2 TRANSPORTATION AND THE ECONOMY

INTERNATIONAL TRADE AND TRADE CORRIDORS

By the end of 2005, exports and imports of merchandise had both hit record highs since the 2000 peak, reaching $435 billion and $378 billion, respectively. Canada's trade surplus with the rest of the world, however, increased by only one per cent over 2004, as the trade deficit increase rate (14 per cent) with non-U.S. countries far exceeded the U.S. trade surplus increase (9 per cent).

TRADE WITH THE UNITED STATES

In 2005, the United States remained by far Canada's most important trading partner, capturing 71 per cent (in value) of Canada's total trade with the world. That share had peaked at 78 per cent in 1999. Exports to the United States represented 84 per cent of Canada's total exports to the world, a share that has been stable at 84 to 86 per cent since 1998. By contrast, Canada's imports share from the United States has continuously decreased since 1998 when it peaked at 68 per cent of total imports from the world before reaching a record low of 57 per cent in 2005. As a result, Canada's annual surplus with the United States has enjoyed an annual average growth of 10 per cent over the last 10 years due mainly to the vitality of its exports¹ to this country.

Figure 2-3 tracks the value of trade with the United States from 1987 to 2005.

FIGURE 2-3: VALUE OF GOODS TRADED BETWEEN CANADA AND THE UNITED STATES, 1987 – 2005

Note: Customs-based trade data; Preliminary data for 2005.

Source: Transport Canada (adapted from Statistics Canada, International Trade Database)

After peaking at $589 billion in 2000, Canada's trade with the United States totalled $580 billion in 2005, an increase of four per cent over 2004. In terms of value, trucks carried 60 per cent of this trade, followed by rail (17 per cent), pipeline (14 per cent), air (6 per cent) and marine (3 per cent). Trucking was the dominant mode for exports (51 per cent) and imports (77 per cent). By volume,² pipelines ranked first at 33 per cent (mainly in exports), followed by trucks (31 per cent), rail Deficit Exports Imports (18 per cent) and marine (17 per cent).

The most important trade flows between Canada and the United States involved Ontario and the U.S. Central Region,³ totalling $167 billion — $84 billion from and to Michigan alone. Four of the top six Canada-U.S. trade flows involved Ontario. However, out of 14 trade flows, flows involving Alberta and U.S. regions showed the greatest growth in 2005 over 2004 (over 20 per cent), while flows including Ontario showed almost no growth growth for the same period. Close to 76 per cent of the Canada-U.S. trade carried by trucks (value) was concentrated at six border crossing points: Windsor/ Ambassador bridge, Fort Erie, Sarnia and Lansdowne in Ontario, Lacolle in Quebec and Pacific Highway in British Columbia.

TRADE WITH OTHER COUNTRIES

In 2005, Canada's trade with other countries increased by 11 per cent, totalling $233 billion, driven by imports valued at $163 billion. Because Canada's exports to non-U.S. countries have grown at a slower pace than imports from these countries, the trade deficit with them has been increasing, especially since 1995. Imports from other countries (mainly Asian countries and more specifically the People's Republic of China) have generally exceeded Canada's exports to these countries. In 2005, approximately 41 per cent of Canada's trade deficit with other countries was linked to Asian countries, compared with 24 per cent in 1995. As Figure 2-4 shows, Canada's trade deficits with non-U.S. countries have grown at an annual average rate of 16 per cent in last 10 years.

FIGURE 2-4: VALUE OF GOODS TRADED BETWEEN CANADA AND OTHER COUNTRIES, 1987 – 2005

Note: Customs-based trade data; Preliminary data for 2005.

Source: Transport Canada (adapted from Statistics Canada, International Trade Database)

Both in terms of value and volume, marine and air were the dominant modes, capturing more than 90 per cent of the trade with oversea countries. In 2005, six trade flows accounted for almost 75 per cent of Canada's total trade with countries other than the United States. Four of these were two-way flows between eastern provinces and Western Europe ($20 billion in exports, $46 billion in imports) and between western provinces and Asian countries ($17 billion in exports, $20 billion in imports). The other two trade flows of importance were imports from Asian countries ($44 billion) and Latin American countries ($24 billion), mainly Mexico to eastern provinces.

