The world’s economies entered 2009 in the acute phase of a deep and synchronized recession. Global merchandise trade had retracted mildly in the third quarter of 2008 before plummeting 21.0 percent in the fourth quarter and falling by nearly as much again in the first quarter of 2009. It began recouping lost ground beginning with the second quarter of the year. By contrast, Canadian merchandise trade started its downturn, and subsequent pull out, later than the world’s economies— by about one fiscal quarter.
Goods and services exports from Canada fell 22.1 percent, from $560.3 billion in 2008 to $436.3 billion in 2009. Goods exports tumbled 24.5 percent to $369.6 billion, as prices and volumes both declined. Export volumes were down for the second consecutive year, while prices reversed, wiping out the notable increases registered in 2008. Losses were led by energy products, which accounted for about 40 percent of the overall export decline. As discussed in the previous chapter, the average value of the Canadian dollar was lower for the year, although it strengthened as the year progressed, making Canadian exports relatively more expensive. This coincided with the period of recovery in global trade, and likely served to moderate the growth in Canada’s exports over the second half of the year. Services exports posted a smaller loss, down 5.4 percent to $66.7 billion.
Canada imported $463.2 billion worth of goods and services last year, down 13.6 percent from the $536.0 billion imported in 2008. As was the case for exports, goods and services imports each posted declines. Goods importswere down 15.6percent to $374.0 billion, while services imports were down 4.0 percent to $89.2 billion. Declines in both goods and services imports were widespread, with only agricultural and fishing products registering a gain among themajor categories. Aswith exports, the declines in goods imports were led by energy. Goods imports resumed their growth beginning in the third quarter of the year, while services imports started to pick up in the final quarter of 2009.
The current account balance fell by $49.4 billion, as it moved from a surplus of $8.1 billion in 2008 to a deficit of $41.3 billion in 2009. The decline was entirely accounted for by a $51.3 billion decline in the goods and services trade balance.
The following sections examine the performance of Canada’s goods and services trade, starting with an overview of the developments in goods and services trade with major partners,1 followed by examinations of goods trade and of services trade, and ending with a brief explanation of the current account balance.
In line with the global recession, Canadian exports of goods and services to the world plunged 22.1 percent ($124.1 billion) in 2009. At the same time, Canada’s appetite for imported goods and services fell 13.6 percent ($72.8 billion) (Table 4-1). For Canada, this meant that a 15-year-long unbroken period of surpluses in goods and services trade was reversed, and the country registered a $26.9 billion trade deficit, its first such deficit since 1993. This was a $51.3 billion decline from the $24.4 billion trade surplus recorded in 2008. Virtually all the decline came on the goods side, as the balance of trade for goods fell by $51.2 billion.
Goods and Services
Goods and Services
|G & S Balance|
|Exports of Goods||Imports of Goods||Goods Balance|
|Exports of Services||Imports of Services||Services Balance|
Canada’s exports of goods and services peaked in the third quarter of 2008 and declined over the next three quarters, before rallying in the second half of 2009. By the second quarter of 2009, Canada’s total exports were 29.0 percent below their previous peak. By year’s end, total exports were still 23.5 percent below peak. Again, it was the goods side that accounted for much of the loss, as goods exports remained 26.0 percent below their highmark set in the third quarter of 2008. In contrast, services exports continued to grow until the fourth quarter of 2008 before falling over the next three quarters. As of the fourth quarter of 2009, they were 6.3 percent below the peak set the previous year.
Within this global recessionary setting, Canadian exports and imports of goods and services to and from all major markets (the United States, the EU, Japan, and the rest of the world2 [ROW]) fell between 2008 and 2009 (Figures 4-1 and 4-2). Lower trade with the United States was responsible formost of the decline.U.S. imports fromCanada peaked in the second quarter of 2008, but had plunged nearly 43percent (inUS dollar terms) by the first quarter of 2009 before slowly beginning to return to their previous levels. As of the fourth quarter of 2009, they were still nearly 32 percent (in US dollar terms) below their quarterly peak. As Canada’s principal trading partner, the United States has had a dramatic impact on bilateral trade: theUnited States was the destination for 70.1 percent of Canadian exports of goods and services in 2009, yet was responsible for 82.0 percent of the decline in Canada’s exports from2008 to 2009. Similarly, the United States accounted for 61.9 percent of Canada’s imports and 65.2 percent of the decline.Overall, Canadian exports to theUnited States fell by $101.8 billion in 2009, a 25.0 percent reduction from 2008. At the same time, imports from the United States declined by a more modest 14.2 percent ($47.5 billion). Bilateral trade in goods registered much larger declines than did bilateral trade in services. Notwithstanding the sizeable difference between the drop in exports and that of imports, Canadamaintained a trade surplus with the United States of $19.1 billion. The United States is the only major trading partner with which Canada maintains a trade surplus.
