Study Shows Marked Drop in Imports of Machinery & Equipment From U.S.

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 U.S. 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. However, 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.

The U.S. share of imports to Canada dropped primarily because of machinery and equipment, our largest import group. The U.S. 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.

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 U.S. leading the way. Exports of industrial goods to China have also contributed to this increase.