International merchandise trade: Annual review

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Canada's reliance on the United States as a trading partner fell even further in 2008, in the wake of declines in the American automobile and housing markets during the economic downturn.

In 2008, the United States accounted for less than two-thirds (65.7%) of Canada's total merchandise trade on a customs basis, that is exports and imports combined, down from 67.2% in 2007 and 74.0% in 2003.

Exports to countries other than the United States have been growing for the past six years. In 2008, they represented 22.3% of total exports, up from 14.3% in 2003. Leading the gain for Canada's exports from 2007 to 2008 were the Asia Pacific countries (mainly Japan) and Brazil.

Exports to Japan increased 20.2% from 2007 to $11.1 billion, driven by coal, canola, and wheat. Exports to China totalled $10.4 billion in 2008, up 9.1% from 2007. As a result, Japan replaced China as Canada's third most important export destination, behind the United States and the United Kingdom (correction).

Canada's exports to Brazil increased 70.7% from 2007, led by potash, used as a fertilizer, as well as coal and newsprint.

Similarly, imports from countries other than the United States have been on the rise for the past seven years. In 2008, they accounted for 47.6% of Canada's total imports, up from 39.4% in 2003.

Imports from countries other than the United States rose by 10.7% in 2008 compared with a year earlier, led by continued growth from China, Canada's second most important trading partner for imports, behind the United States. Chinese companies sold $42.6 billion worth of merchandise to Canada last year, up 11.3% from 2007. Telecommunications equipment, games, toys and computers were the main goods imported from China.

Mexico was the third largest supplier of goods to Canada, sending $17.9 billion worth of goods, a 4.2% increase from 2007. This growth was led by the "other communications and related equipment" category, which consisted mainly of flat panel, high-definition televisions that have gained in popularity as prices have dropped.

Trade balance: Fourth year of decline

Canada's international merchandise trade expanded strongly at the beginning of 2008, but the global economic downturn took much of the wind out of the sails in the second half of the year.

In 2008, Canada exported $489.5 billion of merchandise to the world, on a balance of payments basis, up 5.7% from 2007. At the same time, imports rose 6.7% to $442.8 billion.

As a result, Canada's annual trade surplus with the world narrowed to $46.7 billion from $48.0 billion in 2007, continuing a decline that started in 2005.

The gain in exports was price driven as volumes fell 7.8% in 2008 compared with a year earlier. Export prices started declining in the second half of the year as commodity prices began to fall and the economic downturn set in.

Increases in exports were restricted to energy products, industrial goods and materials as well as agricultural and fishing goods.

On the import side, most sectors recorded increases in 2008. The growth was attributable to a combination of higher prices and volumes. The increase in prices was a result of rising commodity prices in the first half of the year and the depreciating value of the Canadian dollar compared with the US greenback in the latter half of 2008.

Canada's trade surplus with the United States increased to $89.1 billion from $86.3 billion in 2007, following two years of decline. This increase was on the strength of crude petroleum exports, which were partially offset by a large drop in exports of automotive products.

Canada's trade deficit with countries other than the United States increased to $42.4 billion from $38.3 billion in 2007.

Exports rise mainly on the strength of energy products

Exports of energy products rose 37.6% in 2008 compared with a year earlier, totalling $126.1 billion. While the United States continued to be the leading consumer of Canada's energy products, growing demand for coal in the Asia Pacific region boosted energy exports to that area. The supply of coal in the region was disrupted early in the year because of snow storms and flash floods in its principal supply areas.

Exports of automotive products fell 21.0% from a year earlier to $61.1 billion in 2008. These products have been on a downward trend since 2002. The decline was attributable to a drop in volumes, as the economic crisis in the United States depressed car and light truck sales, leaving auto companies with growing inventories. Exports of passenger autos fell 14.8%, while exports of trucks and motor vehicle parts also declined.

Decline in automotive products tempers growth in imports

A decline in imports of automotive products in 2008 tempered strong growth in imports of energy products.

Imports of energy products grew for the sixth straight year, increasing 44.9% to $53.0 billion as both prices and volumes rose.

Leading the gain was crude petroleum, which benefited from rising prices in the first three quarters of the year as imports increased 44.3% to $34.1 billion. Imports of petroleum and coal products as well as coal and other related products also increased due to a combination of prices and volumes.

On the other hand, imports of automotive products declined 10.1% from a year earlier to $72.0 billion, halting four years of increase. Leading the decline was motor vehicle parts, which fell 14.9%, partly due to a strike at an American parts producer early in the year and a weak sales environment.

Imports of trucks and other motor vehicles dropped 13.5%, as rising gas prices in the first half of the year led to a slow down in sales. Imports of passenger autos also slid on declining prices.

Available on CANSIM: tables 228-0001 to 228-0003, 228-0033, 228-0034, 228-0041 to 228-0043 and 228-0047 to 228-0057.

Definitions, data sources and methods: survey numbers, including related surveys, 2201, 2202 and 2203.

The publication International Merchandise Trade Annual Review, 2008 (65-208-XWE, free), is now available online from the Publications module of our website.

For more information, contact Sharon Nevins (toll-free 1-800-294-5583; 613-951-9798). To enquire about the concepts, methods or data quality of this release, contact Miles Rowat (613-951-6820), International Trade Division.