, to a lesser extent, Germany. As with exports, the largest declines were registered for piston engines (down $730.7 million) and office machinery parts (down $469.7 million). The United States and, to a lesser extent, China accounted for declines in imports for both products.

With imports rising more than exports, the trade deficit for mechanical machinery and appliances widened by $486.5 million, to $27.0 billion in 2008.

Electrical and Electronic Machinery and Equipment20

Electrical and electronic machinery and equipment was the fourth-largest category of trade, for both exports and imports, in 2008.

Exports of electrical and electronic products declined by $1.3 billion to $19.1 billion, most notably for the United States (down $605.4 million), the United Kingdom (down $265.9 million), Japan (down $139.6 million), and Australia (down $111.3 million). In contrast, exports to Mexico increased by $240.1 million. The declines in this HS category were mainly in transmission apparatus for fax machines, radio, television, cell phones and the like, which fell $553.3 million, and telephone and related equipment, which fell $1.1 billion. For the transmission apparatus category, about two thirds of the decline was accounted for by the United States (down $355.6 million); for telephone equipment, losses were widespread, led by the United States, the United Kingdom, and Japan. Exports of integrated circuits gained ground last year, advancing $509.0 million, on strong gains to Canada's NAFTA partners.

Imports of electrical and electronic products reached $42.4 billion in 2008, up $1.8 billion over 2007 levels. Imports from China led the advances (up $799.4 million), followed by Denmark (up $541.9 million), and South Korea (up $351.7 million), while imports from the United States fell $227.2 million. Five products posted gains of a quarter of a billion dollars or more, led by telephone and related equipment, up $661.0 million (principally from China and South Korea), and electric generating sets (especially wind-powered), up $558.9 million (mostly from Denmark). This was followed by television receivers (up $366.9 million, principally from Mexico), unrecorded DVDs (up $352.7 million, mostly from the United States), and electrical transformers, static converters and inductors (up $256.0 million, with widespread gains led by Sweden). Partially offsetting the gains were losses in parts for electronic motors and generators at $245.8 million, and miscellaneous parts for radios, televisions, and radar equipment, at $187.7 million.

With falling exports and rising imports, the trade deficit in electrical and electronic machinery and equipment expanded by $3.1 billion to $23.3 billion in 2008.

Technical and Scientific Equipment21

Exports of technical and scientific equipment reached $5.9 billion in 2008, up $0.5 billion over 2007, led by a $299.4 million gain to the United States. At the same time, imports were up $0.6 billion, to $11.6 billion, led by advances from Germany (up $155.2 million) and China (up $143.7 million). Miscellaneous optical devices, appliances and instruments led the gains in exports, up $264.6 million (mostly to the United States), followed by miscellaneous measuring or checking instruments, appliances and machines, which advanced by $100.0 million on gains led by the United States, Japan, and China. The increase in overall imports in this HS category was primarily due to increased imports of medical/surgical instruments and appliances (up $189.0 million—mostly from the United States and Germany), orthopaedic and other appliances that are worn, carried, or implanted in the body (up $112.2 million—led by the United States), and medical/surgical apparatus based on the use of radiation (up $92.1 million—led by Germany). Miscellaneous automatic regulating or controlling apparatus posted a sizeable decline in imports of $131.9 million; imports of these products from the United States alone fell $125.9 million.

As imports grew more than exports, the trade deficit in technical and scientific equipment widened by $62.8 million, to $5.7 billion.

Agricultural and Agri-food Products22

Boosted by strong price increases over 2008, the value of agricultural and agri-food exports increased by $7.4 billion (21.2 percent) to $42.6 billion. Gains were led by advances in wheat, barley, canola, dried legumes, and pork.

Wheat exports were $2.4 billion higher in 2008, in part due to strong prices and a good harvest in Canada, as well as tightened supplies elsewhere. Gains were led by increased exports to the United States, Algeria, and Japan, while new markets were found in Iran and Pakistan. Partially offsetting the gains were sizeable declines in exports to India and Iraq.

Exports of canola seed shot up $1.6 billion (71 percent) to $3.9 billion in 2008 on gains to Japan, China, Mexico, the United States, and the United Arab Emirates, while exports to Pakistan fell. Exports of canola oil to the United States also posted a notable gain, rising by $723.7 million.

Exports of barley rose by just over $0.25 billion in 2008, with the United States, Saudi Arabia, and Japan accounting for 95 percent of the increase.

