Canada’s Imports by Country

by C. Bloskie*

Most discussions of our trade by region focus on how our dependence on US markets for exports¹ has risen from 63% in 1980 to over 86% last year, especially after the Free Trade Agreement (FTA) in 1989. Less well-known, however, is that despite the trend to more integration, the relative importance of the US has shrunk as a source of our imports, from a high of 70% in 1983 to 60.7% last year. Over the same period, Europe gained 4 percentage points, Asia 5 and Latin America 1.

These trends reflect different facets of globalization. Our increased reliance on US markets for exports is exaggerated by changes in production, with exports embodying more parts imported from the US. This ‘outsourcing’ is one aspect of the specialisation that accompanies our increasing integration into the global economy. Another is the diversification of our imports overseas, notably from Europe and Asia (especially China). But changes in the location of plants have not always raised imports: the growth of Japanese auto assembly plants in Canada, for example, reduced our auto imports and shifted the mix from vehicles to parts in the mid-1990s.

Figure 1

The drop in the US share of Canada’s imports parallels the recent sharp drop of the US share in global exports. This was due partly to the slump in demand for high tech goods, which compose the largest part of US exports. More generally, it reflects the erosion of US exports as the US dollar soared in value in the late 1990s, only partly offset by a small depreciation since 2000.

This paper traces recent trends in the geographic distribution of Canada’s imports of goods. It reviews the continental distribution of imports by commodity grouping, with further analysis of individual countries whose products are fast making inroads into our factories, homes and lives.

Continental distribution of imports

As Figure 2 shows, the distribution of imports into Canada by major region has changed significantly in the last quarter century. Canada has historically relied on the US for the vast majority of its imports. Of the $335 billion total in 2003, the US accounted for $203 billion or 60.7%. Next was Asia at 15.5%. Europe followed with 14%, Central and South America (mostly Mexico) 5.7%, Africa 1.3%, the Middle East 1.1%, and Oceania 0.7%.

Figure 2

Imports by commodity

Changes in the source of Canada’s imports do not reflect fundamental changes in the overall structure of imports. Imports by commodity group have been fairly consistent over time, with machinery and equipment, automotive products and industrial goods long leading the way. Intuitively, this makes sense as Canada is rich in natural resources, dampening the need to import primary products such as forestry and energy.

Machinery and equipment account for the largest share, averaging 32% of imports for the past 25 years. Automotive products, particularly from the US, have been steady around 23%, while industrial goods and materials have averaged 19%. Other consumer goods have risen slightly to 14% in 2003. Food imports picked up in recent years to 6%, recovering some of their losses during the late 1990s. Energy imports have ranged from a high of 6% in 1990 to a low of 3% in 1998, and ended 2003 at 6% again, tracing the ups and downs of oil prices.

Machinery and Equipment

Machinery and equipment make up the largest group of imports to Canada, more than doubling in value in the last 15 years to $98 billion. Imports grew at double-digit rates for most of the 1990s, partly due to parts used in the rapid growth of the telecom industry. But they have declined for the past three years reflecting the sharp drop in the telecom industry as well as falling prices. The US is still the largest source of these imports, although its share fell from almost 70% in 1990 to 55% in 2003. Most of the slack was picked up by Asia and Mexico. Imports from China soared from virtually nothing in 1990 to almost 8% ($7.5 billion) in 2003. Western Europe held steady with about 13%.

Figure 3

Autos

Automotive products amounted to $76 billion in 2003 or 23% of all imports. The US accounted for almost 80% of this, with Asia and Western Europe at 10% and 5% respectively. These shares have been fairly consistent over time with only Asia losing some ground (from 14% in the early 1990s). Japan saw its share decline from a peak of almost 15% in 1991 to just 8% by 2003, partly reflecting the growth of transplants in North America. Mexico picked up the slack, rising from just 3% to 7% as imports hit almost $1 billion, up from just $147 million in 1990. Canada’s auto exports continue to exceed imports, although as a share of total exports, they are similar to the auto import share at 22%.

