Canada’s trade picture

In 2005, the U.S. accounted for 70% of Canadian total exports; in 2009 this had dropped to 63% -- in terms of volume, forgetting the impact of Canada’s stronger currency.  Trade with Europe and emerging markets, still small (each less than 1/6^th the size of the US/Canada trade flow) is growing quickly.  China that was nowhere in 2000 as an exporter to Canada is now the third largest (after the U.S, and EU).  As a percentage of GDP trade is ¼ smaller than it was in 2000 at 30% instead of 40% of GDP, but a great portion of that drop is the result of the appreciation of the Canadian dollar – a monetary impact, not so much one in terms of economic significance.  Canada is the world’s ninth largest exporter and the tenth largest importer, and 20% of all Canadian jobs are related to trade.

Some overall characteristics of the Canadian export sector:

(1)               Canada export sector remains deeply reliant on the U.S. as an export market, despite the increased barriers the Americans have added after 9/11 on the exports of goods (services are another issue).  First and foremost the two economies are deeply intertwined – a fact made clear during the 2008 crisis when many US infrastructure projects needed permission to buy Canadian products because there was no American equivalent. 

(2)               Canada’s trade is rapid growth of raw material exports at the expense of processed good.  This is a growing issue for Canada, since the value added (after mining) is processing.  As an example it’s not the bauxite miner that makes the cash it’s the aluminum smelter.

Canada’s dilemma is although merchandise trade is a smaller portion of the GDP it remains an important component.  A world that appears to become more protectionist (see the recent action by China on rare metals) a country that is as open as Canada is vulnerable.