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Canada's State of Trade: Trade and Investment Update 2011
V. Key Developments in Canadian Merchandise Trade
Canada’s trade rebounded with the turnaround in global market conditions in 2010. The pickup in global economic activity, re-stocking of inventories, and a better outlook for consumers helped strengthen foreign demand for Canadian products. This in turn strengthened Canadian demand for foreign intermediate inputs, boosted employment, and helped stimulate consumption in this country. Thus, both Canadian exports and imports were on the rise last year.
This chapter examines in greater detail the developments in Canada’s merchandise trade over the past year—across trading partners, commodities and provinces—using Canadian trade statistics that are prepared at the detailed commodity and individual country levels.1
Canadian merchandise exports to the world rose to $399.4 billion in 2010, while imports advanced to $403.3 billion. However, for the most part, trade levels with Canada’s largest partners remained below their pre-recessionary levels. The bulk of Canada’s trade is conducted with very few partners. The top ten destinations for exports made up about 90 percent of totalmerchandise exports and the top ten import-supplying countries accounted for over 80 percent of all Canadian imports in 2010. There was very little movement in the rankings of Canada’s top trading partners. On the export side, the top eight last year were the same eight in the same order as the year before, while on the import side the top nine were unchanged in composition and order.
The three countries breaking into the top ten partners were Brazil and Norway in the ninth and tenth spots, respectively, for exports, and Taiwan in tenth position for imports.
In terms of specific products driving Canada’s trade performance in 2010, passenger vehicles, gold, certain energy products (i.e., crude oil and natural gas) and a number of non-energy resources, such as potash, wheat, andmetals, generated huge trade surpluses and, for the most part, positive changes to trade balances. On the other hand, a number of manufactured products, led by trucks and automotive parts, telecom equipment,medicines, computers, and integrated circuits generated trade deficits and, again for themost part, negative changes to trade balances. Many of the resource-based products were subject to strong price increases last year, resulting fromthe historic economic expansion now underway in the emerging markets of the world. The North American automotive sector also appears to be emerging froma huge restructuring effort over the past several years. A bright spot in Canada’s trade performance was the upturn in passenger automobile exports after five years of consecutive decline. However, a by-product of the continental restructuring effort seems to be the disappearance of Canadian production of trucks for export.
Another bright spot in Canada’s trade performance in 2010, was the increase in exports of wood products after a five-year slide. Canadian exporters of wood and pulp are becoming more active in the fastexpanding Asian markets, after having suffered for years because of weak demand for their products resulting from the slump in the U.S. housing market.
Trade by Top Ten Partners
After plunging by 25.6 percent, Canadian merchandise exports to the world rebounded in 2010, rising 11.0 percent to $399.4 billion. This was a reflection of the tepid recovery from the world-wide recession experienced in 2009. For the most part, exports to Canada’s largest partners remained below their pre-recessionary levels. However, 2010 exports to China and the United Kingdom were above their 2008 levels, while those to Brazil were virtually at par with 2008. Strong exports to Brazil essentially returned exports to that country to 2008 levels, while last year’s growth in exports to the United Kingdom yielded exports to that country above their pre-recessionary levels. For China, exports continued to grow in 20092 and onwards into 2010.
In 2010, two countries—Brazil and Norway—joined the ranks of the top ten destinations for Canadian exports, at 9th and 10th place, respectively; they displaced France (which fell from the 9th to the 11th spot) and India (from 10th to 13th). Collectively, the top ten destinations accounted for 89.9 percent of total merchandise exports.
The United States remained Canada’s largest export trading partner, accounting for 74.9 percent of total exports in 2010. This was marginally down from the 75.0- percent share registered a year earlier. Exports to the United States rose $29.0 billion, or 10.8 percent, to $299.1 billion. While the U.S. recession ended in June 2009, the recovery continued to be lacklustre by historical standards. Consumer confidence remained weak, affected by a prolonged fall in housing prices and high unemployment levels. Notwithstanding the increase in 2010, Canadian exports to the United States remained lower than in any year during the 1999-2008 period.
For 2010, the bulk of the gains in exports to the United States occurred in three categories: mineral fuels and oils, motor vehicles, and precious metals and stones. Together, these categories accounted for over 95 percent of the increase in bilateral exports during the past year. Buoyant energy prices helped push exports ofmineral fuels and oils up by nearly $12.6 billion. Crude petroleum led the advance, with a $9.2-billion gain, followed by light and heavy oils (up $3.4 billion), while natural gas exports were essentially unchanged fromthe previous year.
Automotive exports to the United States advanced for the first time following five years of consecutive decline. Exports of motor vehicles climbed $11.9 billion to $48.3 billion, withmost of the gains coming from passenger vehicles (up $11.4 billion). Automotive parts were also up by $2.0 billion, while truck exports were down by over $0.75 billion. Exports of trucks have fallen, on average, by about 60 percent annually over the past three years, and in 2010 represented less than one sixteenth of the their 2007 amount.
Gains in precious metals and stones were led by gold (up almost $2.0 billion) and silver (up $1.1 billion), with coins and preciousmetals waste and scrap contributing to most of the remaining gains.
Merchandise exports to the United Kingdom, which continued to be Canada’s second-largest destination, increased to $16.4 billion in 2010, or 4.1 percent of all exports. Exports were up by 35.7 percent (or $4.3 billion). Precious metals and stones led the gains, up $3.5 billion, with gold (up $3.0 billion) accounting for the lion’s share of the advance. Nickel (up $0.7 billion) and aircraft (up $0.4 billion) also registered notable gains.
China retained third place among Canada’s largest export destinations, accounting for 3.3 percent of allmerchandise exports. Exports to China advanced $2.1 billion to $13.2 billion. Pulp, fats and oils, wood, and mineral fuels and oils accounted for much of the gains, advancing $0.7 billion, $0.6 billion, $0.5 billion and $0.4 billion, respectively. However, exports of oil seeds posted a sizeable loss ($0.7 billion), due entirely to reductions in canola seed shipments. Over the five-year period 2006-2010, China’s share of Canadian exports has risen from 1.8 percent to 3.3 percent.
Japan was Canada’s fourth-largest export destination in 2010. Exports to Japan were valued at $9.2 billion, up $0.9 billion (or 10.6 percent) over 2009. Mineral ores accounted for the largest increase, at $331 million, followed by wood, at $164 million. Japan was the destination for 2.3 percent of all Canadian shipments abroad in 2010.
Mexico was in fifth spot for Canadian exports. Exports to Mexico grew the slowest among the top ten destinations, as they expanded by only 4.2 percent (up $204million) to just over $5.0 billion. Strong gains in oil seeds (up $188million) and aluminum (up $104 million) were offset by losses in mechanical machinery and appliances (down $201 million) and electrical machinery and equipment (down $154 million). Smaller gains in other categories, led by iron and steel, meat, and motor vehicles, accounted for the overall increase in exports.
Germany ranked sixth in 2010. Exports to Germany were up $201 million (5.4 percent) to $3.9 billion. Strong gains in mineral ores (up $314 million) and inorganic chemicals (up $122 million) were largely offset by a $379-million reduction in exports of aircraft and parts.
Exports to seventh-ranked Korea advanced $182million (5.2 percent) to $3.7 billion. A $160-million gain in cereal exports was largely offset by a $134 million decline in machinery and appliances. Lesser gains were registered for pulp (up $82 million), mineral fuels and oils (up $60 million), and wood (up $46 million), which contributed to the overall increase.
