World trade study shows marked drop in imports of machinery & equipment from U.S.
Ottawa, ON -- Although the share of natural resources in Canada's exports is increasing and the United States remai...
Ottawa, ON — Although the share of natural resources in Canada’s exports is increasing and the United States remains the country’s dominant export market, the story is different for imports, which now come less and less from the U.S. and are more diversified by commodity group, according to a new study covering the period from 1990 to 2005, released in March 2006 in the Canadian Economic Observer, a Statistics Canada publication.
The study also shows that the marked drop in the U.S. share of imports is unprecedented in the history of Canada-U.S. trade.
The United States and Japan are not as dominant in imports as in the early 1990s, and China has made inroads into many of Canada’s consumer and investment goods. But some of the growth in China is illusory, reflecting its role in assembling parts manufactured in other Asian countries. Consequently, Canada’s overall deficit with Asia did not deteriorate as it did during the 1990s. Much of the recent growth of imports from China can be explained by a large content from other countries in Asia.
About 40% of Canada’s imports in 2005 came from countries other than the United States and Japan, an increase of more than 10 percentage points from the 1990s. Apart from China, Korea, Europe, Mexico and the Organization of the Petroleum Exporting Countries (OPEC) profited from the lower share of imports from the United States and Japan to Canada in recent years.
MACHINERY AND EQUIPMENT IS CANADA’S LARGEST IMPORT GROUP
The U.S. share of imports to Canada dropped primarily because of machinery and equipment, our largest import group. The United States accounted for about 54% of these imports in 2005, down from about 68% in 1990, displaced by China and Mexico. Canada’s imports of electrical and electronic products alone from the United States shrank by $10 billion between 2000 and 2005.
Canadian imports of electrical and electronic products from countries other than China also declined. Between 2000 and 2005, these imports grew by nearly $4 billion from China (+300%) but part of this growth was at the expense of Japan and the rest of Asia, both down by a third.
Canada’s deficit for electronic goods has levelled-off since 2000. That is because Canada imported less directly from Japan and other countries that supply the inputs for China’s computer industry, such as Hong Kong, Taiwan and Singapore. Canada now imports much cheaper computer products that have been assembled in China, often from parts made throughout Asia.
RESOURCES MAE UP HALF OF CANADA’S EXPORTS
On the exports side, Canada is increasingly reliant on resources. Resources have accounted, on average, for about half of Canada’s exports over the past 15 years. In 2005, the proportion jumped to 57%, with energy exports to the United States leading the way. Exports of industrial goods to China have also contributed to this increase.
Energy is also one of Canada’s least diversified exports in terms of trading partners and it became even less diversified after 2000. Roughly 95% of the country’s energy exports went to the United States in 2005, compared with 84% in 1990. In 2005, energy made up one quarter of Canada’s shipments to the United States, double the proportion in the 1990s. Canada exports mainly oil and natural gas, each of which earned at least $30 billion in 2005.
In contrast to resources, exports of finished products fell sharply after 2000. This drop was led by auto products, which hampered overall Canada’s exports to the United States since it is the destination for 96% of our auto exports. The decline affected only North American manufacturers, as foreign automakers with operations in Canada have increased their exports appreciably.
Auto exports to Mexico also have grown, particularly in 2005. More than a quarter of Mexico’s imports from Canada in 2005 were automotive products, an increase of more than 10 percentage points from 2004 and the highest proportion since 1991. Still, auto trade with Mexico is only 1% of Canadian auto exports. Trade between Canada and Mexico has been generally lacklustre despite the North American Free Trade Agreement, displaced by growing trade with China over the past 15 years.
The study “Canada’s place in world trade, 1990 to 2005” is now available for free online. The study is also included in the March 2006 Internet edition of Canadian Economic Observer, Volume 19, no. 3 (11-010-XIB, $19/$182), which is now available.
For more information about the Canadian Economic Observer, go to the Canadian Statistics page at www.statcan.ca, choose National Accounts, then click on the banner ad for Canadian Economic Observer.