Exports of goods and services to the EU fell 14.7 percent in 2009, as exports of goods were down by 18.5 percent while those for services were down only 2.7 percent (Figure 4-3). At the same time, imports from the EU declined 14.2 percent with goods imports down 17.0 percent and services imports down 5.9 percent. Because Canada’s imports fromthe EU are larger than its exports to that region, there was a $1.2 billion narrowing in the trade deficit between Canada and the European Union to $9.0 billion. The gains were equally split between goods and services, as trade deficits for each fell $0.6 billion.
After narrowing in 2008, Canada’s trade deficit with Japan widened by $0.6 billion in 2009, to $1.2 billion. The losses came on the goods side, as Canada improved its services trade deficit by $16million last year. Canada’s goods exports to Japan fell 25.3 percent ($3.0 billion) while imports were down by 20.2 percent ($2.4 billion). As a result, the small trade surplus ($0.2 billion) in goods registered in 2008 was eliminated, and replaced by a $0.4 billion deficit in 2009. The services trade deficit with Japan held steady at $0.8 billion.
Canada’s trade with the rest of the world was the least affected by the global recession of all the major trading partner regions. Exports of goods and services fell by a comparatively modest 13.0 percent ($11.4 billion) while imports declined by only 11.0 percent ($13.8 billion). With the decline in imports somewhat greater than that of exports, the trade balance with this region improved by $2.5 billion. The gains came from goods trade as the deficit narrowed by $3.2 billion. A combination of fewer services exports and more services imports caused the services trade deficit to widen by $0.8 billion to $3.7 billion. The increase in services imports from this region was the only area of growth in Canada’s trade with the major trading partners in 2009.
Canadian exports have significantly diversified beyond the U.S. market since 2002, and this trend continued in 2009. In 2002, less than 20 percent of Canadian goods and services exports were destined for non-U.S. markets; by 2009 this share had increased to nearly 30 percent. For merchandise trade only, the non-U.S. share has risen from under 13 percent to 25 percent over the same period. Until 2008, this rise had been due to faster growth of Canadian exports to non-U.S. markets, but in 2009 it was because exports to non-U.S. markets declined less rapidly than did exports to the U.S. Looking forward, this trend may slow or possibly reverse - in the short term. Canadian exports to the U.S. declined more rapidly than Canadian exports to non-U.S. markets in 2009 due largely to falling energy prices and the poor performance of the auto sector, and thus may also rebound more quickly as conditions improve. But longer-term, Canadian exports are expected to continue diversifying toward fast-growing emerging markets.
As mentioned above, virtually all the decline in overall trade occurred in goods trade, and the bulk of the decline was disproportionately incurred by trade with the United States. Just under $99 billion of the roughly $120 billion decline in goods exports came from reduced flows of exports to our southern neighbour. At the same time, some $45 billion fewer imports (out of a total decline of $69 billion for all imports) flowed into Canada from the U.S.
The rest of the world region was next in importance in terms of the decline of goods trade for Canada in 2009. This region represented roughly half the remaining declines, apart from those accounted for by the United States. Canada’s exports of goods to the ROW fell 16.1 percent in 2009, to $57.5 billion, $11.0 billion lower than the previous year. However, imports of goods from the region fell by slightly more (down 13.7 percent) to $14.3 billion. This difference generated the improvement in the overall trade balance with the region.
Canadian exports of goods to the EU in 2009 retreated to a level approximately comparable with the 2006 level of exports: they fell 18.5 percent ($7.3 billion) to $32.3 billion. Imports of goods fromthe EU fell by slightly more, down 17.0 percent ($7.9 billion) to $38.8 billion.
Finally, goods exports to Japan fell the least in dollar terms (down $3.0 billion) among themajor trading partners. However, this was a 25.3 percent decline over 2008 levels, the second-highest percentage decline in goods exports (after the United States, where Canada’s exports fell 26.7 percent). Goods imports from Japan were down 20.2 percent ($2.4 billion) in 2009 to $9.3 billion. As mentioned previously, Canada moved from a trade surplus with Japan in goods in 2008 to a deficit in 2009.