Lentils and peas were responsible for most of the increase in exports of dried leguminous vegetables, as the former accounted for roughly two thirds and the latter one quarter of the overall $555.1 million increase. Exports to Turkey and India accounted for over half the gains.

Increases in exports to Russia and several Asian countries helped lift Canadian exports of pork by $262.6 million. Just over half the increase was to Russia and a further $91.9 million to Japan. Exports to several other Asian markets, in particular to Hong Kong, Taiwan, the Philippines, and Vietnam all increased by more than 200 percent to account for the bulk of the remainder of the gains.

Imports of agricultural and agri-food products rose $3.2 billion to $29.2 billion in 2008. Only eleven products experienced an increase in imports greater than $100 million. The largest of these were for sweetened or flavoured water, up $179.5 million, bread, pastry, cakes, biscuits and other bakers' wares, up $176.9 million, and corn, up $162.0 million.

Minerals and Metals23

Exports of minerals and metals increased by $4.3 billion to $70.1 billion in 2008. Gains were led by gold (up $2.3 billion), sulfur (up $1.5 billion), iron ore (up $1.1 billion), diamonds (up $781.1 million), flat hot-rolled products of iron and steel (up $718.0 million) and coins (up $666.9 million). Losses were widespread throughout nickel and aluminum products as exports of these products fell $3.5 billion and $0.5 billion, respectively.

The United Kingdom and the United States accounted for much of the increase in exports of precious stones and metals. For the United Kingdom, exports of gold were up $1.5 billion while exports of diamonds were up by $714.4 million. For the United States, gold exports were up $488.4 million over 2007 levels while diamond exports were up by $45.5 million.

Five destinations—China, the United States, Brazil, South Africa, and Australia—accounted for the bulk of the increase in sulfur exports.

Germany and the United States accounted for about 70 percent of the total increase in iron ore exports, while sizeable export increases were also reported for France, China, Trinidad and Tobago, Belgium, Japan, Saudi Arabia, and Australia.

On the import side, imports of metals and minerals increased $5.3 billion in 2008, to $50.4 billion. Precious stones and metals, iron and steel products and iron and steel accounted for the bulk of the gains as they advanced $2.3 billion, $1.6 billion, and $1.1 billion, respectively.

With respect to precious stones and metals, imports of precious metals waste and scrap increased by $1.0 billion followed by gold (up $837.0 million), silver (up $158.6 million) and diamonds (up $94.2 million). The bulk of imports of precious metals waste and scrap came from the United States, the United Kingdom, and Chile, while the United States and Peru, as well as Mexico, the United Arab Emirates, Surinam, and Switzerland were among the countries posting notable gains in our imports of gold.

The United States, China, and Germany accounted for about three quarters of the increases in Canada's imports of iron and steel products. A rise in imports of a variety of tubes and pipes accounted for the increases from these three countries.

The bulk of the increase in imports of iron and steel was accounted for by the United States as imports of these products increased by nearly $1.0 billion. Flat hot-rolled products of iron and steel and ferrous waste and scrap comprised about 60 percent of the increase in total imports of iron and steel from the United States.

Chemicals, Plastics and Rubber24

Exports of chemicals increased by $2.6 billion to $48.2 billion in 2008. Performance in this category was mixed, with fertilizer exports increasing by nearly $3.7 billion and organic and inorganic chemicals exports falling by nearly $1.1 billion over 2007 levels. Exports of rubber and plastics also declined in 2008.

The bulk of the increase in fertilizer exports overall was due to a $3.3-billion increase in potash exports, with nitrogen-based fertilizers accounting for much of the remainder. The United States accounted for $1.7 billion of the increase in potash exports while $0.5 billion of the increase went to India. Sizeable increases were also reported for Indonesia, Brazil, China, and Malaysia.

The decline in exports of inorganic chemicals was accounted for by radioactive chemical elements and isotopes, which fell by $2.0 billion in 2008. This was a result of reduced exports of natural uranium and its compounds. The United Kingdom, the Netherlands, France, and Germany accounted for most of the decline in exports of natural uranium.

Imports of chemicals increased by $2.5 billion to $56.1 billion in 2008. Gains were led by imports of plastics (up $591.2 million), inorganic chemicals (up $540.7 million), and fertilizers (up $393.3 million). At the more detailed level, imports of blood and blood preparations were up by $368.7 million, with gains split between the United States and several western European countries.

Acyclic hydrocarbon imports also advanced strongly in 2008, up $336.8 million, with the bulk of the gains coming from the United States. Acyclic hydrocarbons include ethylene, propylene, and butylene.

