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SUPPLEMENT
CanadExport
Canadian Trade Review
A Quarterly Review of Canada’s Trade Performance
First Quarter 2003
This quarterly review reports on Canada’s economic growth in the first quarter of 2003, and
highlights our trade and investment performance in key sectors and markets.
Energy Fuels Export Expansion while
Imports Decline
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The Canadian economy continued to expand in the
first quarter of 2003, with real gross domestic product
(GDP) increasing by 2.4% on an annualized basis.1
The economy thus showed more robust growth than
the 1.6% expansion registered in the fourth quarter
of 2002; the Canadian rate was also ahead of the
preliminary 1.9% rate registered in the U.S. for the
same period. Strong inventory build-up was the
primary factor sustaining Canadian economic growth
for the quarter, supported by sustained consumer
spending. Expenditure on housing and related
renovations continued to expand, while spending on
durable goods—in particular motor vehicles—levelled
off in comparison to the previous quarter.
Nevertheless, with respect to production, performance
in the manufacturing sector was mixed. Although
manufacturers of motor vehicles and parts expanded
their production in the quarter, weaknesses in other
sectors were evident; slowing sales in the weaker
sectors contributed to the inventory build-up. |
| Table 1: Canada's Economic and Trade Indicators |
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Percent Change at Annual Rates
First Quarter 2003 over Fourth Quarter 2002 |
| Real GDP (annualized) | 2.4 |
| Employment (quarterly increase, level) | 67,300 |
| Rate of Unemployment (quarterly average) | 7.4 |
| Consumer Price Index (first quarter 2003 over first quarter 2002) |
| All Items | 4.5 |
| Core (excludes food and energy) | 3.1 |
| Canadian $ in U.S. funds (average for quarter, level) | 0.6624 |
| Exports of Goods and Services (annualized, current dollars) | 0.5 |
| Imports of Goods and Services (annualized, current dollars) | -5.4 |
| Source: Statistics Canada |
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In current dollar terms, exports of goods and services grew by
0.5% in the quarter, compared to a 0.4% decline in the
previous quarter. A steep rise in energy exports was offset by
declining exports in other goods sectors and in services exports.
Imports declined by 5.4% in the quarter—the result of falling
goods and services imports in most sectors.
Canada’s current account improved in the first quarter. In
addition to the improvement in the trade balance, reduced (net)
interest payments to owners of inward Foreign Direct Investment
(FDI) in Canada also contributed to the improvement.
Strong job creation continued in the first quarter of 2003, with a
net quarterly increase of 67,300 jobs. Although full-timepositions continued its strong expansion at 84,600 jobs, parttime
positions declined. The average unemployment rate for the
first quarter was 7.5%, comparable to the 7.6% rate recorded
in the third quarter of 2002, but up somewhat from the 7.0%
registered in the previous quarter.
The average twelve-month increase in the overall Consumer
Price Index (CPI) was 4.5% during the first quarter of 2003, up
from 3.8% in the last quarter of 2002. Similarly, the average
core items CPI rate (excluding food and energy) reached 3.1%
over the quarter, up from 2.8% recorded in the previous
quarter.
The average U.S dollar value of the Canadian dollar over the
first quarter of 2003 was US$ 0.6624– a 4.0% appreciation from
the US$ 0.6370 average for the fourth quarter of 2002.
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Trade and Investment Highlights
Energy Sector Exports Rise, Mediocre Performance Elsewhere
Exports of Canadian goods and services expanded by 0.5% in the first
quarter (Figure 1). A 2.4% increase in merchandise exports was offset by a
11.9% drop in services exports. Imports of goods and services fell by 5.4%,
reflecting declines in both commodity and services imports.
Although merchandise exports did expand in the first quarter, increased
energy exports masked deteriorating export performances in the other goods
sectors. Price increases in the energy sector, particularly in the price of
natural gas, resulted in the highest level of quarterly energy exports in the last
two years (Figure 2). Elsewhere in the economy, export declines were
especially pronounced for forestry products (down 19.5% or $1.9 billion) and
industrial goods (down 11.2% or $2.0 billion). Merchandise imports of energy
products also expanded (up 27.9% or $1.2 billion) and were up for
agricultural products (9.0% or $0.5 billion), but these gains were more than
offset by steep declines in imports of machinery and equipment (down 14.1%
or $4.0 billion) and automotive products (down 7.7% or $1.7 billion).
Merchandise exports to the US increased slightly, up by 1.0% or $0.9
billion, in the quarter. Increased merchandise exports to the European
Union (up $2.4 billion) and non-OECD countries (up $1.2 billion) were the
major factors contributing to the regional gains for merchandise exports in
the quarter, while goods exports to Japan fell by $0.3 billion and those to
Other OECD countries declined by $1.7 billion.