Sectoral Performance of Goods Trade3
The effects of the global economic downturn were found throughout Canada’s goods trade. All major export sectors experienced declines, most notably energy products and industrial goods and materials, which cumulatively accounted for about two thirds of the total decline. Likewise, all imports sectors also declined, with the exception of agricultural and fishing products, which posted a slight 2.9 percent increase.
The overall 24.5 percent drop in Canadian goods exports in 2009 was a result of declining volumes and values. Export volumes were down 16.6 percent over 2008 levels, following a 7.7 percent decline the previous year. At the same time, export prices fell by 9.5 percent, reversing two thirds of the 14.6 percent gain posted in 2008 (Figure 4-4). Of some 62 major commodities in the balance of payments export statistics, only four commodity groups—miscellaneous cereal preparations, preciousmetals and alloys, asbestos, and aircraft, engines and parts—posted gains over 2008 export values. The aggregate or total of these gains was only $561million, with preciousmetals and alloys accounting for about three quarters of the gain.
Energy products led the overall downward movement in Canada’s goods exports in 2009, accounting for nearly 40 percent of the decline. A 35.4 percent drop in prices was the main driver behind the declines in energy trade, although volumes experienced slight declines as well. Industrial goods and materials were responsible for about a quarter of the decline, with automotive products (down 14.4 percent) and machinery and equipment (down 10.4 percent) accounting for the bulk of the remaining losses.
Exports of energy products fell 38.0 percent ($45.7 billion) to $80.1 billion in 2009. With this decline, energy products moved from being the top export sector in 2008 to the second-largest export sector in 2009, behind machinery and equipment. Goods such as crude petroleum and natural gas, which largely remain in North America, were strongly affected by the economic downturn in the United States, while coal was affected by the industrial slowdown in Asia.
After rising over much of this decade, prices for crude oil plunged by over 30 percent in 2009. A small increase (1.9 percent) in the volume of exports partly offset the price decline. The decline in oil exports accounted for a little over 40 percent of the overall decline in the value of energy exports.
The value of exports of natural gas was reduced by more than half, falling from $33.0 billion to $16.0 billion. The decline came principally from a 48.1 percent drop in prices, reflecting lower industrial demand and high inventory levels in both Canada and the United States. Export volumes were also down over the year, falling 7.0 percent. The decline in natural gas exports accounted for about 37.4 percent of the overall decline in energy exports.
Lower demand from Asia was behind the 25.9 percent decline in coal exports, which had benefited froma supply shortage in the Asia-Pacific region in 2008. Volumes were down by almost 20 percent and prices by 8 percent. Overall, exports of coal fell $1.5 billion to $4.3 billion in 2009.
A slight increase in the volume of electricity exports (up 7.6 percent) was offset by a 41.5 percent decline in prices, as overall electricity exports plummeted nearly 40 percent in 2009. The net result was a near $1.4 billion decline in electricity exports, to $2.4 billion last year.
Exports of industrial goods and materials fell 29.0 percent ($32.3 billion) to $79.2 billion in 2009. It was the first annual decline following five years of growth. Metals and alloys led the declines, followed by chemicals, plastics and fertilizers. Together, these two groups accounted for nearly 70 percent of the decline within industrial goods and materials. However, losses were widespread, with only gold (preciousmetals and alloys) registering an increase.Miscellaneous industrial goods and materials and metal ores accounted for the remainder of the declines in industrial goods and materials, with losses fairly evenly split between these two groups. Overall, this sector was responsible for roughly 30 percent of the total decline in goods exports last year. Both prices (down 11.4 percent) and volumes (down 19.9 percent) contributed to the reduction. With the declines, industrial goods and materials slipped from the second-largest to the third-largest export category in 2009.
Exports of automotive products fell again in 2009, continuing a trend that began in 2005. Last year, automotive products were down 28.3 percent ($17.3 billion) to $43.8 billion. The volume of exports was slashed by nearly one third asmanufacturers in Canada reduced production in the face of falling demand in the United States. The volume of automotive products exported was just under half that exported in 2005.
All three components of automotive products—passenger autos, trucks, and parts—experienced reductions in their exports in 2009, declining by 22.9 percent ($7.8 billion), 48.3 percent ($3.5 billion), and 30.5 percent ($6.0 billion), respectively. Despite the U.S. cash-for-clunkers program which started in July 2009, companies were left with unmoveable inventories as consumers and businesses alike postponed purchases of durables such as trucks and automobiles. The volume of truck exports plunged by over 50 percent while that for automobiles was down by 28.8 percent. With production of automotive products reduced on both sides of the border, the volume of exports of motor vehicle parts also fell last year, down by nearly one third.