Imports of rubber pneumatic tires also rose considerably in 2008, up $245.4 million to $2.7 billion. Gains were widespread, with some 20 economies registering an increase of at least $1 million each. Demand for winter tires was strong in 2008 given that their use was made mandatory in Quebec for motor vehicles, effective December 15, 2008.

Wood, Pulp and Paper25

Exports of wood, pulp and paper fell $3.7 billion to $31.7 billion in 2008, with wood accounting for most of the decline, although exports of books and newsprint, pulp, and cork also fell in 2008. In contrast, exports of straw and paper and paperboard products increased for the year.

Exports of wood products fell $3.7 billion in 2008, the fourth consecutive year of losses of $1 billion or more. Just over 95 percent of the decline was accounted for by fewer exports to the United States. The declines were widespread, but were felt most heavily in lumber (down $2.1 billion), particle board (down $583.5 million), windows, doors, shingles, shakes, and panels (down $437.5 million), plywood (down $117.5 million), wood in the rough (down $104.4 million), fibreboard (down $87.3 million), and veneered plywood (down $84.7 million).

Paper and paperboard exports were up $264.0 million to $13.2 billion in 2008. Exports of newsprint increased by $264.1 million, largely on advances to Brazil and India. Exports of uncoated paper and paperboard also increased, while exports of coated paper and paperboard fell.

Imports of wood, pulp, and paper edged up $16.6 million as advances in books and newsprint (up $89.7 million), paper and paperboard (up $65.2 million), and pulp (up $43.2 million) were partially offset by a $171.8 million decline in imports of wood.

Textiles, Clothing and Leather26

Canadian exports of textiles, clothing and leather (TCL) have been falling over the past six years. In 2008, they dropped a further $667.4 million, from $5.4 billion in 2007 to $4.7 billion. With the exception of small increases in furskins and footwear, exports fell for all other major categories in this HS group. Exports to the United States fell $658.8 million, which accounted for the bulk of the losses. Two thirds of the decline came from reduced exports of knitted and woven apparel and manmade filaments.

Exports of knitted apparel fell $181.4 million in 2008, and the declines were widespread. Exports of woven apparel also fell $142.7 million, and the losses were also widespread. As with TCL products generally, reduced exports to the United States accounted for the declines.

Other notable changes in 2008 for Canadian exports of TCL products were registered for synthetic filament yarns and plastic coated textile fabrics, which fell $90.3 million and $54.7 million, respectively, on declines to the United States. Exports of miscellaneous textile products for technical uses increased by $37.8 million, on gains to the United States, while exports of raw furskins advanced $62.5 million, led by increases to Hong Kong.

Imports of TCL products rose by $494.7 million, led by widespread advances in knitted and woven apparel and in certain leather articles. For knitted apparel, imports increased $370.5 million in 2008. The gains in woven apparel were both small and widespread, as imports of these products increased by $147.8 million.

Imports of articles of leather increased $126.2 million, led by a $108.8 million increase in imports of leather luggage, golf bags, tool bags, hand bags, and other similar articles. The bulk of the increase for these products came from increased imports from China, which were up $93.7 million.

Consumer and Miscellaneous Manufactured Products27

In 2008, exports of consumer and miscellaneous manufactured products fell by $1.0 billion, as exports of furniture and bedding fell by $889.9 million and exports of artwork and antiques fell by $220.6 million.

Furniture and seats accounted for most of the decline in furniture and bedding. Exports of furniture, other than furniture used for medical, surgical or dental use, declined by $494.1 million in 2008 on reduced exports to the United States. Exports of seats, other than barber and dental seats, also fell in 2008, down $381.5 million, again because of fewer exports to the United States.

Exports of art and antiques declined by $220.6 million, as exports of paintings, drawings, and pastels dropped by $191.5 million. The Netherlands and Switzerland accounted for most of the losses.

Imports of consumer and miscellaneous manufactured products increased by $869.3 million in 2008. Toys and sporting goods and furniture and bedding were responsible for the bulk of the increase.

Imports of toys and sporting goods rose by $313.0 million in 2008, led by articles for video, table or parlour games which increased by $219.3 million and sporting goods equipment which rose by $122.5 million.

All but one of the components of furniture and bedding registered increased imports in 2008; the exception was seats, which fell $222.7 million. Fewer imports of parts for seats were responsible for the decline in seats imports. Furniture for nonprofessional use led the gains, up $236.1 million, while imports of prefabricated buildings advanced $151.9 million.

