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31F0026MIE1996001

Destinations of manufacturing shipments 1996

Manufacturing, Construction and Energy Division

Étienne Saint-Pierre and Rowena Orok


Introduction

In 1996, the manufacturing sector posted $406 billion in shipments and the sector's gross domestic product (GDP) represented 17% of the GDP for all industries. As a significant component of the Canadian economy, structural changes and cost/production adjustments in this sector inevitably had a direct impact on economic conditions both at the national and provincial levels.

The pattern of destinations of manufacturing shipments has constantly evolved in response to the competitive challenges faced by the manufacturing sector. This article follows the concepts and definitions used in the 1995 article Destinations of manufacturing shipments 1984 -1993. Based on the Annual Survey of Manufactures (ASM), this update highlights the ASM results for 1996 and evaluates the changes in the destinations of shipments by province and by major manufacturing group. The analysis focuses on three major areas: exports, intra-provincial trade, interprovincial trade and relative trade balance.

Exports

Steady growth characterized the value of manufacturing shipments outside Canada in 1996, as total exports reached $159 billion. The corresponding share of exports, which has also been growing since 1984, expanded to 39% of total manufacturing shipments (Chart 1: Percentage value of manufacturing shipments exported). Thus, this expansion of exports established the increasing significance of foreign markets to the Canadian manufacturing sector.

A closer look at the export market showed that the United States continued to be the major destination for Canadian manufacturing exports. However, 1996 has also seen a 57% increase in shipments to other foreign destinations, from $18 billion to $28 billion between 1993 and 1996. This, in part, showed the widening foreign market base resulting from trade liberalization, declines in transport costs, and increased globalization.

By Province

All Canadian provinces increased their share of exports to total manufacturing shipments between 1993 and 1996, except for Ontario which experienced a slight decrease. As was the case since 1984, Newfoundland and British Columbia had the highest share of export manufacturing shipments in 1996, with shares of 56% and 46%, respectively. In particular, Newfoundland recorded the largest percentage increase in export shipments (14 percentage points) for the period 1993 to 1996. It was also the only province whose exports accounted for more than half of provincial manufacturing shipments.

Focussing on the long-term trend, most of the provinces experienced double-digit percentage point increases in the share of exports from 1984 to 1996 (Chart 1-Percentage value of manufacturing shipments exported). Nova Scotia and Manitoba posted a higher cumulative increase in export shares compared with the other provinces (19 percentage points each). Prince Edward Island, on the other hand, was the only province whose export share has remained relatively unchanged since 1984.

As in the previous years, manufacturing shipments from the Prairies were still least likely to be exported. The relatively longer distances separating these provinces from the main sea routes and large urban centres of the Northeast and Western Coast of the United States may provide a partial explanation for this. Major exporting industries establish local facilities to be able to have access to their markets at the lowest possible cost.

Nevertheless, export shares continued to improve for all three Prairie provinces from 1984 to 1996. During the recent period between 1993 and 1996, export levels in Saskatchewan and Alberta more than doubled, raising each province's share of export manufacturing shipments. For example, Saskatchewan's share of exports rose from 19% in 1993 to 29% in 1996. This increase was mainly due to the export growth in the food industries, Saskatchewan's top manufacturing industry.

By Industry

The bulk of Canadian manufacturing exports originated from the transportation equipment industries (33%) and the paper and allied products industries (12%). The combined export share of these top two industries, however, has decreased from over half of total manufacturing exports in 1993 to about 45% in 1996.

The decline was mainly attributed to slower export growth in the transportation equipment industries relative to other manufacturing industries. The share of exports, which has been over 70% since 1984, dropped to 60% in 1996 (Table 1- Percentage of export shipments). In effect, this major group posted one of the largest declines in export share during the period.

The paper and allied products industries, on the other hand, increased their export share to 62%, the highest posted by any major group in 1996. Another significant increase came from the electrical and electronic products industries whose share of exports rose by 13 percentage points to 59% of the industry's total manufacturing shipments.

Other industries that were closely tied with the external markets in 1996 included wood, machinery, and primary textile. In contrast, major groups such as printing, publishing and allied products, refined petroleum and coal products, and food comprised the industries that were highly oriented towards local markets.

At the 4-digit SIC level, the number of manufacturing industries exporting less than 20% of the value of their shipments continued to decline while those exporting over 20% increased (Chart 2 - Distribution of industries based on percentage of export shipments, all manufacturing industries). Specifically, more industries allocated between 20% and 40% of their shipments toward exports.

Intraprovincial Trade

By Industry

At the major manufacturing group level, the decrease in the percentage of total shipments to markets within the province of origin persisted in 1996. Only 8 out of the 22 major groups had manufacturing shipments where more than half stayed in the producing province (Chart 3 - Intraprovincial trade). Rubber products industries, transportation equipment industries, and tobacco products industries were the only major group which reported an increase in in-province shipments during the period from 1993 to 1996. This was consistent with the observed trend since 1984 wherein the majority of manufacturing products was more likely to be destined for places away from the province where they were produced.

Between 1993 and 1996, the same industries reported the highest proportion of in-province shipments - printing, publishing and allied products industries, beverage industries and non-metallic mineral products industries. In particular, in-province shipments for the top two industries made up over 70% of the industry's total manufacturing shipments. At the opposite end, in-province shipments in the electrical and electronic products industries and paper and allied products industries accounted for only one-quarter of manufacturing shipments.