Likewise, the combined effects of reduced business investment in equipment and less discretionary spending on consumer electronics in the United States and abroad contributed to a 13.5 percent reduction in Canada’s exports of machinery and equipment (M&E). M&E exports fell to $80.5 billion last year, the lowest level since 1997. The decrease was entirely driven by a 17.2 percent decline in volumes, even as prices increased 4.4 percent. Volumes were down for allM&E commodities, with the exception of aircraft, engines, and parts, which registered a small increase over 2008 levels.
The other machinery and equipment group was responsible for over 60 percent of the decline in M&E exports. Exports in this group, which includes televisions, office machinery and equipment, and various other miscellaneous tools and pieces of equipment, were down $7.6 billion from 2008. In particular, exports of other equipment and tools, which includes such items as electronic processors and controllers, fell 18.6 percent ($4.3 billion). Industrial and agricultural machinery accounted for the bulk of the remainder of the decline in M&E exports, falling by $4.2 billion, with industrial machinery accounting for most of the decrease (down $4.1 billion).
Notwithstanding these declines, M&E became the leading export category in 2009, overtaking industrial goods and materials and displacing energy for the top spot.
With the exception of miscellaneous cereal preparations, exports for all major agricultural commodities fell in 2009, as both prices and volumes fell across most commodities. Overall, exports of agricultural and fishing products decreased by $3.6 billion, led by declines in wheat (down $1.0 billion), live animals (down $0.7 billion), and canola (down $0.4 billion). Both wheat and canola sustained substantial price declines (down 28.4 percent and 23.7 percent, respectively), as export volumes were up between 17 and 18 percent. Within the live animals group, beef exports continued to be hampered by trade restrictions, while lower pork exports reflected the negative image associated with the swine flu. Agricultural and fishing products remained the fifth-largest export category, behind automotive products in fourth place.
Forestry products exports have been trending downward since 2004. In 2009, export performance continued the trend, falling a further 24.0 percent ($6.2 billion) over 2008 levels to reach $19.5 billion. Lumber and sawmill products were responsible for about 40 percent of the decline. The low number of housing starts in the United States softened demand for spruce, pine, and fir; volumes were down 18.9 percent and prices were down 9.0 percent over 2008. The remaining losses were fairly evenly split between wood pulp and newsprint.
The smallest export category is other consumer goods, which includes such commodities as footwear and apparel, medical supplies, toys, and household goods. Exports of these consumer goods fell 1.3 percent to $17.9 billion, as volumes fell 3.2 percent and prices moved up 2.0 percent.
Imports also declined in all sectors except agricultural and fishing products, which posted a slight 2.9 percent increase. Import volumes were down 16.0 percent while prices increased slightly by 0.7 percent, resulting in an overall 15.5 percent decline in the value of total imports (Figure 4-5).
On the import side, the losses were fairly evenly divided among energy (27.9 percent), automobiles (24.2 percent), industrial goods (24.0 percent), andmachinery and equipment (21.4 percent). Of the 61 major commodities in the balance of payments import statistics, only 15 commodities posted gains, totalling $4.0 billion with precious metals and miscellaneous end products accounting for over one third of these advances.
The decline in imports of energy products nearly matched that of exports, falling 36.0 percent ($19.1 billion) to $34.0 billion. It was the first decline following six years of increases. Lower imports of crude petroleum (down $13.2 billion) accounted for the bulk of the decline. At the same time, imports of coal and of petroleum and coal products were down by $1.5 billion and $4.4 billion, respectively. As with exports, falling prices (down 31.8 percent) were mostly responsible for the declines, although volumes also declined (down 6.2 percent).
The poor economic environment was also reflected in the lower automotive imports statistics. The value of auto imports was down 23.1 percent ($16.6 billion) to $55.3 billion in 2009 because of a reduction in volumes. With a weak commercial automotive market, imports fell alongside domestic production. Imports of passenger cars were down 27.8 percent, while truck imports were down 15.3 percent. As with exports, lower production levels translated into lower imports of automotive parts, which fell 23.0 percent from2008. It was the second consecutive year that automotive imports into Canada have declined.
The economic downturn also exerted an impact on imports of industrial goods and materials. Lower production levels reduced the demand for importedmanufacturing inputs. Overall, imports of industrial goods andmaterials were down 18.0 percent ($16.5 billion) to $75.1 billion in 2009. Fewer imports of metals and metal ores accounted for almost half the decline, as both prices and volumes were hit hard. Within this group, the only commodity to register an increase was precious metals including alloys. As previously mentioned, global demand for gold was quite strong last year, and Canada was no exception. Imports of precious metals/alloys climbed 27.2 percent last year as volumes increased (up 7.6 percent) in the face of a strong price increase (up 18.2 percent).