Merchandise imports from the US experienced a substantial decline in the
quarter , down 6.4% or $4.2 billion. Further abroad, a $0.7 billion increase in
imports from the EU was insufficient to offset substantive declines in all
other major markets.
With exports growing and imports falling, the Canadian merchandise trade
balance expanded by $7.6 billion in the quarter. At $5.0 billion the
merchandise trade balance with the US registered the largest increase. The
merchandise trade balance with the EU improved by $1.7 billion—entirely
due to an improvement in the trade balance with the UK. A decline in the
merchandise trade balance with Other OECD countries (down $1.2 billion)
was more than offset by improvements in the trade balance with Japan and
non-OECD countries.
Services Trade Deficit Worsened
As noted above, services exports fell by 11.9% in the first quarter, primarily
due to declines in travel (down 19.5% or $900 million), transport services
(down 20.2% or $644 million) and commercial services. Advances in
government services exports limited the overall losses (Figure 3). Services
exports to the US and Japan fell in particular. Services imports also fell in
the first quarter, but, at 4.7%, the decline in services imports was more
moderate than the rate of decline in services exports. The most pronounced
declines were for imports of transport services (down 16.8% or $660 million)
and for travel services imports (down 5.8% or 276 million). A $140 million
increase in imports of commercial services was insufficient to offset the
declines in imports in all other services sectors.
Because services exports declined at a more rapid rate than services
imports, the deficit on services trade widened to $8.1 billion in the first
quarter—up from $7.1 billion in the previous quarter.
Outward Foreign Direct Investment (FDI) Flows Exceed Inward FDI Flows
Canadian Direct Foreign Investment Abroad (CDIA) was $5.6 billion in the
first quarter of 2003 - down from $6.7 billion recorded in the first quarter in
2002. Although the energy and machinery & transport sectors registered
increases in quarterly flows compared to the same quarter a year earlier,
declining quarterly flows in the finance & insurance and in the services &
retailing sectors more than offset these gains. In terms of destination,
outward flows to the US and the EU increased, but were down for all other
major markets.
Foreign Direct Investment (FDI) flows into Canada amounted to $3.1 billion
in the first quarter of 2003 - less than one fifth of the $16.8 billion registered
in the same quarter a year earlier. Most of the decrease in FDI flows
occurred in the energy and machinery & transport sectors, which were
down some 90% over the same quarter last year. The reduction in FDI
flows stemmed from a decline in FDI from the US, which lowered its inflows
to $1.5 billion in the first quarter of 2003 from $15.5 billion in the same
quarter the previous year. Only partially offsetting this decline was the reestablishment
of $0.4 billion in FDI from the UK, which was absent in the
first quarter of 2002. Overall, outward flows exceeded inward flows in the
first quarter by $2.6 billion, a reversal of the situation in the same quarter
the previous year when FDI exceeded CDIA by some $10.1 billion.
Canada Draws Down on Its Official International Reserves
Canada reduced its official reserves of assets in the first quarter of 2003 by
$2.7 billion, compared with an $696 million increase recorded in the same
quarter in 2002.
Canada’s Exports to the United States by Province of Origin
This special feature reviews Canada's
merchandise exports to the United States on a
provincial basis to determine to what extent the
provincial origin of exports to the US corresponds
with the province of clearance, i.e. the
geographic location where the exported goods
are deemed to have left Canada to enter into the
US. The data used provides information on three
distinct modes of transport for exports to the US;
road, rail and other modes (the latter thus
includes mail, air, sea and pipeline).
Canadian Exports to the US by Province
Table 1 shows total Canadian merchandise
exports to the United States by province for the
year 2002. The table presents provincial export
shares by Province of Origin and by Province of
Clearance, where Province of Origin denotes the
province in which the good was extracted,
manufactured, or grown, while Province of
Clearance represents the province where the
border crossing took place and the good
physically crossed the border into the US.
From Table 1, it is clear that Ontario and Québec
account for the bulk of merchandise exports to
the US -- accounting for roughly three-quarters
of the total exports by either measure. In terms
of provinces producing goods for export to the
US, Ontario produced 55.8% of the total
Canadian exports to the US and Québec for
another 16.6%. By the gauge of where the
goods left Canada and entered the United States,
65.8% of Canadian merchandise exports to the
US traversed the border from an Ontario border
crossing and a further 11.0% from a Québec
border crossing.
