Update On Canada-China Trade

The sharp rise in exports during the first seven months of 2007 was the result of several factors. Accelerating Chinese demand, combined with higher world prices for metals, potash and canola, boosted industrial goods and agricultural exports. China also became Canada's number two export market for crude oil. Canada is clearly benefiting from the magnitude of China's demand for natural resources. The nation of more than 1.3 billion people is expanding its manufacturing base and building massive infrastructure projects, from ports and bridges to facilities for the 2008 Olympic Games. This demand has propelled world commodity prices to unprecedented levels. In 2007, metals prices were over three times higher than in 2002, and crude oil prices quadrupled to over $90 US per barrel. By pushing prices higher, China has boosted Canada's natural resource exports to other countries. Increasing exports to Europe and Asia, combined with relatively little growth in exports to the United States, resulted in a sharp increase in the share of Canada's exports held by countries other than the United States. Nearly one-quarter (24%) of Canada's exports headed to non-US destinations in 2007, compared with 16% just five years earlier. ... China leads Canada's trade diversification In recent years, exports to countries other than the United States have outpaced those to the United States. Given higher commodity prices pushed up by Chinese demand, exports of industrial goods to several European countries and China accounted for the major part of the shift in exports. Aircraft and other machinery, which are in high demand overseas, also had an impact. As a result of this sharp gain in exports overseas, Canada's exports have become increasingly diversified. Between 2002 and 2006, the United States' share of Canadian exports fell from its peak of 84% to 79%. During the first seven months of 2007, this share declined to 76%. Conversely, between 2002 and 2007, the share of Canada's exports to countries other than the United States rose sharply from 16% to 24%. The recent shift to increased trade with the rest of the world was well-timed, given the onset of the housing-induced slowdown south of the border. All regions of Canada have benefited from this shift in exports toward non-US countries. ... Canada's imports from China grew only 17% over the first seven months of 2007 compared to the same period in 2006. Canadian import values have been dampened by the stronger Canadian loonie vis-à-vis the Chinese currency, lowering Canada's import bill with China. Essentially, this means that Canadian companies can import the same quantity for less. The increase of 17%, which occurred in spite of lower prices, suggests a large increase in imported volumes. The study, "Trading with a giant: An update of Canada-China trade", is included in the November 2007 Internet edition of the Canadian Economic Observer, Vol. 20, no. 11 (11-010-XWB, free), now available from the Publications module of our website. The monthly paper version of the Canadian Economic Observer, Vol. 20, no. 11 (11-010-XPB, $25/$243), will be available soon. ... http://www.statcan.ca/Daily/English/071108/d071108b.htm

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