The Netherlands ranked eighth in 2010, the same as in 2009. Exports to the Netherlands were up $490million (17.8 percent) to $3.2 billion. Strong gains in aluminum( up $226million), oil seeds (up $215 million), nickel (up $153 million) and inorganic chemicals (up $115million) were partially offset by a $228-million decline in exports of mineral fuels and oils.
Brazil broke into the top ten Canadian export markets for the first time in 2010, placing 9th—a considerable jump from14th place in 2009. Exports vaulted 60.4 percent, or $967million, to nearly $2.6 billion. Three products accounted for the bulk of the increase: fertilizers, up $301 million (180.9 percent); pharmaceutical products, up $281 million (3,158.6 percent); and mineral fuels and oils, up $192million (94.7 percent). For the most part, Canada recouped all of its exports to Brazil lost during the global recession of 2009.
In 10th spot was Norway, up from 13th place in 2009. Exports to Norway jumped 43.4 percent, or $765 million, to $2.5 billion. Gains were widespread among the leading products, but the bulk of the increase was in nickel (up $616 million) and to a lesser extent in aluminum (up $108 million).
Canadian merchandise imports also rose in 2010, but at a slower pace than exports. Total imports were up 10.5 percent ($38.2 billion) to $403.3 billion. There was very littlemovement in the ranks of the top import suppliers to Canada between 2009 and 2010, with the first nine (the United States, China, Mexico, Japan, Germany, the United Kingdom, Korea, France and Italy) retaining their positions. There was, however, a change in the 10th place spot, with Taiwan displacing Algeria. The top ten import suppliers combined accounted for 80.7 percent of the total Canadian import market in 2010.
Accounting for just over half of all of Canada’s imports (50.4 percent), the United States was Canada’s largest supplier of foreign- produced products; this was down from a 51.2-percent share in 2009. Notwithstanding the decline in share, imports from the United States rose by $16.4 billion (8.8 percent) to $203.2 billion. Increased imports of automotive products led the advances, as imports of these products were up by $7.2 billion. Trucks for transport of goods (up 25.0 percent), passenger cars (up 22.3 percent), and motor vehicle parts (up 21.7 percent) accounted for the bulk of the automotive import gains. Smaller gains were registered formineral fuels and oils, iron and steel, and mechanical machinery and appliances (up $1.6 billion each), and for plastics (up $1.2 billion). Imports of aircraft and parts were trimmed by $0.6 billion to limit the gains.
China was Canada’s second-largest merchandise import supplier. At 12.1 percent, the growth in imports fromChina was slightly above the overall average, and China increased its share of the Canadian import market from 10.9 percent in 2009 to 11.0 percent in 2010. Imports from China rose by $4.8 billion to reach almost $44.5 billion last year.Mechanicalmachinery and appliances (up $1.6 billion) and electrical machinery and equipment (up $1.5 billion) accounted for about two thirds of the overall gain. Computer-related equipment and printingmachinery led the gains within the former category, while telephone sets and transistors and diodes led the advances in the latter category.
Mexico was in third place, increasing its market share by a full percentage point between 2009 and 2010, rising to a 5.5-percent market share on the strength of a 33.7-percent (or $5.6 billion) increase in shipments to Canada. More than 60 percent of the gains came from motor vehicles (mostly trucks and passenger vehicles) and electrical machinery and equipment (in particular telephone equipment and parts). Mechanical machinery and appliances andmineral fuels and oils accounted for about half of the remaining gains.
Imports from Japan, Canada’s fourthlargest source, were up $1.1 billion (8.8 percent) to $13.4 billion in 2010. Automotive products (mainly parts and passenger vehicles) and mechanical machinery and appliances (led by bulldozers, graders, scrapers, etc. and piston engines) accounted for roughly 60 percent of the overall gains.
Imports from Germany, Canada’s fifthlargest supplier of imports in 2010, advanced $0.6 billion (5.9 percent) to $11.4 billion. Automotive products accounted for the gains, expanding by $0.7 billion. Increased imports of passenger cars largely accounted for the increase in automotive products. Electricalmachinery and equipment imports were also up ($110 million), but were more than offset by a $130 million decline in mechanical machinery and appliances.
Imports from the United Kingdom, which placed sixth among Canada’s top ten import sources, were up $1.3 billion (13.9 percent) to $10.7 billion. Mineral fuels and oils registered the largest increase, at nearly $1.0 billion, with crude oil accounting for some 80 percent of the gains and non-crude oil making up most of the remainder.
Imports from seventh-ranked Korea were up $217million (3.7 percent) to $6.1 billion. The largest increase was for ships and boats (up $193million), followed by automotive products (up $77 million) and mineral fuels and oils (up $49million). Partially offsetting the gains was a $175-million decline in electrical machinery and equipment.
Eighth-ranked France was the only country in the top ten to register a decline in imports in 2010. Imports fell 3.6 percent to $5.4 billion in 2010 from $5.6 billion a year earlier. Despite a $314-million increase in aircraft and parts imports, declines in a number of other categories contributed to the overall decrease. Imports of pharmaceutical products fell the most ($194 million), with notable declines recorded for mineral fuels and oils ($92 million), electrical machinery and equipment ($66 million), mechanical machinery and appliances ($65million) and articles of iron and steel ($40 million).
Italy held on to its ninth place standing, as imports from that country expanded by $0.2 billion to $4.6 billion. Mineral fuels and oils (almost totally non-crude oils) were up by $113million, followed by pharmaceutical products ($43 million), and beverages ($27 million).
Taiwan entered the top ten importsupplying economies for the first time in tenth spot. Canadian imports from Taiwan rose by $625 million (up 18.7 percent) to almost $4.0 billion in 2010. Electrical machinery and equipment accounted for just under half of the overall gains (up $286 million), with precious metals and stones (up $85 million) and articles of iron and steel (up $82 million) also contributing strongly to the advance.
Merchandise Trade by Top Drivers
Out ofmore than 1,200 goods,3 the 26 products listed in Table 5-1 were included for their overall impact on the change in Canada’s trade balance. Jointly, these products made up slightly less than half of Canada’s merchandise exports in 2010 and nearly a third of merchandise imports. Twelve of the selected products generated improvements to the trade balance amounting to nearly $25.9 billion. Another fourteen products registered the largest declines in the trade balance, totalling some $16.8 billion. When taken together, these 26 products produced a $9.1-billion improvement in Canada’s trade balance from 2009 to 2010. In comparison, Canada’s overall trade balance only improved by $1.4 billion.