The other half of the decline in industrial goods and materials was fairly evenly split between chemicals and plastics on the one hand and miscellaneous industrial goods andmaterials on the other. Imports of chemicals and plastics fell for the first time since 2003, down 14.0 percent to $27.1 billion. Volumes fell by 10.3 percent while prices fell less (4.1 percent). Import volumes of miscellaneous industrial goods and materials were down nearly 20 percent while prices were up by over 5 percent, which translated into the overall value of these imports falling 15.4 percent to $23.2 billion.
Losses in M&E imports were widespread, as all commodities that comprise this group registered declines in 2009. The volume of M&E imports declined by 18.5 percent in tandem with a 19.2 percent decline in real business investment inmachinery and equipment. At the same time, prices increased 8.0 percentwhich helpedmitigate the overall decline in the value of M&E imports.Overall, imports of machinery and equipment fell 12.0 per cent to $107.9 billion.
Lower imports of industrial and agricultural M&E (down 43.9 percent) accounted for the largest portion of the loss. The industrial M&E category, in particular miscellaneous industrial M&E and excavating M&E, was largely responsible for this decline. Imports of excavating machinery were constrained by lower production levels in the petroleum sector.
Imports of othermachinery and equipment were down 7.8 percent to $52.0 billion as imports ofmiscellaneous communication and related equipment fell 6.9 percent and other equipment and tools imports fell 8.2 percent. This reversed five years of consecutive growth in this group.
Agriculture and fishing products was the onlymajor commodity group to register an increase in imports in 2009 — the fifth consecutive year of increases — and gains were widespread. Imports in this group rose 2.9 percent ($0.8 billion) to $29.3 billion. A 6.2 percent increase in the volume of imported fruits and vegetables was partly offset by a 1.3 percent decline in prices as the overall value of imports of fruits and vegetables increased by $0.4 billion. By contrast, a 4.9 percent increase in prices led the way for other agricultural and fishing products, while volumes were down 2.6 percent. Overall, imports of other agricultural and fishing products were up by $0.5 billion last year.
Imports of other consumer goods nudged down 0.1 percent as a 10.0 percent increase in prices was insufficient to offset a 9.1 percent decline in volumes. Imports of footwear advanced while those for apparel were down. In the miscellaneous consumer goods category,most of the $1.4 billion gain in miscellaneous end products was offset by reductions in the import values of watches, sporting goods and toys (down $0.4 billion), photographic goods (down $0.4 billion), televisions, radios, phonographs (down $0.3 billion), and printed matter (down $0.2 billion).
Finally, imports of forestry products, the smallest import category, fell 16.9 percent ($0.5 billion) to $2.4 billion. The bulk of the decline (94.0 percent) was due to a reduction in imports of wood fabricated materials.
Services trade also contracted last year, with exports falling faster than imports. In 2009, services exports declined 5.4 percent to $66.7 billion while services imports dropped to $89.2 billion, resulting in a $22.6 billion deficit for the year. This was $0.1 billion more than the deficit in 2008. The increased deficit was due to a $0.7 billion increase in the commercial services deficit, which was partly offset by reductions in the travel and transportation deficits combined with an increased trade surplus for government services.
Regionally, the overall increase in the services trade deficit came from a widening of the deficit with the ROW, as Canada narrowed its deficits with the United States, the EU, and Japan last year. In the case of the EU, the deficit with the U.K. widened by $354 million while that with the rest of the EU narrowed by $942 million, generating an overall reduction in the deficit with this region.
Nevertheless, Canada runs trade deficits for services with all of itsmajor partners (Table 4-2). The largest is with the United States ($15.6 billion), followed by the ROW($3.7 billion). Next largest is that with the EU ($2.5 billion), while that with Japan is the smallest ($0.8 billion).
* ROW = Rest of World
Source: Statistics Canada CANSIM Matrix 376-001
Canadian travel expenditures abroad fell 3.4 percent in 2009. However, somewhat surprisingly, it was not personal travel expenditures that bore the brunt of the decline, as these declined by only 1.6 percent. Rather, it was business travel expenditures that fell substantially (down 14.3 percent). The situation was similar for foreign travel spending in Canada, where foreign personal travel expenditures were down 0.2 percent and foreign business travel expenditures were down by 16.7 percent. The net result was that Canadians reduced their travel expenditures abroad more than foreigners reduced their expenditures in Canada, thereby helping to narrow the travel services trade deficit by $448 million to $12.2 billion.
