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•	Policy Overview
•	Transportation in Canada Annual Reports
•	Table of Contents
•	Report Highlights
•	1. Introduction
•	2. Transportation and the Canadian Economy
•	3. Government Spending on Transportation
•	4. Transportation and Safety
•	5. Transportation - Energy and Environment
•	6. Transportation and Regional Economies
•	7. Transportation and Employment
•	8. Transportation and Trade
•	9. Transportation and Tourism
•	10. Transportation Infrastructure
•	11. Structure of the Transportation Industry
•	12. Freight Transportation
•	13. Passenger Transportation
•	14. Price, Productivity and Financial Performance in the Transportation Sector
•	Minister of Transport
•	Addendum

Transport Canada

8 TRANSPORTATION AND TRADE

International Trade

Trade flows are one of many ways to illustrate interactions between Canada and other countries. Comparing east-west interprovincial trade flows with north-south international trade flows reveals the increasing importance of outside markets to the provincial economies.

From 1992 to 1998, international exports and imports grew at an average annual rate of 11.9 per cent and 10.9 per cent, respectively. Interprovincial trade, on the other hand, grew at a more modest rate of 4.7 per cent. International exports and imports almost doubled, with exports rising from $181 billion to $356 billion, and imports jumping from $184 billion to $343 billion.

Figure 8-6 shows trends in interprovincial trade versus exports and imports from 1992 to 1998.

Composition of Imports and Exports

From 1992 to 1998, goods dominated international exports and imports, with a share over services ranging from 82 to 84 per cent. In 1998, goods traded by Canada at the international level were estimated at $590 billion, while services were valued at $110 billion.

Main services traded by provinces at the international level were business and finance ($41 billion), transportation ($28 billion), trade wholesaling ($13 billion), and personal/miscellaneous services ($13 billion). Goods were concentrated into manufactured products and fabricated materials, totalling nearly 90 per cent of the total. The share of primary goods fell from 11 to eight per cent over this period.

Figure 8-7 shows Canada's external trade by type from 1992 to 1998.

Trade Flows and Modal Choice

To examine the relation between trade flows and the choice of modes, the trade flows of goods will be explored in two ways: Canada's trade with the US and Canada's trade with other countries.

Canada-US Trade

Impact of Canada-US Trade

Canada's trade with the US has been a driving force in the overall performance of its economy and trade activities. From 1992 to 1998, the share of exports to the US rose from 77 to 85 per cent of Canada's total exports. At the same time, the share of imports from the US increased from 65 to 68 per cent of Canada's total imports from all countries.

From 1992 to 1998, exports to the US soared from $126 billion to $270 billion, an annual growth rate of 13.6 per cent. At 4.6 per cent, the average growth of exports to countries other than the US was more modest, a situation partially explained by the Asian and Latin American currency crises and a recession that took a heavy toll on the economies in these regions during 1998.

Imports from the US grew by an average annual rate of 13.3 per cent, jumping from $96 billion to $204 billion. As for imports from countries other than the US, the average growth rate reached 10.7 per cent.

Modal Split

Trucking and rail were the main modes of transportation for transborder trade.Note 5 In 1998, the trucking mode dominated Canada's trade with the US, at 63 per cent of exports and 80 per cent of imports. This was followed by rail, at 21 per cent of exports and nine per cent of imports. The pipeline mode (included in "Other" mode) ranked third in carrying exports to the US, while air took second place in imports.

From 1992 to 1998, the trucking and air modes registered a slight increase in their shares (mainly in exports), while rail and marine experienced a decline, both growing at a slower pace than trucking and air.

Table 8-5 shows Canada's exports to and imports from the US by mode and sector.

Canada-US Trade by Region

In 1998, four provinces captured 93 per cent of Canada's trade with the US. Ontario dominated with 65 per cent of transborder trade, accounting for $158 billion in exports and $148 billion in imports. Quebec was next with 14 per cent, accounting for $48 billion in exports and $20 billion in imports. Alberta and British Columbia followed with seven per cent and six per cent, respectively. All Canadian provinces, except Manitoba and the Yukon Territory, registered a positive balance, as their exports to the US exceeded their imports.

Table 8-6 shows Canada's trade with the US by province in 1988 and 1998. Provinces' shares did not vary significantly between these two years.

