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As one of the most important economies in the world, Canada’s international trade has distinctive characteristics. Rich resources and small population size determine that its economic industry is relatively easy to meet China’s demand and has a sensitive response to changes in the external market. Of course, for Canada, the continuous border makes it highly dependent on the U.S. economy.
Under the impact of covid-19 epidemic, Canada’s economy is also facing challenges, but it has shown a good recovery trend this year. According to the latest data, both imports and exports of Canadian goods trade grew rapidly, with exports growing by 6.4% month on month and imports increasing by 5.3%. As a result, Canada’s goods trade surplus expanded from US $1.4 billion in September to US $2.1 billion in October, becoming the largest surplus in 2021.
The rapid growth of Canadian exports is mainly driven by two categories of products – vehicles (including passenger cars and light trucks) and energy products. Canada’s total exports in October reached 56.2 billion US dollars, a new high, about one sixth of China’s; The total import volume is 54.1 billion US dollars, about a quarter of that of China. Vehicles and parts accounted for two-thirds of Canada’s October export increment. Energy products were the second largest driver of Canada’s rapid export growth in October. The export of energy products increased by 9.8% year-on-year to US $13.9 billion, even exceeding the historical peak of US $1 billion in 2014. Among them, crude oil exports contributed the most, with an increase of 11.6% to US $9.8 billion with the rise of prices. Canada’s coal export also hit a record high, with a month on month increase of 62.8%, and the export price doubled compared with July. In addition, Canada’s exports of Shenzhen Agricultural Products Group Co.Ltd(000061) and fishery products increased by 5.6% in October, of which rapeseed exports doubled, with the highest exports to China, Japan and Mexico.
Compared with exports, Canada’s imports are outstanding in three categories of goods. First, the import of vehicles and parts increased by 27.2% over the previous month, basically recovering the decline caused by supply chain problems (mainly semiconductors) and providing two-thirds of the import increment. Secondly, Canada’s consumption also recovered moderately in October. Although the growth rate in October was only 4.5%, it was the third consecutive month of recovery. Canada’s imports of clothing, shoes and accessories increased by 15.4% over the previous month, and Asian countries are its main source of imports. Drug imports increased by 6.6% year-on-year due to the expansion of covid-19 vaccine imports. Finally, the import of energy products in October increased by 14.9% over the previous month, mainly due to the decline of refinery refining capacity caused by the impact of Hurricane IDA on the crude oil production capacity of the United States in September. Canada increased the import of petroleum refining products in October to make up for the gap in market supply.
Under the multiple constraints of geographical location, supply chain and economic and trade rules, Canada’s foreign trade and even China’s economy are directly and significantly affected by the United States. Most of Canada’s import and export growth in October was due to the growth of US Canada trade. In terms of growth scale, Canada’s exports to the United States increased by 6.9%, reaching a new high of US $42.2 billion, accounting for 75.1% of its total exports; Imports from the United States increased by 9.1% to US $33.9 billion, accounting for 62.7% of its total imports. In contrast, Canada’s exports to countries other than the United States increased by only 5.0% in October. Among them, the main growth commodities are rapeseed and coal exported to China, iron ore exported to South Korea and gold exported to Hong Kong, China. The difference is more obvious. Canada’s imports from countries other than the United States fell by 0.6% in October. Even though the number of mobile phones imported from China has increased, the decline in turbine engines imported from Japan is still greater. On the contrary, the substitution effect of trade is more obvious when Canada’s imports from the United States increase. Canada’s economy is increasingly dependent on the United States.
From the commodity structure and country structure of Canada’s trade, it can be seen that the driving force of its economic development is relatively limited to a few industries, and the automobile industry and energy industry have the highest impact weight on its economy. In order to form a supply chain with American multinational corporations, the layout of Canadian automobile industry should focus on the American market. In recent years, with the decline of American traditional manufacturing (especially automobile manufacturing) in the northern Great Lakes region, Canada has been significantly affected and impacted. In order to pursue lower costs and higher profits, some international automobile manufacturers have moved more supply chain links from Canada to Mexico, thus forming the industrial hollowing out in some parts of Canada. The greater impact comes from the emergence of new energy vehicles and the rapid rise of their market share. The development space of fuel vehicles has been more squeezed during the Biden administration. It is expected to reduce the trade scale of vehicles and parts between Canada and the United States in 2022.
In fact, as early as the era of former Prime Minister Trudeau, Canada has been implementing the diversification strategy of economic development, including energy diversification. However, due to the low cost of enjoying the U.S. economic radiation and the strong growth of the U.S. economy in the world for decades, Canada lacks enough courage and motivation to truly achieve the goal of diversification. On the contrary, the Canadian economy is more dependent on the United States. In recent years, the US economy has risen sluggishly, structural problems have become more prominent, and the original growth dividend has gradually become negative assets. During the trump period, Canada was pressured by tariffs on steel and aluminum products to make concessions on the opening of dairy products and cork markets, further undermining Canada’s economic autonomy. The twists and turns of cross-border oil pipelines have weakened the competitive advantage of Canada’s energy industry. Canada is not only directly affected by industry, employment and trade activities, but also by the negative impact of the U.S. economic slowdown and prominent supply chain problems in areas such as maritime logistics. Similar to San Francisco and Los Angeles in the west of the United States, the loading and unloading speed of Vancouver Port has slowed down significantly and the freight rate has risen, which makes the original trade model of Canada face great challenges.
Canada’s recent foreign trade data show that other countries, including China, can provide more stable and differentiated market demand. Perhaps, for farmers and enterprises in Canada, changing the original development mode of making fast and easy money, creating a more stable economic and trade cooperation mechanism, reducing the distortion of government policies on market resource allocation, establishing a stronger and diversified supply chain network and forming more stable market expectations may be more in line with their long-term development interests.
(the author is a researcher of the Research Institute of the Ministry of Commerce)
(International Business Daily)