Other Transportation Equipment28

Exports of other transportation equipment fell by $804.3 million to $11.6 billion in 2008. The bulk of the decline was in aircraft and related equipment, whose exports fell by $768.5 million. Exports of ships and boats also decreased by $72.5 million, and declines were widespread. Exports of railway equipment increased by $36.7 million.

The decline in exports of aircraft and related equipment was mainly centred on aircraft (which fell $1.1 billion) as exports of launch gear and ground flight training equipment and aircraft parts rose by $233.5 million and $120.1 million, respectively. Airplanes largely accounted for the decline in aircraft exports as exports of helicopters and spacecraft registered gains. Although falling exports to the United States (down $1.0 billion) contributed to the overall decline in aircraft exports, notable changes were reported in eight other countries. Four of these countries posted an aggregate gain of $690.7 million: the United Kingdom (up $221.3 million), Austria (up $191.7 million), Uruguay (up $173.9 million), and Australia (up $103.9 million). The second set of four countries posted an aggregate decline in exports of $675.7 million: France (down $101.2 million), Spain (down $115.8 million), Mexico (down $134.3 million), and Italy (down $324.4 million). These latter four countries effectively cancelled out the gains of the first set of four.

On the import side, gains in railway equipment and ships and boats were partially offset by a decline in aircraft and related equipment, as overall imports of other transportation equipment increased by $119.0 million to nearly $9.9 billion in 2008.

Increases in imports of railway equipment were widespread as all components of this group registered increases over 2007 levels. Overall railway equipment imports increased by $251.5 million in 2008, led by a $139.9 million increase in imports of locomotives.

For ships and boats, gains in passenger transportation vessels and fishing vessels were partially offset by declines in yachts and other pleasure craft and in light vessels, floating docks and platforms, yielding an overall increase of $41.8 million in this category.

Imports of aircraft and related equipment fell by $174.4 million as a $607.9 million decline in aircraft imports was partially offset by a $443.6 million increase in parts imports. A $630.0 million decline in imports from Brazil accounted for the decline in aircraft imports.

Trade by the Provinces and Territories

Ontario was the only Canadian province or territory to register a decline in merchandise exports in 2008, as exports fell $13.8 billion (6.8 percent) to $188.7 billion (Table 5-2). The declines were centred on nickel and auto-related products. Ontario's exports of unwrought nickel and nickel mattes fell by $2.2 billion, exports of passenger cars, motor trucks, and automotive parts fell by $15.1 billion, and exports of piston engines and parts fell by $930.8 million.

Table 5-2
Merchandise Trade by Province and Territory, 2008
 ExportsExport GrowthExport ShareImportsImport GrowthImport Share
Ontario$188,691,400,000-6.8%39.0%$241,606,500,0000.6%55.8%
Alberta$110,781,700,00033.9%22.9%$21,938,700,00018.5%5.1%
Quebec$71,008,500,0001.6%14.7%$78,558,500,00010.5%18.1%
British Columbia$33,753,700,0004.2%7.0%$42,988,000,00011.1%9.9%
Saskatchewan$30,635,600,00055.2%6.3%$9,022,700,00029.6%2.1%
Newfoundland and Labrador$14,646,500,00026.3%3.0%$4,255,900,00032.5%1.0%
Manitoba$12,883,500,0003.5%2.7%$15,291,500,00016.3%3.5%
New Brunswick$12,820,600,00014.5%2.6%$10,889,500,00045.8%2.5%
Nova Scotia$5,802,000,0006.4%1.2%$8,432,900,00013.0%1.9%
Northwest Territories$2,312,200,00022.9%0.5%$14,600,000264.3%0.0%
Prince Edward Island$878,200,0009.4%0.2%$118,800,000118.2%0.0%
Yukon Territory$132,000,000484.9%0.0%$92,500,000-3.8%0.0%
Nunavut$23,500,000323.2%0.0%$31,900,00080.9%0.0%
 $484,369,300,0007.5% 100.0%$433,241,900,0006.5%100.0%

On the other hand, three provinces and two territories reported increases in merchandise exports by more than 25 percent in 2008. The Yukon reported the strongest increase as exports in 2008 were 5.8 times as great as in 2007. A full year of production from a new copper-gold mine contributed to the jump in exports, lifting Yukon's exports by $109.5 million to $132.0 million in 2008. Exports from Nunavut increased more than three-fold, from $5.6 million in 2007 to $23.5 million in 2008. Iron ore exports accounted for the bulk of the increase, rising from zero in 2007 to $16.6 million in 2008.