In 1998, transborder trade by US regionNote 6 revealed the predominance of the US Central region, which captured 43 per cent of the trade for a total of $202 billion ($113 billion from Canada, and $89 billion to Canada). The US North East region ranked second with $107 billion (23 per cent of the trade), followed by the US South at $94 billion and the US West at $64 billion. All US regions recorded a negative balance with Canada, except the South, which shipped more goods to Canada than it received.

Figure 8-8 shows transborder trade by US region for 1988 and 1998.

Between 1988 and 1998, two US regions increased their shares of trade with Canada: the South, from 16 per cent to 20 per cent, and the West, from 11 per cent to 13 per cent. As explained later, the increasing importance of US southern and western regions reflects surface modes taking goods over longer distance, farther away from Canadian points.

Preferred Mode

As mentioned previously, trucking is the dominant mode in Canada-US trade. From 1991 to 1998, the number of trucks crossing Canada-US border points increased at an average annual rate of 7.9 per cent, from 19,680 units to 33,410 units on a daily basis.Note 7 Over the same period, the share of daily crossings for trucks of Canadian firms rose from 57 per cent to 66 per cent.

Canada-based for-hire trucking carriers have been transporting goods over greater distances. From 1988 to 1998, the average distances by tonne carried rose by an average annual rate of 2.7 per cent for exports (from 791 to 1,037 kilometres) and by an average rate of 2.5 per cent for importsNote 8 (from 928 to 1,184 kilometres).

Major Canada-US Trade Flows

In 1998, there were 16 two-way trade flows between Canada and the US worth at least $9 billion each, representing close to 85 per cent of total Canada-US trade. Trucking was the dominant mode of transportation, capturing a 50 per cent share or more in 14 of them.

Four trade flows, all involving Ontario, totalled $241 billion, or more than 50 per cent of total transborder trade. The largest was between Ontario and the US states bordering the Great Lakes, which accounted for a 30 per cent share, with exports of $75 billion and imports of $66 billion. The vehicles and parts trade dominated Ontario's exports, mostly to Michigan, valued at $44 billion ($39 billion carried by truck, $14 billion by rail). Likewise, Ontario's imports consisted mainly of the vehicle and parts trade at $26 billion ($22 billion by truck, $4 billion by rail) and of machinery and equipment at $19 billion with truck as the mode of choice.

Table 8-7 illustrates the 16 trade flows, showing the trade balance and modal breakdown for each.

Figures 8-9 and 8-10 illustrate the Canada-US trade flows involving Ontario and other Canadian regions.

Strength of Canada-US Trade

Internal and external factors have contributed to the increase in Canada's trade with the US. Among these are dollar exchange rates and the gradual reduction of tariffs on goods as a result of trade agreements.

From 1988 to 1998, the share of duties collected on total goods imported from the US decreased steadily, from 2.6 per cent to 0.2 per cent. Table 8-8 shows the share of duties collected on selected imported goods from the US.

With exports, the currency exchange rate made Canadian goods relatively less expensive to American consumers. Table 8-9 shows the exchange rate evolution in recent years.

Canada's Trade with Countries Other than the US

Canada's trade with countries other than the US is less significant than trade with the US. From 1992 to 1997, exports grew by an average rate of 7.9 per cent, from $37 billion to $54 billion. In 1998, however, they fell to $49 billion, due to recessions and the financial crisis that hit the Asian and Latin American economies. Imports from countries other than the US were not affected by such financial crises and grew annually at an average rate of 10.7 per cent, from $52 billion (1992) to $95 billion (1998).

Figures 8-11 and 8-12 illustrate Canada's trade with countries other than the US.

Trade by Mode

Marine and air were the primary modes used in trade with countries other than the US. From 1992 to 1998, marine's share declined in both exports and imports. Over the same period, air's share grew from 16 to 19 per cent in exports, and from 15 to 22 per cent in imports. This trend reflects the increasing trade in high-valued commodities such as electronic and telecommunications equipment. Air imports of electronic and electric machinery/equipment grew at an average annual rate of 28 per cent, jumping from $1.2 billion to $5.2 billion in value. The value of other equipment/machinery imported by air also increased by an average 23 per cent over the same period.

Table 8-10 shows modal shares of Canada's exports and imports with countries other than the US.

Direction of Trade Flows

Between 1988 and 1998, eastern and western provinces generally shared exports to countries other than the US on an equal basis. In 1998, however, eastern provinces accounted for a slightly larger proportion (54 per cent) than western provinces. This reflects decreased exports to the Pacific Rim countries, which were primarily shipped from the western provinces.