Consumer Goods

Regionally, this is the most varied of all the commodity groupings for non-oil imports. The US accounts for just under 50% of the total, followed by Asia at 31% (over half of which come from China, notably toys and games). Western Europe held most of the remaining share, oscillating between 11% and 16%.

Energy

Canadian energy imports, mostly crude oil, are widely dispersed geographically. After rising rapidly during the late 1990s, they declined, only to shoot up again in 2003. But at $20 billion they still account for just 6% of all imports in 2003. The import price of oil over this time period was very volatile, dropping 25% in 1998 before recovering. Canada exports three times the amount of energy it imports; at 15% of all exports, it was our fourth largest export last year.

Regionally, despite a recent dip, almost 40% of our energy imports originate in Western Europe, mostly Norway and the UK. The US has maintained a fairly steady share in the low 20s. Imports from the Middle East have fluctuated from 13% in 1993 to just 6% in the late 1990s, but have climbed back to 11% in recent years. Algeria dominates imports from Africa, with 72% of Africa’s energy exports to Canada in 2003, up from just 9% in 1990. South American imports have tapered off from their peak near 10% in the late 1990s (when they picked up the slack from the Middle East) to just 4% in 2003.

By country, our largest source of oil is the US at $4.7 billion, up from $1.9 billion in 1990. This is a reflection of the reason we import oil: despite our overall surplus in meeting domestic demand, refineries on the East Coast find it easier to import crude from the US and Europe than to have it piped from Western Canada. As well, refiners find the oil from some regions easier to process than others.

Table 1: Energy Imports in 2003

Other sources in 2003 include Norway at $3.9 billion, Algeria at $2.4 billion and Iraq at $1.1 billion. Oil is virtually the only commodity these countries ship to Canada.

Industrial Goods

Imports of industrial goods and materials rose from $26 billion in 1990 to a peak of $70 billion in 2000, before easing to $64 billion in 2003. The US dominates with 70%, primarily fabricated metals, plastics and chemicals. Western Europe accounts for 12%, Asia 8%, and South America 3%. Imports from China have grown rapidly, from just 0.5% in 1990 to almost 3% (or $1.8 billion) in 2003.

Food

Agricultural products have experienced steady growth since 1990, contracting slightly only in 2003. Overall, they have risen from $8.7 billion to almost $22 billion. The bulk arrives from the US, whose share has been about 60%, consisting largely of meat, fresh fruits and vegetables, and cereals. Western Europe accounts for almost 25%, led by alcoholic beverages. Asia and South America stand at 8% and 7% respectively.

Major importing countries

The top 25 countries accounted for almost 93% of our imports in 2003. These same countries, although not all in the top 25 in 1990, accounted for the same share in 1990 and 87% in 1980. The top ten countries alone accounted for 85% in 2003. In 1990 and 1980, these same countries supplied 86% and 81% respectively. The dominance of the US plays a large role in this, as does the consistency of the other G7 nations as our trading partners.

While the US has long been Canada’s main trading partner, historically we have exported more to them than we import, and the gap continues to grow². Our exports to the US grew from $48 billion in 1980 to $112 billion in 1990 and to $327 billion in 2003, or from 63% to 75% to 86% of our total exports. At the same time, our imports from the US have risen from $47 billion to $90 billion to $203 billion, but their share has steadily eroded, from 68% to 65% to 60%. Autos, machinery and engines, and electrical equipment account for almost 50% of total imports from the US in 2003, little changed from 54% in 1990. The US share of imports has shown only a loose relationship with the exchange rate, largely because the rapid integration of the two economies following the FTA overwhelmed the effect of a rising US dollar in the mid-1990s.

A recent study in this publication³ showed that adjusting for the one-third of our exports that come from imports lowers the overall dependence of GDP on exports from 43% to 29% in 1999. Furthermore, many of these imports are parts used in making autos, computers and electronics, for which the US supplies a relatively high share. Accounting for this reduces the share of the US in our exports by about three percentage points. By the same token, this same heavy trade in parts (conceivably the same part could cross the border two or three times) exaggerates the role of the US in our imports.