The last column of Table 1 establishes a simple
relationship between the shares by Province of
Origin and by Province of Clearance. If the
difference between the two is positive
(that is, the share of the Province of
Origin less the share of the Province of
Clearance), then the province produces
a greater share of goods for export to
the US than actual goods are cleared
through the province. Thus, Québec,
the Atlantic provinces (with the
exception of New Brunswick), and,
particularly, Alberta, produce more for
export to the US than crosses the
border from their respective provinces.
On the other hand, the Western
provinces (except Alberta) and,
especially, Ontario clear relatively more
goods from their border crossings than
they produce for export to the US.
Of course, there are many reasons why
goods produced in one province are not
exported from that province. For
example, pipeline exports of oil and gas
can only cross the border where the
pipeline networks cross the border
between the two countries. Further, exports
that take place via mail may be routed to
regional or national centres and then
transported across the border from these
depots. Simple geography also helps to
influence the pattern of provincial export
production and border crossing. In the next
section, the cross-provincial reliance on other
provinces for clearance of goods is examined.
| Table 1: Canadian Exports to the United States, Year 2002 |
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| All Modes of Transport |
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Province of Origin |
Province of Clearance |
Province of
Origin
compared to
Clearance |
| EX $ million |
Share |
EX $ million |
Share |
| Canada | $346,457 | 100.0% | $346,457 | 100.0% | |
| Newfoundland and Labrador | $4,160 | 1.2% | $1,162 | 0.3% | 0.9% |
| Prince Edward Is. | $626 | 0.2% | $36 | 0.0% | 0.2% |
| Nova Scotia | $4,507 | 1.3% | $3,558 | 1.0% | 0.3% |
| New Brunswick | $7,383 | 2.1% | $8,719 | 2.5% | -0.4% |
| Quebec | $57,344 | 16.6% | $38,072 | 11.0% | 5.6% |
| Ontario | $193,308 | 55.8% | $228,031 | 65.8% | -10.0% |
| Manitoba | $7,678 | 2.2% | $15,042 | 4.3% | -2.1% |
| Saskatchewan | $7,011 | 2.0% | $13,501 | 3.9% | -1.9% |
| Alberta | $43,877 | 12.7% | $12,382 | 3.6% | 9.1% |
| British Columbia | $20,516 | 5.9% | $25,934 | 7.5% | -1.6% |
| Northern Territories | $48 | 0.0% | $20 | 0.0% | 0.0% |
Cross-provincial Clearance of Exports to the US
Table 2 presents a cross-tabulation of export to
the US by Province of Origin and Province of
Clearance for 2002. The diagonal (in bold)
indicates the extent to which goods produced in
a province are physically exported (i.e., cleared
at the border) from that province. Of note from
this table is the strong role Ontario plays in
clearing goods from other provinces, especially
for goods of Québec origin. This also helps to
explain why Ontario's share in exports by
Province of Clearance in Table 1 was 10
percentage points higher than its share in
exports by Province of Origin.
In terms of self-importance of producing and
exporting goods (i.e., the diagonal entries of
Table 2), Ontario cleared some 94.4% of its
exports to the US in 2002 followed by BC
(72.7%) and Manitoba (71.1%), New Brunswick
(56.8%) and Quebec (54.9%). The Atlantic
provinces, with the exception of Newfoundland &
Labrador, favour New Brunswick as their primary out-of -province
point of clearance, followed by Ontario - i.e.
Quebec played a limited role as a point of
clearance for exports to the US from the Atlantic
provinces in 2002. As much as 43.5% of Quebec
exports to the US in 2002 were cleared through
Ontario in 2002. Although Manitoba cleared over
70% of its exports to the US in the province in
2002 it also relied on Ontario to clear 19.9% of
its US exports and on BC to clear 4.3%. Both
Saskatchewan and Alberta have a fairly wide
geographic spread of clearing their exports to the
US, which incorporates Ontario, the Prairies and
BC. Transportation of fossil based energy exports
(oil and gas) from Saskatchewan and Alberta by
pipeline, which largely enters the US in other
provinces, is a major factor contributing to the
wide geographic dispersion of province of
clearance for exports originating from Alberta and
Saskatchewan. Based on US data for imports
from Canada by province2 for goods transported
by surface freight, which includes pipelines,
Alberta accounted for 84.7% of US imports from
Canada transported by pipeline in 2001 while US
imports of energy products originating in Alberta
accounted for 72.6% of total US imports from
Alberta the same year. As noted, BC clears over
70% of its export production within the province,
but also relied on Ontario to clear 12.1% and
Saskatchewan to clear 8.8% of provincially-produced
goods last year.
