7

TRANSPORTATION AND TRADE

International Trade

Overview

An examination of international trade flows reveals the increasing importance that outside markets have for provincial economies. From 1997 to 2000, exports of goods and services to external markets increased at an average rate of 11 per cent, from $348 billion to $479 billion.Note 6 For imports, the average annual growth rate was close to nine per cent over the same period, as goods and services entering the country rose from $331 billion to $426 billion. Over 85 per cent of international trade from 1997 to 2000 was composed of traded goods, while the balance was services, mainly commercial and transportation.

The average growth rate of international trade flows from/to Canadian provinces and territories was more than twice that of interprovincial trade flows, which were close to 4.5 per cent from 1997 to 1999. Figure 7-5 shows the average growth rates for trade sectors between 1997 and 2000.

Trade Flows and Modal Choice

The following sections look at the trade of goods and what transportation modes were used to move them between Canada and the United States, as well as between Canada and countries other than the United States.

Canada-US Trade

Impact of Canada-US Trade

Since the 1970s, commercial exchanges with the United States have been increasingly important as a driver of economic activity for Canada. In 1981, Canada's exports to the United States accounted for 66 per cent of Canada's total export trade in terms of value. This share soared to 75 per cent in 1991 and reached a peak of 87 per cent in 2001,Note 7 with $351 billion worth of goods exported to the United States, compared with only $51 billion exported to other countries. Canada's imports from the United States have oscillated between 65 per cent and 69 per cent of Canada's total imports for the past 20 years.

From 1997 to 2000, Canada's exports to the United States showed a strong annual growth rate of 13.8 per cent, growing from $244 billion to $359 billion. Exports to other countries, on the other hand, were stagnant (zero growth) due to economic difficulties in Asian and Latin American countries. Canada's imports from the United States grew more modestly, with an average increase of 7.6 per cent over the period, rising from $204 billion to $230 billion. Canada's imports from other countries, however, were more robust, with an average annual increase of nearly 13 per cent.

By the end of 2000, an economic slowdown had started in the United States and continued to affect economic activities between the trade partners throughout 2001. This situation was further aggravated by the September terrorist attacks on the United States. As a result, Canada's trade with the United States declined in 2001 for the first time in a decade, as exports to the United States decreased by two per cent, and imports from the United States decreased by five per cent.

Figure 7-6 shows the importance of the United States in Canada's total exports over the last five years.

Modal Split

In terms of value, trucking is the dominant mode of transportation for North American trade, carrying over 65 per cent of Canada-US trade in 2000. This can be broken down as nearly 57 per cent of Canada's exports to the United States and 80 per cent of imports from the United States. In 2000, Canada's exports to the United States by truck totalled $200 billion, while imports by truck totalled $183 billion. Rail ranked second, carrying 16 per cent of total Canada-US trade, followed by pipeline at nine per cent, air at eight per cent and marine at two per cent. Rail shipments were particularly export-oriented (four times the value of rail imports), and pipeline movements were mainly southbound.

On a tonnage basis, the picture was different, as pipeline ranked first on the export side, moving 147 million tonnes (44 per cent of exports to the United States), followed by trucking, rail and marine transport services, with shares of 21, 19 and 16 per cent, respectively. Trucking dominated imports from the United States with a 55 per cent share of the volume of shipments, followed by marine and rail.

In 2001, the trucking and air modes were the most affected by the economic slowdown, as the value of total shipments by these modes declined by five and ten per cent, respectively, from 2000 levels. The value of rail shipments to the United States stayed at its 2000 level.

Table 7-7 examines the value and volume of Canada's trade with the United States by mode and sector between 1997 and 2001.

Canada-US Trade by Region

In 2000, 79 per cent of Canada's trade with the United States involved the eastern provinces, with Ontario accounting for 61 per cent of the total and Quebec for 15 per cent. Ontario captured 54 per cent of exports to the United States, or $193 billion, and 73 per cent of imports, or $168 billion. Trucks carried over 75 per cent of the shipments' value involving Ontario and the United States. Canada's western provinces, led by Alberta and British Columbia, accounted for 21 per cent of Canada-US trade.

All Canadian provinces except Manitoba and the territories registered a positive trade balance with the United States; that is, their exports exceeded their imports. In 2001, Canada's trade with the United States experienced a 3.2 per cent decrease, which affected all provinces except Alberta, Nova Scotia and New Brunswick. These provinces showed an increased level of trade with the United States. British Columbia's trade record with the United States in 2001 was similar to that observed in 2000. Table 7-8 shows Canada's trade with the United States by province.