As seen in the Table 5-1, these top drivers fall into two broad categories: trade surplus products and trade deficit products. Within each category, trade is further subdivided into trade that flows substantially in both directions and trade that is primarily one-way.
|2010 Exports||Export Growth||2010 Imports||Import Growth||Balance 2010||Balance 2010/2009|
|2010 Exports||Export Growth||2010 Imports||Import Growth||Balance 2010||Balance 2010/2009|
|Iron Ores & Concentrates||$3,190,600,000||-5.3%||$916,600,000||206.1%||$2,274,000,000||-$796,000,000|
|Wheat And Meslin||$4,671,200,000||-22.4%||$12,700,000||-32.8%||$4,658,500,000||-$1,344,000,000|
|2010 Exports||Export Growth||2010 Imports||Import Growth||Balance 2010||Balance 2010/2009|
|Medicaments, Dosage Form||$3,982,000,000||-29.3%||$8,879,600,000||-6.8%||-$4,897,600,000||-$1,003,500,000|
|Motor Vehicle Parts||$9,058,200,000||30.1%||$18,353,600,000||22.9%||-$9,295,400,000||-$1,327,600,000|
|Telephone Equipment & Parts||$3,185,200,000||-12.7%||$7,496,200,000||20.6%||$4,311,000,000||-$1,742,900,000|
|2010 Exports||Export Growth||2010 Imports||Import Growth||Balance 2010||Balance 2010/2009|
|Precious Metals Waste||$629,300,000||15.8%||$1,986,000,000||-24.8%||-$1,356,700,000||$741,000,000|
|Electronic Integrated Circuits||$1,631,600,000||-28.1%||$3,559,100,000||1.8%||-$1,927,500,000||-$701,300,000|
|Trucks (Transport Of Goods)||$705,200,000||-55.7%||$11,570,500,000||34.7%||-$10,865,300,000||-$3,866,200,000|
|Bulldozers, Graders, Scrapers Etc.||$137,100,000||-37.1%||$2,579,000,000||38.8%||-$2,441,900,000||-$802,400,000|
|26 Product Total||$199,684,900,000||20.3%||$139,440,000,000||25.4%||$60,244,800,000||$9,073,000,000|
|Total All Commodies||$399,420,700,000||11.0%||$403,347,200,000||10.5%||-$3,926,500,000||$1,362,000,000|
Performance of Small, Medium, and Large-sized Firms in Canadian Exports During the Global Financial Crisis1
Export Performances by Firm Size and the Crisis
Value of Exports, by Firm Size, 1999-2009
Source: Statistics Canada, Exporter Register.
During the recent global financial crisis, medium-sized Canadian exporters (businesses with 100 to 499 employees) performed better than either small or large exporters, increasing the value of their exports by 7 percent between 2008 and 2009 to $51 billion (Figure 1). This continued a decade-long trend during which the share of medium-sized enterprises in Canadian exports has steadily increased. In contrast, large firms (those with 500 or more employees) saw the value of their exports decrease by 36 percent to $157 billion during the crisis. Small businesses (those with fewer than 100 employees) make up the remaining category. During the crisis, small firms experienced a 34- percent drop in export (from$103 billion in 2008 to $68 billion in 2009). In 2009, small firms accounted for 86 percent of Canadian exporters.
The Crisis and Canada’s Exports to the United States
Number of Exporters, by Firm Size, 1999-2009
Source: Statistics Canada, Exporter Register.
The value of Canadian exports to the United States increased from$279 billion in 1999 to $322 billion in 2008, which represented 78 percent of the total value of Canadian exports. However, the advent of the global financial crisis caused the value of Canadian exports to the United States to fall by 31 percent to $225 billion in 2009. At the same time, Canada’s large firms experienced a similar sharp decline in exports to the United States, of roughly the same magnitude as the overall decline. This result is hardly surprising given that large firms account for the vast majority of Canada’s exports to the United States. For Canada’s small businesses, exports to the United States also fell, by 30 percent between 2008 and 2009, while medium-sized firms were slightly less affected—down by 25 percent over the same period.
The somewhat different performance among different sized firms can partly be explained by relating the size of a firmto the industry to which it belongs. For example, transportation equipment and mining and oil and gas extraction accounted for about 45 percent of Canadian merchandise exports to the United States in 2008. One feature of the oil and gas and other resource-related sector is that it is more likely to be populated by large firms, which would in turn have been subjected to the sharp declines in resource prices during the global crisis. Large firms are also major participants in the automotive sector, which was already declining but then fell sharply during the crisis. By contrast, small and mediumsized enterprises typically serve niche markets or provide intermediate inputs as part of integrated North American value chains. These activities were likely less impacted by the crisis.
Small Business and Other Export Destinations
Small Business Exports by Destination
Source: Statistics Canada, Exporter Register.
Small firms are particularly important for exports to non-traditional markets. Canada’s small firms accounted for just over 20 percent of total merchandise exports to both the United States and the EU in 2009; however, they accounted for over 30 percent of exports to the rest of the world before the global financial crisis, and subsequently saw that share shoot up to 40 percent in 2009. The absolute value of their exports also increased slightly. Meanwhile, the shares and the absolute value of exports for both medium-sized and large firms declined during the crisis.
Main Export Destinations for Canadian Small Businesses
Source: Statistics Canada, Exporter Register.
The share of exports destined for the United States from Canada’s small businesses has also decreased since 1999. In 2009, the United States received 66 percent of the total value of Canadian small business exports, down from75 percent in 2008 and 82 percent in 1999. In contrast, exports to Japan, China and South Korea have become increasingly important for Canada’s small businesses over the last decade. In 2009, these firms exported disproportionally more than medium-sized or large firms to a number of key emerging markets. For example, small firms accounted for 65 percent of the value of Canadian exports to India, 63 percent to Egypt and 60 percent to Turkey.
1 Additional information on small business exporters is available in Industry Canada’s Key Small Business Statistics, Special Edition: Canadian Small Business Exporters. This report investigates the importance of small business in international markets by examining the number of exporters of merchandise and the value of exports by industry, province, destination and firm size over the 1999-2009 period. The report also provides a financing profile of Canadian SMEs that exported in 2007 and explores the involvement of SMEs in global value chains. To receive the publication, please subscribe online.
Products for which there are substantial trade flows and for which Canada registers a trade surplus include passenger vehicles, gold and certain energy products (e.g. natural gas and crude oil). The resourcebased products were affected by price changes in 2010. For crude oil, prices were up last year, helping to underpin the expansion of the trade balance for this product. Likewise, prices of precious metals were on the rise in 2010, with the price of gold up from US$973 per troy ounce in 2009 to US$1225 per troy ounce in 2010.4 Natural gas prices fell over 2010 while experiencing a modest increase in export volumes, resulting in a small increase in value of natural gas exports; however with imports up by more, the balance narrowed. For passenger cars, most of which were destined for the United States, the gain was a result of volumes increasing while prices fell. Overall, these four products registered a $63.5-billion trade surplus, up $16.1 billion over the previous year.
Products for which Canada typically reports large exports and smaller imports are largely composed of non-energy resources such as potash, metals, and wheat. Many of these products benefited from strong price gains along with improving demand conditions as production began to pick up coming out of the global recession. For pulp, strong demand from China helped push exports up. By contrast, wheat exports fell in 2010, as both export prices and volumes fell last year. Finally, sales of big ticket items such as aircraft were likely impacted by the recession. The trade surplus for these products grew by $4.8 billion to $45.6 billion.
Products with substantial trade flows but for which Canada registers a trade deficit include telecommunications equipment, medicines, andmotor vehicle parts. The subsiding of fears of a global influenza pandemic may explain the fall in trade of dosage-sizedmedicaments, while the pickup in the North American automotive market likely explains the strong increases in auto parts trade. However, the overseas business environment is generally weak as compared to Canada; thismight lie behind the increase in telecom imports at the same time as exports were down. Overall, the increase in exports of auto parts was offset by the declines inmedicaments and telecomequipment and the value of exports of these products was little changed over the year while imports increased, resulting in a $4.1-billion widening of the deficit for these products.
Products for which Canada typically reports large imports and smaller exports are largely composed of manufactured goods. For most categories, Canadian demand was up while foreign demand was off. Overall, the trade deficit for these products widened by $7.8 billion to $30.4 billion.