Saskatchewan reported a banner year with respect to its total merchandise exports, which were up by $10.9 billion (55.2 percent) to $30.6 billion. The province's strong export performance benefited not only from high energy prices and strong price increases for agricultural commodities (described above) but also from strong demand for potash. Exports of energy products increased by $4.7 billion, while exports of potash more than doubled, increasing by $3.1 billion in 2008. Exports of agricultural products also made strong gains: the province's wheat exports rose by $1.4 billion; canola seed exports were up by $604.8 million; dried leguminous vegetables exports were up by $531.5 million; canola oil exports were up by $301.5 million; barley exports were up by $139.5 million; flaxseed exports were up by $139.4 million; and exports of oats were up by $76.7 million.

Exports from Alberta were up $28.0 billion (33.9 percent) to $110.8 billion in 2008 largely on the strength of energy products, which advanced $24.0 billion. Crude oil (up $19.6 billion) accounted for much of the increase, while petroleum gases (principally natural gas) accounted for $4.2 billion of the increase and coal for $246.0 million. Sulfur exports posted a $1.4 billion increase and wheat and canola exports also benefited from strong prices and a good harvest, rising by $713.2 million and $666.6 million, respectively.

Exports from Newfoundland and Labrador advanced $3.1 billion to $14.6 billion in 2008. Energy and iron ore were behind the gains as exports of crude oil were up by $1.5 billion, exports of non-crude oil were up by $1.1 billion, and exports of iron ore were up by $613.9 million.

Ontario accounted for 39.0 percent of all Canadian merchandise exports, followed by Alberta at 22.9 percent, Quebec at 14.7 percent, and British Columbia at 7.0 percent (Figure 5-1). The 6.0 percent decline in Ontario's share was largely offset by Alberta and Saskatchewan, whose shares increased by 4.5 percent and 1.9 percent, respectively.

Figure 5-1
Share of Merchandise Exports by Province, 2008

Share of Merchandise Exports by Province - Text Alternative

Imports increased to all regions in Canada, with the exception of the Yukon, where they slipped 3.8 percent. Double-digit advances were registered for the remainder of the provinces and territories, except for Ontario, where imports increased by $1.3 billion (0.6 percent) to $241.6 billion. The largest increases, by value, were recorded for Quebec (up $7.5 billion), British Columbia (up $4.3 billion), and Alberta and New Brunswick (up $3.4 billion each). Energy products accounted for much of these increases, due partly to the high energy prices over the year.

Ontario accounted for over half of Canadian merchandise imports (55.8 percent), followed by Quebec (18.1 percent), and British Columbia and Alberta, at 9.9 percent and 5.1 percent, respectively (Figure 5-2).

Figure 5-2
Share of Merchandise Imports by Province, 2008

Share of Merchandise Imports by Province - Text Alternative


12. Canadian trade statistics are provided in two basic forms: Customs basis and Balance of Payments basis. In Chapter Four, the analysis of trade with "major partners" used trade data prepared on the Balance of Payments basis. Trade statistics at greater detailed commodity and individual country levels are provided on a Customs basis only. Since Chapter Five examines trade developments in detail, data is therefore provided on a Customs basis.

13. Recall from Chapter 1, consumer spending decelerated and imports of goods contracted in the U.S.

14. Canada's merchandise trade is usually reported by what is known as the Harmonized System (HS) of Trade Classification, an internationally defined system for codifying traded products. Within the HS system, trade is broken down into some 97 chapters, also known as the HS 2-digit level. Each chapter is then broken down into sub-categories at the 4-digit level and each 4-digit sub-category is further broken down into individual products at the 6-digit level. This section examines Canada's top traded products at the 4-digit HS level.

15. 28 commodities are examined, including the top 19 exports and top 19 imports, with 10 products common to both the top exports and top imports.

16. HS Chapter 27.

17. HS Chapter 87.

18. Specifically, trucks under HS 870421 and HS 870422.

19. HS Chapter 84.

20. HS Chapter 85.

21. HS Chapter 90.

22. HS Chapters 1 through 24.

23. HS Chapters 25, 26, and 68 through 83, except for Chapter 77. Chapter 77 is being held in reserve and presently does not exist in the HS system.

24. HS Chapters 28 through 40.

25. HS Chapters 44 through 49.

26. HS Chapters 41 through 43, and 50 through 65.

27. HS Chapters 66, 67, and 91 through 99.

28. HS Chapters 86, 88, and 89.