| Table 2: Provincial Origin of Exports to the US versus Province of Clearance |
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| Province of Origin |
| | NFL & Labrador | P.E.I. |
Nova Scotia | NB | Quebec | Ontario | Man. | Sask. | Alberta | B.C. | N.T. |
| Province of Clearance |
| Newfoundland and Labrador | 26.6% | N/A | 0.0% | 0.2% | 0.0% | 0.0% | N/A | 0.0% | 0.0% | 0.0% | N/A |
| Prince Edward Is. | N/A | 5.7% | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| Nova Scotia | 25.4% | 0.1% | 5.8% | 19.1% | 0.3% | 0.3% | 0.4% | 0.1% | 0.1% | 0.2% | 0.0% |
| New Brunswick | 12.0% | 81.0% | 56.4% | 56.8% | 0.4% | 0.3% | 0.3% | 0.1% | 0.0% | 0.2% | 0.4% |
| Quebec | 14.5% | 1.4% | 6.3% | 5.4% | 54.9% | 2.0% | 1.1% | 0.5% | 1.8% | 3.0% | 0.0% |
| Ontario | 2.4% | 11.4% | 29.0% | 13.8% | 43.5% | 94.4% | 19.9% | 23.1% | 28.3% | 12.1% | 31.6% |
| Manitoba | 0.0% | 0.1% | 0.0% | 0.1% | 0.1% | 0.8% | 71.1% | 21.4% | 13.6% | 2.4% | 0.8% |
| Saskatchewan | N/A | 0.0% | 0.0% | 0.0% | 0.0% | 0.3% | 1.3% | 29.4% | 20.4% | 8.8% | 0.3% |
| Alberta | 0.0% | 0.0% | 0.0% | 0.1% | 0.1% | 0.5% | 1.6% | 20.8% | 21.8% | 0.6% | 34.2% |
| British Columbia | 19.1% | 0.3% | 2.5% | 4.6% | 0.7% | 1.3% | 4.3% | 4.7% | 13.9% | 72.7% | 10.3% |
| Northern Territories | N/A | N/A | N/A | N/A | 0.0% | 0.0% | N/A | 0.0% | 0.0% | 0.0% | 22.4% |
Provincial Exports to the US by Mode of Transport
As alluded to earlier, differences between
provincial exports by Province of Origin and by
Province of Clearance might be affected by the
method, or mode, of transport (MoT) across the
border. Table 3 shows exports to the US by
Province of Origin for three types of transport --
road, rail, and all other types of transportation
(including air, sea, pipeline, and mail) -- for last
year. Exports to the US transported by road or
rail in 2002 exhibit a similar pattern in respect of
provincial origin; Ontario has an overwhelming
lead accounting for about two thirds of the value
of all shipments, followed by Quebec, BC and
Alberta. However, for Other MoT, energy exports
by pipeline plays an exceedingly important role
and Alberta accounted for as much as 42.6% in
2002. Shipments to the US from Ontario and
Quebec by Other MoT predominantly reflect
exports to the US by air.
| Table 3: Provincial Origin of Exports to the US by Mode of Transport, 2002 |
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Provincial share of
Canadian
Exports to the US, $ |
| Road | Rail | Other |
| Newfoundland and Labrador | 0.3% | 0.0% | 4.9% |
| Prince Edward Is. | 0.3% | 0.0% | 0.1% |
| Nova Scotia | 1.3% | 0.9% | 1.8% |
| New Brunswick | 1.4% | 1.3% | 5.0% |
| Quebec | 19.2% | 11.7% | 14.3% |
| Ontario | 64.4% | 67.9% | 20.3% |
| Manitoba | 2.6% | 1.7% | 1.8% |
| Saskatchewan | 1.1% | 2.8% | 3.7% |
| Alberta | 4.0% | 6.2% | 42.6% |
| British Columbia | 5.6% | 7.3% | 5.4% |
| Northern Territories | 0.0% | 0.0% | 0.0% |
Canadian Exports to the US by Port of Clearance
With the bulk of merchandise exports crossing
from Ontario, it comes as no surprise that the
three customs stations that handle the most
exports are all situated in this province (Table 4).
The three border crossings -- Windsor's
Ambassador Bridge, Sarnia, and Fort Erie --
accounted for almost $191 billion of bilateral
goods exports, or just under one-half of total
Canadian exports to the US in 2002. That is,
these three customs clearance stations processed
nearly two-thirds of all exports transported by
road, and nearly three quarters of all exports
shipped by rail. However, they accounted for
only about one-eight of merchandise exports not
sent by road or rail.