Merchandise Trade by Major Product Groups
This section examines Canada’s 2010 trade performance according to the following 12 product groups: energy; vehicles and parts; machinery and mechanical appliances; electrical and electronicmachinery; 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. The first five of these groups are single chapters under theHarmonized Classification system, while each of the remaining seven groups are comprised of several HS chapters.
Canadian exports of energy products increased 15.6 percent ($12.8 billion) to $94.8 billion in 2010, making energy Canada’s largest export product group. As explained in Chapter Four,most of the gains were caused by price increases, while volumes held fairly steady. Notwithstanding the increase, exports remained well below their record-setting 2008 level ($133.3 billion), established when crude oil prices surpassed US$150 per barrel.
Imports of energy products into Canada also rose last year, up 18.0 percent ($6.2 billion) to $40.6 billion. With exports risingmore than imports in value terms, the trade surplus for energy products expanded to $54.2 billion.
China is a growing market for Canadian energy exports. Exports were up 45.0 percent ($394 million) in 2010, reaching nearly $1.3 billion—a level five times as great as two years ago. However, the United States was by far the principal destination for Canadian energy exports in 2010, accounting for some 92.6 percent ($87.7 billion) of total Canadian exports of fuels, oils, and other energy products. The United States also supplied $12.3 billion (30.4 percent) of Canada’s total energy imports.With exports exceeding imports, Canada posted a bilateral trade surplus with the United States for energy products, amounting to $75.4 billion. This was an overall increase in the trade surplus for energy products of $10.9 billion. Thus, the United States accounted for more than the total of the increase in the energy products trade surplus. Important declines in energy products balances came fromtrade with Nigeria (down $1.2 billion), the United Kingdom (down $1.1 billion), Iraq (down $633million),Mexico (down $475million), and Saudi Arabia (down $440 million) to account for much of the difference between the U.S. balance and the total balance for these products.
Three commodities (crude oil, noncrude oil, and petroleum gases—almost exclusively natural gas) make up about 90 percent of the trade in energy products—a little more for imports and a little less for exports. Crude oil is the largest of the three categories, making up 55 percent of energy exports and almost 59 percent of energy imports. Crude oil exports advanced $9.1 billion in 2010 to reach $51.9 billion, a 21.3 percent increase over 2009 levels. Increased exports to the United States (up $9.1 billion) accounted for the gain, while the largest export declines were registered for India (down $38.4million),Malaysia (down $38.1 million) and Chile (down $25.1 million).
Crude oil imports grew at a slower pace than exports, rising 12.4 percent to $23.9 billion in 2010. Ten countries posted notable gains amounting to $5.1 billion while another ten posted notable losses totalling $2.5 billion to explain the overall $2.6 billion increase in imports. Nigeria (up $1.2 billion), the United Kingdom(up $0.8 billion), and Iraq (up $0.6 billion) led the advancing countries, followed by Brazil at $549million. Brazil was a new source of crude oil imports for Canada in 2010, as there were no imports of crude recorded fromBrazil in the two previous years. Suppliers that experienced a decline in crude oil imports into Canada were led by Norway (down $854 million), Azerbaijan (down $624 million) and the United States (down $364 million). Four countries—Venezuela, Denmark, Algeria, and the United Arab Emirates (UAE)— recorded declines of between $100 million and $200million each, with shipments from the UAE virtually disappearing. France, Trinidad and Tobago, and the Ukraine posted no sales to Canada last year after having supplied $65 million, $63 million and $9 million, respectively, in crude oil imports the year before.
With crude oil exports up more than imports, the trade surplus for these products widened by $6.5 billion, from $21.6 billion in 2009 to $28.1 billion last year.
Canadian exports of non-crude petroleumoils were up $2.8 billion (23.5 percent) to $14.8 billion last year. Exports to the United States accounted for the gains as they were up by $3.4 billion (31.9 percent). Limiting the gains were losses to European destinations. Combined, exports of these products to France, Germany, Italy, the Netherlands, Spain, Switzerland and the United Kingdomfell by $438million, led by a $140-million decline to the Netherlands. At the same time, Canadian imports of noncrude oils increased by nearly $2.7 billion (38.3 percent) to $9.6 billion. The United States accounted for roughly half the gains at $1.3 billion. Imports from the Netherlands posted the largest decline, at $130million. As a result of these increases, there was a small increase in the trade surplus for noncrude petroleumoils, to $5.2 billion in 2010 from $5.0 billion a year earlier.
Exports of petroleum gases were up marginally by $19.7 million (0.1 percent) between 2009 and 2010, to $18.4 billion. Virtually all of these exports were destined for the United States. Imports of petroleumgases advanced more strongly than exports, rising by $659.4 million (18.6 percent) to $4.2 billion. About two thirds of the increase came from the United States, with the remainder largely coming from Trinidad and Tobago (up $135 million) and Qatar (up $53 million). As imports were upmore than exports, the surplus in petroleum gas trade narrowed by $640 million to $14.2 billion in 2010.
About half of the remaining smaller energy categories registered a deterioration in their trade balances last year, while the other half posted improvements. For example, coal recorded the largest gain, as its trade surplus widened by $1.0 billion, while electricity recorded the biggest loss, with a $364 million-narrowing of its trade surplus. These categories contributed about $0.5 billion to the overall $6.0 billion increase in the energy trade surplus.
As noted above, exports to China have increased rather strongly over the last couple of years. Two commodities have accounted for the bulk of the increase—coal and petroleum coke. For coal, exports to China were up by over 53 percent last year after having almost quadrupled the year before, while coke exports jumped by 358.5 percent in 2010 after having risen by over 67 percent a year earlier. Coal is the larger of the two export products, accounting for roughly eight of every ten dollars of shipments of energy products to China.
Vehicles and Parts6
As reported earlier, exports of vehicles and parts reversed a five-year slide and posted a gain in 2010. For the year as a whole, exports were up $11.8 billion (30.8 percent) to $50.2 billion. Imports also increased, although at a slower pace. Imports of vehicles and parts posted a $10.9-billion increase to $60.3 billion, up 22.1 percent over the 2009. With these movements, the automotive trade deficit narrowed to $10.1 billion in 2010 from $11.0 billion a year earlier.
Some 96 percent of Canadian automotive exports were destined for the United States in 2010, while that country supplied roughly two thirds of Canada’s automotive imports. Other important suppliers of automotive products to the Canadian market include Mexico (9.9 percent), Japan (9.5 percent) and Germany (5.6 percent).
The bulk of the changes in automotive trade can be attributed to three products— passenger vehicles, transportation vehicles (i.e. trucks) and automotive parts. Together, these three products accounted for over 95 percent of exports and nearly 88 percent of imports of automotive products.
Passenger vehicles were the largest of the three major automotive product categories, accounting for over 75 percent of automotive exports and nearly 40 percent of automotive imports in 2010. Passenger vehicle exports were up 43.0 percent ($11.4 billion) to $38.0 billion last year, with the United States accounting for all of the increase. At the same time, imports of these products grew by 18.5 percent ($3.6 billion) to $23.0 billion. Import gains were led by the United States ($2.1 billion), followed byMexico ($0.8 billion) and Germany ($0.6 billion). Korea (down $116million) and Brazil (down $100 million) registered the largest declines over the year. With exports advancing considerably more than imports, the trade surplus for passenger vehicles more than doubled in 2010, rising from $7.2 billion in 2009 to $15.0 billion last year.