In terms of the import of goods, the eastern provinces accounted for over 80 per cent, dominated by Ontario, with 49 per cent. From 1988 to 1998, the eastern provinces were the main provinces of clearance for imports from countries other than the US, and Ontario increased its share from 44 per cent to 49 per cent. Canada had a negative trade balance with most countries other than the US. In 1998, exports to overseas countries totalled $49 billion, while imports from the same countries reached $95 billion.

Figures 8-13 and 8-14 show provincial shares in Canada's trade with countries other than the US in 1988 and 1998.

Major Trade Flows

In 1998, four trade flows accounted for 78 per cent of exports to countries other than the US:

eastern provinces to European countries: $14.3 billion
western provinces to Pacific Rim countries: $13.1 billion
eastern provinces to Pacific Rim countries: $5.7 billion
western provinces to European countries: $4.7 billion.

Figures 8-15 and 8-16 illustrate Canada's main trade flow with countries other than the US.

In terms of exports, the largest trade flow from the eastern provinces to European countries totalled $14.3 billion. It was composed primarily of electric/electronic machinery and other equipment ($3.1 billion), non-ferrous products ($1.8 billion), forest and paper products ($1.5 billion), and food products ($1 billion). This trade was carried by water (60 per cent) and air (35 per cent). The flow from the western provinces to the Pacific Rim countries amounted to $13.1 billion. Forest and paper products, food products and mineral fuels (e.g. coal) were the main traded goods and were carried almost exclusively by water (96 per cent).

In 1998, four trade flows represented nearly 80 per cent of goods imported from countries other than the US:

European countries to the eastern provinces: $30.0 billion
Pacific Rim countries to the eastern provinces: $27.2 billion
Pacific Rim countries to the western provinces: $11.4 billion
Mexico to the eastern provinces: $6.9 billion.

Imports to the eastern provinces from European countries represented the largest trade flow with overseas countries, totalling $30 billion. The principal goods traded were electric/electronic machinery and other equipment ($8.2 billion), chemical products ($3.6 billion), mineral fuels ($3.1 billion), motor vehicles and parts, food, and steel products. The modes used were marine (47 per cent), followed by air (30 per cent) and road (20 per cent).Note 9 In this case, the road figure is probably overestimated, as part of it covers transshipment via the US and the rest is distributed on marine and air modes.

Imports to the western provinces from the Pacific Rim countries totalled $27.2 billion in 1998, and included machinery and equipment ($6.8 billion), electric/electronic machinery ($6.5 billion), steel products, motor vehicles and parts, and food processed products. Goods were shipped by road (40 per cent), water (30 per cent) and air (24 per cent). As mentioned previously, the road share is overestimated and would feed the marine and air modes.Note 10

Tables 8-11 and 8-12 show the major trade flows between Canada and countries other than the US.

Duties on Imports

The influence of the General Agreement on Tariffs and Trade (GATT) was felt on goods imported from countries other than the US. From 1988 to 1998, the share of duties collected by Canada Customs on these goods dropped from 5.7 per cent to 2.5 per cent. Decreased duties paid on imported goods have been visible mainly since 1992.

Table 8-13 reveals the share of duties collected on selected imported goods from countries other than the US.

Recent Trends

World economy and trade have been affected in recent years by financial crises and recessions that started in Japan and then spread to neighbouring Asian countries and Latin America. Canadian exports were significantly affected in 1998 as domestic exports to Japan and Asian APECNote 11 (Asia-Pacific Economic Cooperation group) countries declined by over 25 per cent from their 1997 levels.

In 1999, economies of Asian APEC countries did not fully recover and remained sluggish. As a result, Canada's exports to Japan and other APEC countries decreased by 3.5 and 5.4 per cent, respectively, from 1998 levels. Canadian exports to other Latin American countries fell by 20 per cent from 1998 to 1999.

Over the same time, domestic exports to the US increased by over 14 per cent. By the end of 1999, Canada's exports to the US accounted for 87 per cent of total Canadian exports, compared with 81 per cent two years previously.

In 1999, imports to Canada from Japan and Asian APEC countries were strong, with a combined growth rate of nine per cent compared with that of 1998. This growth exceeded that of imports from the US, which stood at 5.7 per cent for the same period. Tables 8-14 and 8-15 reveal Canada's exports and imports by major country grouping over the 1998-1999 period.