For more detailed information on Canada's trade with the United States and other countries, see tables A2-1 to A2-9 in the Addendum.

NEW TRENDS AND GATEWAYS

From 1995 to 2005, the average annual growth rate for imports from non-U.S. countries reached 8.1 per cent, three times the rate of exports from Canada to these countries (2.5 per cent). Out of Canada's top 20 trading country partners in 2005, six countries had a two-digit average annual growth rate in trade with Canada over the 1995-2005 period: Algeria (28 per cent for imports), China (20 per cent for imports), India (13 per cent for imports), Brazil (12 per cent for imports), Mexico (11 per cent for imports, 11 per cent for exports) and Norway (10 per cent for imports). Addendum Table A2-10 lists Canada's top 25 trade partners in 2005 and includes their ranking and growth rate.

FIGURE 2-5: VALUE OF GOODS TRADED BETWEEN CANADA AND CHINA (PEOPLES REPUBLIC), 1990 – 2005

Note: Customs-based trade data; Preliminary data for 2005.

Source: Transport Canada (adapted from Statistics Canada, International Trade Database)

China's increased trade with Canada and the U.S. has been a new driving force in North American business, putting more strain on transportation infrastructure and modal logistics. In the last five years (2000-2005), China's exports and imports to and from Canada recorded an average annual growth of 14 per cent and 21 per cent, respectively. In 2005, China ranked second ($29.4 billion) and fourth ($7.1 billion), respectively, in Canada's total imports and exports from and to the world. As a result, China has surpassed Japan and Mexico as a source of imports for both Canada and the United States. Figure 2-5 illustrates the evolution of Canada's trade with China since 1990.

Between 1995 and 2005, marine exports to China doubled to reach $6 billion, while exports moved by air were more than five times their 1995 level and totalled $863 million. On the import side, the pattern is similar with marine imports quadrupling, and air imports at 13 times their 1995 levels. As mentioned previously, in addition to China, countries such as Mexico, India, Brazil and others also showed strong growth in their trade with Canada in recent years.

The impact of this increased trade on the country's transportation system has been important in recent years. A significant proportion of this increased trade has been moving in containers, resulting in capacity bottlenecks. In 2005, Canada's total commodity exports to other countries (excluding the U.S.) totalled $69.6 billion, including $26 billion (37 per cent) shipped through British Columbia customs points (e.g., marine ports and airports) and $20 billion (29 per cent) moved through Quebec customs ports. Figure 2-6 illustrates this increased trade by province of origin and by province of export. The present trade data does not allow for a similar view (by province of arrival) for imports.

FIGURE 2-6: CANADA'S TOTAL EXPORTS TO COUNTRIES OTHER THAN THE U.S., BY PROVINCE OF ORIGIN AND EXPORT, 2005

Note: Customs-based trade data; Preliminary data for 2005.

Source: Transport Canada (adapted from Statistics Canada, International Trade Database)

Almost 75 per cent (by value) of Canada's exports to Asian countries were shipped through British Columbia customs ports, including 83 per cent of Canadian exports to Japan, 79 per cent of exports to South Korea, and 77 per cent of exports to China. Addendum Table A2-11 shows more details on Canada's exports moved through British Columbia's customs ports.

¹ Another factor favouring Canada's exports to the U.S. was the value of the Canadian dollar against the U.S. currency, which made the Canadian goods relatively less expensive to American consumers (especially over the 1994-2003 period). Return

² 2004 modal rankings are applied as 2005 volume trade data are not available (under revision). Return

³ The U.S. Central Region includes states bordering the Great Lakes area, i.e., states of Michigan, Ohio, Indiana, Illinois, Wisconsin; also the states of Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska and Kansas. Return

Canadian Economic Performance

International Trade and Trade Flows

Areas of Importance to Transportation

Productivity and Price Performance of Transport

Importance of Transportation to the Canadian Economy