Parts and accessories were the secondlargest category of automotive trade, and represented 18 percent of automotive exports and 30 percent of imports in 2010. Trade in these products expanded with the pickup in North American automotive production: exports increased by $2.1 billion to $9.1 billion, while imports were up by $3.4 billion to $18.4 billion. With these movements, the trade deficit in automotive parts and accessories widened by $1.3 billion to $9.3 billion. On the export side, the bulk of the increase was to the United States (up $2.0 billion) followed by Mexico (up $57 million). For imports, the United States accounted for about 70 percent of the increase ($2.4 billion), with Japan ($286million), Mexico ($273 million), Korea ($192 million) and China ($173 million) accounting for most of the remainder of the gains.
Canadian truck exports have virtually disappeared over the past decade or so. They reached a peak of $14.4 billion in 2002 and have fallen every year since, with the exception of the slight increase registered in 2005. In 2010, exports were valued at $705 million, less than one-twentieth of the 2002 value; export values have more than halved in each of the past three years. The bulk of the decline was in shipments to the United States. At the same time, truck imports were up by more than a third last year, or nearly $3.0 billion. Canada sources over 95 percent of all truck imports from its two North American neighbours, so it is no surprise that imports of trucks sourced in the United States led the advances (up $1.8 billion) followed by Mexico (up $940 million).
Mechanical Machinery and Appliances7
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, covering a variety of items ranging from ball bearings to mobile cranes and derricks.
Machinery exports fell $1.1 billion (3.7 percent) in 2010, to $28.8 billion. Declines were widespread, with only 36 of 87 subcategories registering increases. Leading the declines were gas turbines (mainly for aircraft), air or vacuum pumps, appliances for manufacturing semiconductor crystals, and computers and components, as these exports decreased by $349million, $321million, $220million, and $196million, respectively. A pickup in the automotive sector led to gains for piston engines and engine parts, which partially offset the declines. Notable declines occurred in exports to China (down $279million),Mexico (down $201million), Korea (down $134 million) and France (down $112 million). There was a gain of $132 million posted to Russia.
In contrast to exports, imports of machinery rose over 2010, up $4.1 billion (7.8 percent) to nearly $57.0 billion. The vast majority of the increase went to four countries— China, the United States,Mexico and Japan—as imports fromthose countries rose by $1.6 billion, $1.6 billion, $695 million and $415 million, respectively. Piston engines posted the largest increase, at $1.1 billion followed by computers, self propelled dozers, and engine parts, at $933 million, $721million and $381million, respectively. Gas turbines posted the largest decrease, at $645 million.
The combination of falling exports and rising imports in 2010 meant that the trade deficit for mechanical machinery and appliances widened by $5.2 billion to $28.2 billion, completely erasing the $4.3-billion improvement in the balance registered in 2009. The trade deficits with China (up $1.9 billion), the United States (up $1.6 billion), Mexico (up $0.9 billion) and Japan (up $0.5 billion) all widened, to account for over 90 percent of the deterioration in the trade balance.
Electrical and Electronic Machinery and Equipment8
Exports of electrical and electronic products fell by $1.1 billion to $15.1 billion, most notably to the United States (down $1.0 billion, or 90.6 percent of the total). Smaller declines toMexico (down $154million) and Hungary (down $96 million) accounted for much of the remainder while a $71-million increase in exports to China helped stemthe losses. Among the products that comprise this category, gains and losses were evenly split with 23 of the 48 major subcomponents posting gains, another 23 posting losses, and no trade in the final two categories. However, the losses compiled were greater than the gains and so overall exports fell. The key losses were concentrated in three products—integrated circuits, telephone and related equipment, and television receivers—which fell by a combined $1.2 billion.
Imports of electrical and electronic products advanced to $42.5 billion in 2010, up $4.2 billion from a year earlier. Higher imports from China (up $1.5 billion), Mexico (up $1.2 billion), the United States (up $0.8 billion), Denmark (up $0.4 billion) and Taiwan (up $0.3 billion) accounted for the overall gain. Increases were widespread across products, led by telephone and related equipment, insulated cables and wires, electric generators and rotary converters, and semiconductor devices, to account for two thirds of the gain.
With exports falling by $1.1 billion and imports expanding by $4.2 billion in 2010, the trade deficit in electrical and electronic machinery and equipment widened by $5.3 billion to nearly $27.5 billion.
Technical and Scientific Equipment9
Exports of technical and scientific equipment edged down 0.6 percent ($30.8 million) to $5.4 billion last year. On a regional basis, losses were widespread, but small for the most part. The largest export decline occurred with Germany, where exports were down by $15.9 million. On the other hand, exports to the United Kingdom advanced $34.3 million, while those to Hong Kong and the United States were up by $21.3 million, and $20.6 million, respectively. At the same time, imports rose by $343 million to $11.6 billion. Gains were led by Japan (up $102 million), Mexico (up $77 million) and China (up $74 million), while imports from the United States were down by $76million.
On the export side, gains were led by liquid crystal devices and lasers (up $57.4million), followed by miscellaneous machines (up $32.8 million), while losses were largest for direction finding compasses and navigational instruments (down $61.0million) and surveying, meteorological, and geophysical instruments (down $50.2 million). For imports, gains were most notable for surveying, meteorological, and geophysical instruments (up $104.6 million) and automatic regulating or control instruments and their parts (up $82.2 million), but were partially offset by losses in medical/surgical instruments and appliances (down $64.4 million).
Again, the combination of falling exports and rising imports set the stage for a deterioration of the trade balance for technical and scientific equipment. Last year, the trade deficit in these products widened by $374 million, to $6.1 billion.
Agricultural and Agri food Products1010
Canadian exports of agricultural and agri food products edged up $382 million (1.0 percent) to $39.2 billion in 2010. Exports to Mexico led the way, up $213 million, while exports to six other countries (the Netherlands, China, Korea, Pakistan, Russia and the United Arab Emirates) registered gains of between $100 million and $200 million for each. At the same time, important losses accrued to Iraq (down $263 million) and to Saudi Arabia,Morocco, India and Italy, with declines of between $100 million and $200 million each. Exports of canola oil posted the largest increase, up $644 million. Increased exports to China were responsible for over 87 percent of the gain. Soya bean exports also advanced, up $310million from 2009, with the Netherlands accounting for nearly 70 percent of the increase. Pork exports expanded by $212 million, with important gains to the United States and Russia. By contrast, price corrections in cereals and grains contributed to declines in the value of their exports in 2010. For example, wheat prices were down 16.9 percent while barley prices were off by 13.9 percent. The net result was that the value of wheat exports tumbled $1.4 billion and barley exports declined by $115million. Exports of frozen potatoes and other vegetable also fell in 2010, down $135million, with two thirds of the decline attributed to fewer sales in the U.S. market.
Imports of agricultural and agri food products also rose in 2010, but by less than for exports. For the year, imports of this major commodity group were up by $134 million (0.5 percent) to $29.9 billion. For the most part, changes by suppliers were fairly small. For example, the largest increases were a $147 million rise in imports from Mexico followed by a $54 million increase from Guatemala, while the largest declines were posted by the United States (down $333million) and New Zealand (down $33 million). Likewise, gains and losses by product were fairly small. A $178-million advance in ethyl alcohol led all imports of agricultural and agri food products, followed by coffee (up $110 million) and sugar (up $104 million), while a $105-million reduction in soya bean oilcakes posted the largest decline.