A few border crossings are dominated by exports
shipped by road transportation in 2002:
Lansdowne (ON) (100.0%), Philipsburg (QC)
(87.0%), Lacolle (QC) (83.5%), the Ambassador
Bridge (ON) (76.7%), Pacific Highway (BC)
(76.6%), and Fort Erie (ON)(74.5%). Rail
dominated goods cleared at Fort Frances (ON)
(87.2%) and accounted for about half the value
of goods cleared through Sarnia (ON) and North
Portal (SK) last year. Exports to the US by other
modes of transportation are dominated by air
shipments and the transfer of fossil fuels by
pipeline. Pearson Airport in Toronto and Mirabel
Airport outside of Montreal combined to account
for about one-quarter of all exports to the US by
other modes of transport. Pipeline shipments
accounted for an overwhelming share of exports
to the US through Monchy (99.7%) and Gretna
(98.5%) last year. Significant amounts of energy
exports were also cleared through Huntington
(B.C.), Coutts (Alberta), and Emerson (Manitoba).
However, Sarnia cleared the greatest value of
energy exports to the US by pipeline in 2002,
although the large values of exports by road and
rail also cleared through Sarnia masks this fact .
When totaled, the 16 customs clearing posts
listed in Table 4 collectively accounted for over
75% of the total value of merchandise exports
to the US in 2002. They cleared 92.3% of the
value of all goods shipped by road last year, as
much as 96.1% of all exports to the US
shipped by rail, and over 60% of all exports by
other modes of transport.
| Table 4: Canadian exports to the US by Port of Clearance, 2001 |
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| |
All Mode of Transport | Of which Exported by |
|---|
| Eports |
Share of Canadian |
Cumulative |
|
|
Air,mail,pipeline |
| Rank | Port of Clearance | Province | $ million | Exports | share | Road | Rail | sea & other |
| 1 | Windsor - Ambassador Bridge | Ontario | $76,995 | 19.4% | 19.4% | 76.7% | 19.0% | 4.3% |
| 2 | Sarnia | Ontario | $63,778 | 16.1% | 35.5% | 44.2% | 48.0% | 7.7% |
| 3 | Fort Erie | Ontario | $50,016 | 12.6% | 48.1% | 74.5% | 23.1% | 2.4% |
| 4 | Lacolle | Quebec | $17,601 | 4.4% | 52.6% | 83.5% | 6.4% | 10.1% |
| 5 | Pacific Highway |
British Columbia | $12,347 | 3.1% | 55.7% | 76.6% | 19.9% | 3.6% |
| 6 | Lansdowne | Ontario | $11,072 | 2.8% | 58.5% | 100.0% | 0.0% | 0.0% |
| 7 | Emerson | Manitoba | $10,755 | 2.7% | 61.2% | 63.3% | 15.5% | 21.2% |
| 8 | Coutts | Alberta | $9,519 | 2.4% | 63.6% | 63.0% | 5.8% | 31.2% |
| 9 | Toronto - Pearson Int. Airport | Ontario | $9,024 | 2.3% | 65.9% | 0.0% | 0.0% | 100.0% |
| 10 | Montréal -
Mirabel Int.
Airpor | Quebec | $7,733 | 2.0% | 67.8% | 0.0% | 0.0% | 100.0% |
| 11 | Fort Frances | Ontario | $7,520 | 1.9% | 69.7% | 6.2% | 87.2% | 6.6% |
| 12 | North Portal | Saskatchewan | $6,013 | 1.5% | 71.3% | 48.7% | 48.0% | 3.3% |
| 13 | Philipsburg | Quebec | $5,136 | 1.3% | 72.5% | 87.0% | 12.3% | 0.8% |
| 14 | Huntington | British Columbia | $4,473 | 1.1% | 73.7% | 34.2% | 3.0% | 62.8% |
| 15 | Monchy | Saskatchewan | $3,799 | 1.0% | 74.6% | 0.3% | 0.0% | 99.7% |
| 16 | Gretna | Manitoba | $3,461 | 0.9% | 75.5% | 1.5% | 0.0% | 98.5% |
| | All ports | CANADA | $346,457 | 100.0% | 100.0% | 56.9% | 21.9% | 21.2% |
1. To make quarterly data comparable to annual data, the quarterly figures for trade in goods and services are adjusted for seasonality and are
expressed at annual rates by raising them four times, i.e. seasonally adjusted annual rates - s.a.a.r. All figures, with the exception of investment
figures, are expressed on an s.a.a.r. basis, unless otherwise noted.
2. US Department of Transportation, Transportation Statistics from the Transborder Surface Trade Database
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