Figure 4

The ranking of the remaining countries has changed dramatically over time, reflecting the changing nature of both our economy and theirs. For example, where we once imported mostly low-value consumer non-durable goods and foodstuffs from countries such as Mexico, China and other Southeast Asian nations, we now receive predominately industrial goods, auto parts and machinery from them. Similarly, our reliance on the Middle East and Venezuela for oil has been supplanted by Norway and Algeria.

Table 2. Canada's imports by country

China was second in 2003, accounting for 5.5% of our imports, up from 0.3% in 1980 and 1% in 1990 (when it was our 11th largest source of imports). The surge illustrates their rapid industrialization. In 1990, our main imports from China were clothing, toys and leather goods. By 2003, electrical equipment and machinery dominated.

Japan had long been our second largest supplier of imports, surpassed by China only in recent years. Its share moved from 4% in 1980 to 7% in 1990 and back to 4% in 2003. Vehicles, industrial goods and machinery have consistently accounted for over three-quarters of their goods.

Mexico now places 4th in our imports, up from 9th in 1990 and 17th in 1980. North American free trade also boosted their trade with the US. Our imports jumped from $342 million in 1980 to $12.2 billion by 2003 while US imports from Mexico rose from $30 billion to $138 billion. Canada’s main Mexico imports are auto parts, equipment and machinery, accounting for about 70% in both 1990 and 2003.

The ranking of the large European nations changed little. The UK dropped from 3rd in 1990 to 5th in 2003. Oil from the North Sea was their primary export, at $2.8 billion in 2003. Machinery and autos from Germany left it 6th in Canada’s import share, down slightly from 4th in 1990 and unchanged from 1980. From France and Italy (8th and 9th), we receive industrial goods and machinery, as well as wine and aircraft.

Some notable changes occurred within Asian sources. We import a varied selection of goods from South Korea (7th in 2003, up from 13th in 1980) with autos and electrical machinery and equipment accounting for over half. Malaysia moved up to 13th spot from 26th in 1990 on the strength of industrial machinery and equipment. Increased industrialization boosted Thailand to 17th place from 25th in 1990 and 54th in 1980, although we continue to import fish. Taiwan lost import share over time, down to 11th from 7th in 1990.

Australia (19th) sends us chemicals and ores as well as wine and beef, although its share has fallen steadily from 11th place in 1980. Clothing and textiles and a surge in organic chemicals moved India up ten spots to 20th, although its overall share of imports remained minuscule at 0.4%. Belgium ranked 23rd as growing imports of autos and pharmaceuticals surpassed pearls and precious stones, partly displaced by Canada’s nascent diamond industry.

Comparing the leading 25 source of our imports in 2003 and 1980 shows many of the same countries, but some countries lost considerable ground. Saudi Arabia ranked 3rd in 1980 with $2.4 billion in oil, compared with 31st ($826 million) in 2003. Venezuela was 4th in 1980, also on the strength of oil, and now ranks 35th, as its oil went from $2 billion to $618 million. As mentioned earlier, the major sources of oil imports by Canada are now the US, Algeria, Norway, the UK and Iraq. Hong Kong went from 10th to 33rd as clothing imports slowed. South Africa, Cuba and New Zealand all fell out of the top 25 by 2003.

Conclusion

While Canada imports a wide variety of products from many parts of the world, the US has long been our biggest trading partner, and it still sells Canada eleven times more than China, our next largest supplier. The rapid industrialization occurring in South-east Asia, however, has begun to lead to a change in trading patterns. These countries’ ‘soft’ goods, such as textiles, toys, and food, are now being surpassed by ‘hard’ goods, such as iron and steel, machinery, and engines. Imports from Europe have expanded, while our reliance on oil from the Middle East and South America has declined.

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Notes

* Current Analysis (613) 951-3634.

1. The data used in this paper are on a customs basis, which measures the change in the stock of material resources of the country resulting from the physical movement of merchandise into or out of Canada. In the Balance of Payments, transactions are defined in terms of ownership change regardless of border.
2. This surplus was the counterpart to our capital account deficit, as US foreign investment helped finance Canada’s development.
3. See “The Import Content of Exports” in the December 2002 issue.