With exports risingmore than imports, Canada’s trade surplus in agricultural and agri food products widened by $249million to $9.2 billion in 2010.
Minerals and Metals11
Rising prices for primary commodities proved a boon to trade inminerals andmetals last year. Exports of minerals and metals jumped up by $14.9 billion to $63.4 billion in 2010. Gains were registered across all HS chapters that make up this category, with the exception of articles of stone, plaster, and cement (HS Chapter 68) and glass and glassware (HS Chapter 70), which posted declines of $62 million and $54 million, respectively. Advances were led by precious metals and stones, where exports were up by $7.8 billion to account for slightly over half the overall gain. Iron and steel (up $2.0 billion), aluminum(up $1.7 billion), and nickel (up $1.6 billion) also recorded strong gains. Three countries—the United States, the United Kingdom and Norway—accounted for over 80 percent of the gains, with advances of $7.2 billion, $4.1 billion, and $745 million, respectively.
At the product level, four commodities recorded increases in exports in excess of $1.0 billion in 2010. Gold led the gains, with exports up nearly $5.5 billion (65.4 percent) to $13.8 billion. Gold prices were up 25.9 percent last year and averaged US$1,224.55 per troy ounce for the year. The United Kingdom accounted for some 55 percent of the gains, followed by the United States, at 36 percent, with Switzerland and Hong Kong accounting for the remainder.
Nickel exports advanced $1.3 billion (85.5 percent) to $2.8 billion as prices were up 48.8 percent over the year. Norway (up $06 billion) and the United Kingdom (up $0.7 billion) accounted for the gains. Exports of unwrought aluminumrose by $1.2 billion (23.9 percent) to $6.0 billion, led by gains to the United States (up $0.7 billion), the Netherlands (up $0.2 billion), and Mexico (up $0.1 billion). Finally, exports of silver more than doubled last year, up $1.0 billion (137.8 percent) to $1.8 billion. All of the gains came from the United States, which absorbed over 98 percent of total Canadian exports of silver.
On the import side, imports of metals andminerals were up $9.5 billion in 2010, to $49.0 billion. As was the case for exports, the gains were widespread, with only lead and related articles (HS Chapter 78) registering a decrease last year. Preciousmetals and stones (up $3.5 billion), iron and steel (up $2.2 billion), articles of iron and steel (up $1.1 billion) and metal ores (up $1.0 billion) led the gains. Geographically, gains were widespread. The United States accounted for 43.4 percent of the overall increase in imports, followed by Argentina (9.7 percent), Peru and the United Kingdom (6.3 percent each), and China (6.0 percent).
Gold imports, which accounted for nearly one third of the increase, were up by $3.1 billion (67.8 percent) to $7.6 billion. Three countries—Argentina, Peru and the United Kingdom—accounted for nearly 60 percent of the overall gain in gold imports, up by $888 million, $547 million, and $377 million, respectively. Thus, gold accounted for some 96.6 percent of the overall increase in metal and mineral imports fromArgentina, some 91.0 percent for these imports fromPeru, and 63.0 percent of these imports from the United Kingdom.
With exports of metals and minerals increasing by more than imports in 2010, the trade surplus for this category widened by $5.4 billion to $14.4 billion.
Chemicals, Plastics, and Rubber12
Exports of chemicals, plastics, and rubber increased by $2.7 billion to $41.5 billion in 2010. Fertilizers posted the largest gain, up $1.4 billion, followed by plastics (up $744 million), organic chemicals (up $670 million), inorganic chemicals (up $480million), and rubber (up $410million). A $1.4 billion decline in pharmaceuticals put a cap on the gains. The United States accounted for over 60 percent of the gains, Brazil accounted for 20 percent and China 10 percent.
The overall gain in exports of fertilizers was due to a $1.5-billion rise in potash exports and a $98-million decline in nitrogen based fertilizers. The United States accounted for slightly over half of the increase in potash exports, with Brazil, China andMalaysia together accounting for a further 38 percent of the overall increase.
Exports of plastics were up by 7.2 percent ($744 million). Polyethylene (up $391 million) and polyvinyl chloride (up $67million) were responsible for over 60 percent of the overall gain in plastics.
The net decline in exports of pharmaceuticals was the result of a $1.7-billion decline in dosage-form medicaments that was partially offset by a $166-million increase in exports of blood and vaccines. The United States accounted for 73.5 percent of the decline for dosage-formmedicaments, with Ireland (down 12.5 percent) and Switzerland (down 10.7 percent) accounting for much of the remainder.
Imports of chemicals were up by $1.8 billion to $55.2 billion in 2010. The gains were greatest for plastics (up $1.3 billion), rubber (up $495 million), and inorganic chemicals (up $437 million), but were partially offset by a $1.0-billion decrease in imports of pharmaceuticals. The bulk of the gains came fromincreased imports fromthe United States (up $1.7 billion), China (up $352million), and Kazakhstan (up $179million), while notable declines were registered for Ireland (down $685million), Switzerland (down $296 million) and Australia (down $186 million).
Canadian imports of plastics were up across most subcategories, most notably for polypropylene (up $253million), polyethylene (up $207million), polyacrylics (up $135 million) and polyesters (up $110 million). Imports from the United States were up $1.2 billion, to account for over 85 percent of the overall increase in plastics imports.
Imports of rubber and related products were led by increases in natural rubber (up $222million) and synthetic rubber (up $127 million) to account for about 70 percent of the overall advance in this subcategory.
For inorganic chemicals, aluminum oxides, radioactive isotopes, and miscellaneousmetal oxides accounted for about two thirds of the increase in imports last year.
The $2.7-billion increase in exports was greater than the $1.8-billion increase in imports in 2010, resulting in a $0.9-billion narrowing of Canada’s trade deficit in chemicals, plastic, and rubber, to $13.7 billion last year.
Wood, Pulp, and Paper13
As mentioned in the previous chapter, exports of forestry products halted a fiveyear overall slide in exports. In 2010, exports of wood, pulp and paper increased by $2.4 billion to $27.2 billion over 2009, with gains in pulp (up $2.0 billion) and wood (up $1.3 billion) outweighing a $0.9 billion decline in paper and paper products.
Roughly half of the advance came from greater exports to China. Japan and India were next, with each accounting for a little over 10 percent of the gain, followed by Korea and the United States, at a little over 5 percent of the advance for each country.
Pulp exports were up, led by chemical wood pulp (up $1.3 billion) and wood pulp frommechanical or chemical pulp processes (up $423million). Together, these two products accounted for over 85 percent of the overall increase in pulp exports.
For wood exports, lumber accounted for the bulk of the increase (up $1.1 billion), with particle board and logs making up most of the remainder of the gains. In the case of lumber, the United States, China and Japan togethermade up about 90 percent of the overall increase, accounting for 46 percent, 33 percent, and 13 percent of the gains, respectively.
Broad declines were registered for exports of various paper and paperboard products in 2010.Overall, outward shipments fell by $910 million, as exports of uncoated paper fell by $683 million, or 75 percent of the overall decline. Fewer exports of uncoated paper to the United States accounted for virtually all of the decline.
Imports of wood, pulp, and paper rose by $138 million in 2010. Wood led the advance, as imports were up by $245 million. Pulp was the only other category to post an increase, with imports ahead by $32 million. Fewer imports were reported for paper and paperboard (down $71 million), books and newsprint (down $57 million), manufactures of straw (down $9 million), and cork (down $3 million).