Individual Canadians are apparently choosingmore exotic locations or those that are further afield. Canadian expenditures abroad were up for Japan and the ROW, while they were down for the United States and the EU. At the same time, expenditures by Americans, Japanese, and Europeans in Canada were down, while those from the ROW were the only ones to register an increase last year.
In line with the fall in goods trade with all major partners, trade in transportation services to all regions fell. Transportation services exports fell by 16.6 percent ($2.1 billion) as exports fell from between 15.2 percent to the United States to 23.9 percent to Japan. Exports of water transportation services were down by almost 21 percent, while those for air transport were down 17.2 percent and those for land transportation were down by 10.5 percent. Imports of transportation services also fell across the board, most notably from the United States (down 15.3 percent). Overall, imports of transportation services were down 10.1 percent. Again, those for water transportation fell the furthest (down 13.6 percent), followed by air transport (down 7.8 percent) and land transport (down 4.7 percent). On a regional basis, imports were down by 15.3 percent fromthe United States, by 9.7 percent from the EU, by 5.4 percent fromthe ROWand by 4.1 percent from Japan.
Commercial services are the largest of the services categories and made up almost 60 percent of services exports and over 45 percent of services imports in 2009. Exports of commercial services fell 3.2 percent ($1.3 billion) and imports fell 1.4 percent ($0.6 billion), widening the trade deficit from $1.5 billion in 2008 to $2.2 billion in 2009. Exports of commercial services were up to all major partners, except to the United States. However, because 60 percent of commercial services exports are destined for the United States, the decline to this region was sufficient to lower total exports of commercial services in 2009. Imports of commercial services were also down across the major partners, with the exception of the ROW, where imports were up 9.5 percent.
The bulk of the decline in exports of commercial services came in other (noninsurance) financial services, which fell by $0.7 billion. Important, but smaller, declines were also registered for miscellaneous services to business and computer and information services (both down $0.3 billion), as well as for research and development services and audio-visual services (both down $0.2 billion). Four sectors—communications, construction, management services, and architectural, engineering, and other technical services—recorded increases in their exports last year, with the largest gain registered by communications, up $0.4 billion.
On the import side, declines were also widespread, led by royalties and licence fees (down $0.7 billion) and research and development services (down $0.3 billion). Strong gains were registered for audio-visual services (up $0.6 billion) and architectural, engineering, and other technical services (up $0.2 billion) and communications (up $0.1 billion).
The current account records the flow of transactions between Canada and its commercial partners. The exchange of goods and services, as discussed above, is the largest component of these transactions. The remaining two components of the current account capture the flow of payments and receipts of investment income and current transfers.
The current account moved from a surplus of $8.1 billion in 2008 to a deficit of $41.3 billion in 2009—which amounted to a decline of $49.4 billion. This was the largest annual change in the current account balance in the history of this data series, dating back to 1926. The last time Canada recorded a current account deficit was in 1998.
The decline in the current account balance was entirely due to the $51.3 billion decline in the goods and services balance. The severe decline in goods trade accounted for all but $0.1 billion of the overall decline in trade.
While there was an overall $3.0 billion improvement in the investment income deficit, this improvement was the result of reduced income flows in both directions. Total Canadian receipts of investment income were $13.9 billion lower in 2009 than in 2008, which amounted to a 19.3 percent decline. Profits earned by Canadian direct investors were down by $7.7 billion while dividend and interest payments to portfolio and other investment holders were down by $1.8 billion and $4.4 billion, respectively. At the same time, the inward flow of current transfers was down by $1.6 billion last year.
However, Canadians reduced their payments to foreign investors by 19.4 percent (down $16.9 billion). Compared to 2008, foreign direct investors received $11.0 billion less last year, other investment holders received $6.9 billion less and portfolio investors received $1.1 billion more. Canadian current transfers abroad were also down by $0.5 billion over the year.
Canada has always run an investment income deficit. In 2009, as a result of the greater reduction in outflows than for inflows, this deficit was reduced from $15.2 billion to $12.2 billion.
1“Major partners” is a term used in Canada’s international balance of payments (BOP) to break out international transactions at a more detailed partner level than the aggregate (total) all-countries level. In this chapter, the major partners comprise the United States, the European Union, Japan, and the rest of the world (ROW).