 

Interprovincial trade and relative balance of interprovincial shipments

This section focuses on the trade patterns within Canada: manufacturing goods shipped to other provinces and manufacturing goods received from other provinces. Unlike the first two sections which are based on total manufacturing shipments, trade patterns among the provinces (domestic "exports" and "imports") are evaluated as a percentage of domestic shipments.

The analysis of the trends from 1984 to 1996 showed that the share of manufactured goods sold to Canadian provinces other than the place of origin has been increasing for majority of the provinces. Between 1993 and 1996, there were only four provinces where the share of "exports" to other provinces declined: Prince Edward Island, New Brunswick, Ontario and Quebec (Chart 4 - Share of domestic shipments destined for the rest of Canada). During the same period, the shares of domestic shipments to other parts of Canada were highest in New Brunswick (54%), Manitoba (50%), and Prince Edward Island (46%). The lowest shares of interprovincial shipments, on the other hand, were found in Newfoundland (19%), Ontario (20%), and British Columbia (23%).

In terms of manufactured goods "imported" by each province from the rest of Canada between 1993 and 1996, Ontario and Quebec maintained their self-sufficiency, receiving only 15% and 27%, respectively, of shipments from other provinces. These shares, however, were lower than those posted in 1993. Similarly, the 1996 percentage of shipments from other provinces have also gone down in most cases. At the other extreme, Prince Edward Island and Newfoundland continued to receive the highest percentage of shipments from the rest of Canada in 1996, at 75% and 71%, respectively.

Given the value of domestic "exports" and "imports," the relative balance of interprovincial manufacturing shipments can be calculated for each province (Table 2 - Long-term trend: Relative balance, provinces). In 1996, positive relative balances were again observed in Ontario (17%) and Quebec (14%), as the large number of manufacturing industries in these provinces continued to supply both in-province demand as well as demand from other provinces. A more notable change, however, was observed in Alberta. In 1996, the increase in Alberta's exports to the rest of Canada was significantly more than the growth of imports from other provinces. Its relative balance, thus, improved from a deficit of 6% in 1993 to a positive balance of 4% in 1996.

As Table 2 shows, provincial relative balance deficits were prevalent since 1984. However, a comparison of 1984 and 1996 relative balances in Table 2 indicate a decrease in these deficits for most of the provinces. The most notable improvements were observed in Alberta, Saskatchewan and New Brunswick.

Table 2: Relative balance, provinces

1984

1990

1993

1996

%

%

%

%

NFD

-80

-81

-84

-83

P.E.I.

-65

-75

-43

-55

N.S.

-23

-28

-33

-25

N.B.

-23

-14

-2

-13

QUE.

12

11

10

14

ONT.

24

24

23

17

MAN.

-30

-14

-22

-22

SASK.

-57

-37

-41

-36

ALTA.

-18

-17

-6

4

B.C.

-35

-42

-47

-39

Source: Annual Survey of Manufactures, Manufacturing, Construction and Energy Division

It is important to note that the above discussion concentrated specifically on the trade patterns in the manufacturing sector. Negative balances of interprovincial shipments of manufacturing goods may be counterbalanced by positive balances in natural resources and services as well as by federal government transfers to disadvantaged provinces and individuals.


Conclusion

As the market for Canadian manufacturing products continued to grow, manufacturing shipments in 1996 were more often destined for markets outside their province of origin. The majority of the provinces and industries experienced a boost in the value of foreign exports as well as interprovincial trade for 1996. In particular, the rise in the propensity to export outside Canada was supported by fewer trade barriers as well as lower exchange rates for the Canadian dollar.


Definitions

17% of the GDP: Calculated based on GDP at factor cost, constant dollars (1992 prices).

Destinations of manufacturing shipments 1984-1993: Saint-Pierre, Etienne "Destinations of manufacturing shipments 1984-1993," Products shipped by Canadian manufacturers, 1995 (Statistics Canada, Catalogue 31-211-XPB).

Destinations of manufacturing shipments: The Annual Survey of Manufactures (ASM) uses the "first destination" concept. Respondents were asked to report the first destination to which goods were shipped. This might be the location of a wholesaler or other distributor or the final user of the product.

4-digit SIC level: The fourth level of aggregation in the 1980 SIC represents the industry Class. For further information, refer to Standard Industrial Classification (SIC) 1980, Statistics Canada, Catalogue No. 12-501-XPE.

Relative balance: The relative balance of interprovincial manufacturing shipments is calculated by dividing the excess or deficit of interprovincial shipments by the sum of all the shipments from one province to the rest of Canada and all the shipments which this province received from the rest of Canada.


This article was written by Étienne Saint-Pierre and Rowena Orok.  Étienne and Rowena are Statistics Canada economists in the Manufacturing, Construction and Energy Division.

Further information on Canadian manufacturing can be found in the publication, Products Shipped by Canadian Manufacturers (Cat. 31-211-XPB).  This publication is available annually for $67 per issue in Canada and for $67 U.S.   outside Canada.   Order this publication by telephone:  1-800-267-6677, by fax: 1-800-889-9734, or by Internet: Order.  For more information about manufacturing data or time-series call the Disclosure and Dissemination Unit, Manufacturing, Construction and Energy Division at (613) 951-9497 or by Internet:  manufact@statcan.gc.ca.





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