With exports up by $2.4 billion and imports advancing by only $138 million, the trade surplus in wood, pulp and paper widened by $2.2 billion to $14.3 billion in 2010.
Textiles, Clothing, and Leather14
Canadian exports of textiles, clothing and leather (TCL) reversed a seven-year slide in exports with a $347-million increase in 2010, as total TCL exports reached $4.4 billion. Increases were registered in 12 of the 19 major categories that comprise this group. Exports to the United States advanced $119million, while those to Hong Kong and China were up by $80million and $33 million, respectively, to account for roughly two thirds of the overall gains.
Gains in exports were led by furskins and artificial fur (up $120 million) and raw hides and skins (other than furskins) (up $95 million), followed by impregnated textiles (up $45 million) and man-made filaments, yarns, and fabrics (up $44 million), to make up the bulk of the advances.
Imports of TCL products also rose in 2010, up $322 million to $16.0 billion. As with exports, gains were widespread, with only 4 of the 19 major categories that make up this group posting declines over their 2009 levels. Gains were small across the group, with leather articles registering the largest increase, at $90 million. Similarly, losses were small, with imports of woven apparel down themost, at $113million, followed by furskins at $11 million.
Imports from China were up the most ($177 million), followed by Cambodia (up $63 million), Poland (up $48 million) and Mexico (up $36 million). At the same time, imports from the Netherlands were down the most, at $48 million, followed by India (down $44 million).
With exports rising by $347 million and imports up by only $322 million, the trade deficit for TCL products improvedmarginally (down $24 million) to $11.6 billion in 2010 .
Consumer Goods and Miscellaneous Manufactured Products15
Exports of consumer and miscellaneous manufactured products fell by $2.2 billion in 2010. All of the decline was attributable to special provisions, in particular to reductions in unclassifiable exports (generally these are low-value export transactions and confidential commodities), repairs, and goods of U.S. origin returning to the United States without transformation. Once these special provisions are removed fromconsideration, exports of the remaining consumer and miscellaneous manufactured products increased by $303 million, with some 85 percent of the advance attributable to furniture and bedding, which rose by $259million last year.
Seats, other than barber and dental seats, led the gains for furniture exports as they rose by $307million in 2010. The principal export category was “parts for seats,” which accounted for 94 percent of all exports of these products. Themain destination for exports of seats was the United States, which accounted for some 90 percent of the overall shipments abroad.
Exports of toys, games, and sports equipment, the next largest subcomponent, also increased last year, up $34 million. A $107million gain in articles for funfair, table or parlor games wasmostly offset by declines in toys, sporting goods, and other entertainment articles, which fell by $47million, $31 million, and $11 million, respectively.
Imports of consumer and miscellaneous manufactured products were up $1.1 billion last year, with just under 40 percent of the gain attributable to special provisions. After taking these special provisions into account, imports of consumer andmiscellaneous manufactured products were up by $664 million. Furniture and bedding accounted for the increase, up $780 million last year; all other major subcomponents that comprise this group registered fewer imports last year than in 2009.
All subcomponents of furniture and bedding registered increased imports in 2010: seats and their parts accounted for just over half the increase, with miscellaneous furniture and lamps and lighting fixtures accounting for another 30 percent of the overall increase.
Articles for funfair, table or parlor games registered the largest decline in consumer products, down an overall $211 million in 2010. A $303-million decline in imports of these products from China was behind the decline.
Other Transportation Equipment16
Exports of other transportation equipment fell by 10.4 percent ($1.2 billion) to $10.7 billion in 2010. Losses were registered in all three subcomponents of this group: aircraft and related equipment exportswere down by $925 million, while those for railway equipment, and ships and boats, were down by $197million and $117million, respectively.
Declines in aircraft and related equipment mainly centred on aircraft, with exports falling by $868 million to $6.9 billion, accompanied by a $515-million decline in exports of aircraft parts. Sales of aircraft to the United States were down $1.1 billion while those to Denmark and Germany fell by $358 million and $353 million, respectively. By contrast, exports to the United Kingdomwere up by $388million. Increases in excess of $100million were also recorded for Switzerland (up $158million), Latvia (up $155 million), Ethiopia (up $147 million) and Angola (up $112 million).
On the import side, a $629-million decline for aircraft and related equipment was partially offset by increases of $109million for ships and boats and $8 million for railway equipment.
The decline in imports of aircraft and related equipment was dominated by a $515-million decrease in parts for aircraft, supported by an $88 million decline for aircraft. For aircraft parts, three countries—the United Kingdom, the United States and Japan—accounted for much of the overall decline, as imports from these three countries fell by $229 million, $159 million, and $123 million, respectively.
For railway equipment, advances for locomotives, freight cars, containers, and parts were largely offset by declines for self propelled and not self propelled coaches.
Yachts and other pleasure vessels, up $75 million, and cargo vessels, up $52 million, accounted for most of the increase in imports of ships.
With exports falling more than imports, the trade surplus in other transportation equipment narrowed by $726million to $3.3 billion in 2010.
Trade by the Provinces and Territories
Canadian merchandise trade rebounded in 2010 across most provinces and territories, with a few exceptions: exports declined for Manitoba and the Yukon; imports into the Northwest Territories were down; and both exports and imports fell for Prince Edward Island.
Ontario posted the largest recovery in trade among the provinces and territories, as the province accounted for more than one half of the overall increase in Canadianmerchandise exports in 2010, and over 70 percent of the rise in merchandise imports. Overall, Ontario’s exports were up $20.8 billion (19.1 percent) to $168.5 billion and imports advanced by $27.4 billion (13.2 percent) to $235.7 billion (Table 5-2). On the export side, half of the gains ($13.2 billion) came from the automotive sector, with precious metals and stones responsible for another quarter of the gains ($6.3 billion). Other sectors with important increases included iron and steel (up $1.5 billion), nickel (up $1.1 billion), and chemicals, both inorganic and organic (together up $1.1 billion). A number of sectors posted declines, the most important of which were pharmaceuticals (down $1.5 billion) and electrical machinery and equipment (down $0.9 billion). As with exports, the increase in Ontario’s imports was greatest in automotive products (up $10.6 billion), which accounted for 39 percent of the overall increase.Mechanical and electrical machinery and equipment (up $3.4 billion and $3.3 billion, respectively) accounted for a further 24 percent of the total provincial increase.
|Exports||Export Growth||Export Share||Imports||Import Growth||Import Share|
Source: Office of the Chief Economist, DFAIT; with data from Statistics Canada.
Exports from Alberta posted the nextlargest increase, up $8.0 billion (11.3 percent) to $78.7 billion last year. Over 95 percent of the gains came fromenergy, with virtually all of the gains originating from crude oil. As reported earlier, most of the gains in this sector came about because of price increases, with volumes holding fairly steady over last year. Imports into Alberta advanced by $1.4 billion (7.7 percent) to $19.2 billion. Automotive products led the gains with an increase of $307 million, followed by articles of iron and steel, at $278 million. Conversely, aircraft and aircraft parts posted the largest decline in provincial imports last year, at $291 million.
British Columbia registered the thirdlargest increase in exports among the provinces and territories in 2010, with exports up $3.7 billion (14.5 percent) to $29.1 billion. The strength in international commodity markets was reflected in these gains as mineral fuels and oils (up $1.2 billion), wood (up $1.0 billion), pulp (up $0.9 billion), and mineral ores (up $0.5 billion) accounted for over 90 percent of the advance. However, in line with the general weakness in Canadian exports of paper products in 2010, provincial exports of paper fell $340million last year. At the same time, the province posted a small increase in imports, up $394 million (1.1 percent) to $37.1 billion. Strong gains in mineral fuels (up $605 million) and mechanical and electrical machinery and equipment (up $351 million and $347million, respectively) were largely offset by a $1.1-billion decline in automotive imports.
Higher energy prices also impacted trade in Newfoundland and Labrador, where a $311 million increase in energy exports accounted for about half of the overall $580- million gain in provincial exports. Likewise, rising prices boosted imports of energy by $709million to fully account for three quarters of the overall $934-million increase in that province’s merchandise imports.
Rising international energy prices affected the energy trade in every Canadian province. For New Brunswick, energy accounted for 80.6 percent of the increase in provincial exports and 75.1 percent of the increase in imports to that province. Energy accounted for 82.5 percent of the increase in imports to Quebec; for 30.7 percent of the increase to Manitoba; and for 80.0 percent of the increase to Nunavut. Conversely, there was little impact on the import side in Saskatchewan, although energy accounted for over 70 percent of the increase in that province’s exports.
For Prince Edward Island, a $27.0-million increase in exports of fresh and prepared seafood was more than offset by a $43.4 million decline in vegetable preparations and an $18.6-million decline in mechanical machinery and appliances. As a result, exports fromthe province slipped 8.9 percent ($70.2 million) to $716.9 million.
Quebec benefited from a $1.4 billion increase in exports of aluminum. Precious metals and stones also boosted exports from Quebec by $694.6 million, fromNunavut by $680.2 million and from the Northwest Territories by $570.1 million. By contrast, exports of cereals posted notable losses, down $81.7million inManitoba, $645.1million in Saskatchewan, and $752.8million in Alberta. Aircraft exports from Quebec declined $1.0 billion in 2010.
A Forecast for Canadian Merchandise Exports
The rapid growth of developing economies is changing the global economic landscape. Newly emerging economies are becoming global powers, while advanced economies are beginning to see their influence wane. While the world is already witnessing evidence of these global economic changes, as emerging markets continue to grow at faster rates than advanced economies, over the long term the shift in global economic power will become even more pronounced. These changes will affect Canada inmany ways, including exerting a direct impact on Canada’s future trade patterns. The countries that are currently among Canada’s top export markets may not be the same in the future.
Employing a frequently-used and well-testedmodel of trade in conjunction with private-sector forecasts of economic growth for each of Canada’s trading partners, we develop a long-term outlook for Canadian exports to 2040. The results of this forecast show that, due to size and proximity to Canada, the U.S. will continue to be, by far, Canada’s most important export market. However, as a result of their strong growth, China, India, and Brazil will all become much more important destinations for Canadian exports going forward.
The Gravity Model of Trade
The gravitymodel of trade is a commonly used tool to analyze trade flows between countries. The name gravity is given to this model because, similar to the model used in physics to explain the gravitational force between two bodies, it shows that the trade between two countries is mainly a function of the economic size of the two countries and the distance between them. The model is widely used for many reasons. First, the model has high explanatory power, meaning the model provides a good prediction of current trade flows. Second, the model generates consistent results: different gravity models applied to different countries, regions, and time periods yield similar findings. Gravity models of trade also allow for the addition of other variables that impact trade, such as common language, membership in the WTO, and bilateral free trade agreements. The following gravity model was designed to explain Canada’s merchandise exports.
- Exports = F(GDP, distance,WTO membership, FTA, landlocked, language, U.S.)where,
- exports is Canadian merchandise exports to each individual country in 2007;
- GDP is real GDP of the export market; distance is the partner country’s distance from Canada; and,
- the other terms are dummy variables forWTO membership, a free trade agreement with Canada, being landlocked, and having English or French as a spoken language. Finally a special dummy variable was introduced for the U.S., because it shares a land border, and a unique economic relationship, with Canada.
The model is based on 175 observations and has a high explanatory power, accurately predicting roughly 90 percent of Canada’s currentmerchandise exports. Thismodel was then shocked using a private third-party forecast for long-term GDP to give a prediction of Canada’s future exports in 2040. Because GDP is the only variable allowed to change1, it is the difference in each country’s relative GDP growth that drives the forecast for Canada’s trade.
IHS Global Insight (GI) provided the forecast for GDP growth to 2040 used in the model. GI predicted that by 2040 world GDP will increase to more than two and a half times its current level, fromapproximately US$50 trillion to US$130 trillion. Most of this growth will come from the emerging markets, especially in the emerging Asia-Pacific region. By 2040 the emerging Asia-Pacific region will constitute 32 percent of global output, up from 16 percent in 2009. Advanced economies will fall from68 percent of output in 2009 to 48 percent in 2040. Other emerging markets in Latin America and Caribbean, Europe, the Middle East and Africa will also witness their share of global GDP increase, rising froma combined share of 16 percent in 2009 to 20 percent in 2040. It should be noted that the GI forecast is just one ofmany long-termforecasts that could be used in this exercise, however, while these forecasts may differ for individual countries the broad regional trends GI identified are similar to most other long-term forecasts.
Canada’s Export Markets in 2040
Top 20 Destinations for Canadian Merchandise Exports, 2009 and 2040
The results of this exercise show a scenario wherein the composition of Canada’s top 20 export markets in 2040 may differ slightly from what it is today. The United States would remain Canada’s largest trading partner far into the future. In 2010, the U.S. market accounted for 74.9 percent of Canadian merchandise exports, already down from 77.7 percent in 2008 prior to the global economic crisis. By 2040 the U.S. share of Canadian exports is expected to be 75.5 percent. This is not surprising; despite the rapid growth in emerging economies, the United States remains a large and wealthy market that is right next door to Canada, whereas emerging markets are a significant distance away. In short, proximity is important. Likewise, the United Kingdom, Mexico, Germany, and France would remain among Canada’s top 20 export markets. Those countries that are expected to see the largest improvements in rank as export markets for Canada are those predicted to see large growth in their GDP: China, India, Brazil and Spain. Strong forecast GDP growth suggests that Turkey, Russia, South Africa, Poland, Israel and Ireland will all be included in Canada’s top 20 list by 2040. By contrast, due to their relatively slower growth outlook, Belgium, Norway, Hong Kong, the United Arab Emirates, Switzerland and Saudi Arabia would no longer be among Canada’s top 20merchandise exportmarkets in 2040.
1 Variables such as WTO membership and free trade agreements are assumed to remain constant, while others such as landlocked or distance do not change over time.
1 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. As Chapter Five examines trade developments in detail, the data in this chapter are provided on a Customs basis.
2 Canada’s State of Trade 2010 report.
3 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 those products at the HS 4-digit level that drove the change in Canada’s trade balance over the past year.
4 Statistics Canada Cat. No.: 65-208, International Merchandise Trade: Annual Review 2010.
5 HS Chapter 27.
6 HS Chapter 87.
7 HS Chapter 84.
8 HS Chapter 85.
9 HS Chapter 90.
10 HS Chapters 1 through 24.
11 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.
12 HS Chapters 28 through 40.
13 HS Chapters 44 through 49.
14 HS Chapters 41 through 43, and 50 through 65.
15 HS Chapters 66, 67, and 91 through 99.
16 HS Chapters 86, 88, and 89.
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