On the US side, all regionsNote 8 recorded a negative balance with Canada in 2000 and 2001. In 2000, the US Central region dominated US trade with Canada, with $244 billion, or 42 per cent of trade ($146 billion from Canada and $98 billion to Canada). The US North East ranked second, with $130 billion, or 22 per cent of trade, followed by the US South at $117 billion, or 20 per cent, and the US West at $89 billion. In 2001, all the US regions registered a decline in trade with Canada, except the US West, which showed an increase of 1.5 per cent. The US North East had the most significant decrease in trade with Canada, dropping by ten per cent.

Trade Concentration

As mentioned above, trucking carries over 65 per cent of total Canada-US trade. In 2000, daily trade between Canada and the United States amounted to $1.6 billion, including over $1 billion by trucks. Over 125 border crossing points recorded trucking activities between the two countries. From 1991 to 2000, daily truck traffic at Canada-US border crossings soared at an annual rate of 7.4 per cent, from 19,600 to a peak of 37,400 daily truck movements. In 2001, for the first time in a decade, daily truck movements decreased by three per cent to 36,100 movements.Note 9

Transborder truck movements are highly concentrated. In 2000, Ontario border crossings accounted for over 60 per cent of all Canadian transborder truck movements and over 70 per cent of the value of all Canada-US trade by trucks. Ontario's dominant position in truck movements can be explained by its proximity to the US industrial heartland and to in-transit truck traffic originating from or destined to other provinces, but travelling through Ontario. Ontario also plays an important role within the highly integrated North American automobile industry.

In terms of trade shipments moved by road, four of the five busiest border crossing points are in Ontario (the Windsor/Ambassador Bridge, Fort Erie/Niagara Falls, Sarnia and Lansdowne). The fifth busiest is in Lacolle, Quebec. These five border crossing points handled almost 75 per cent of total Canada-US trade by road in 2000.

Figure 7-7 shows the growth of daily truck traffic at Canada-US border crossing points between 1986 and 2001. Table 7-9 indicates the major road transportation border crossing points in Canada's trade with the United States in 2000.

Commodity Mix and Major Trade Flows

In 2000, 18 trade flows -- 11 with American destinations and seven with American origins -- recorded annual shipments worth approximately $10 billion. The top five export flows accounted for $174 billion, or nearly 50 per cent of all Canada's exports to the United States, while the top five import flows totalled $137 billion, or 60 per cent of all of Canada's imports from the United States. The majority of these flows involved Ontario as the province of origin or destination.

Trade flows between Ontario and the US Central East regionNote 10 ranked first with southbound shipments in 2000 totalling $93 billion and northbound shipments $74 billion. Automobile products (mainly directed to Michigan) dominated Ontario's exports, with $58 billion split equally between trucking and rail services. Machinery and electronic equipment ranked second at $11 billion, mainly carried by trucks. Similarly, Ontario's imports from the same US region consisted mainly of automobile products ($28 billion) and machinery and electronic equipment ($21 billion). In both cases, trucking services were used to move over 90 per cent of these commodities.

The second most important trade flow involved Ontario and the US Middle Atlantic region, which includes the states of New York, Pennsylvania and New Jersey. Ontario's exports to this region totalled $29 billion, while imports from this region totalled $23 billion. A variety of manufactured products were traded between these two regions, including mainly transportation equipment, automobile products, machinery and electronic equipment, chemical and plastic/rubber products. Trucks carried nearly 85 per cent of this trade.

Table 7-10 shows major trade flows between Canada and the United States in 2000, indicating the modal breakdown for each. Figures 7-8 and 7-9 illustrate the top five Canadian export and import trade flows to and from the United States.

Several factors explain the growth of Canada's trade with the United States between 1997 and 2000: sustained economic growth in both countries; the reduction of tariffs on goods as a result of trade agreements; and the fluctuations in the exchange rate, which have made Canadian goods relatively less expensive to American consumers.

Canada's Trade with Other Countries

Overview

From 1997 to 2000, Canada's trade with countries other than the United States was characterized by stagnant exports that remained more or less unchanged at $54 billion, and robust imports, which grew from $88 billion to $127 billion annually, or at the average yearly rate of 13 per cent growth for the period. The export situation can be explained by the economic difficulties experienced by Asian and Latin American economies starting in 1998, and their slow recovery.

Imports to Canada from countries other than the United States have grown at a higher annual rate (12.8 per cent) than imports from the United States (7.6 per cent). As a result, imports from other countries increased their share of Canada's total imports from 32 to 36 per cent over this period.

The year 2001 marked a pause in global economic growth. Many national economies were affected by the US economic slowdown. As a result, Canada's exports to and imports from countries other than the United States decreased by five per cent and two per cent, respectively, from 2000 levels.

Figures 7-10 and 7-11 illustrate the evolution of Canada's trade with other countries between 1997 and 2001.

Trade by Mode

As expected, marine was the dominant mode of transportation in Canada's trade with countries other than the United States, carrying shipments valued at $90 billion in 2000. This included $37 billion in exports (70 per cent of Canada's exports to countries other than the United States) and $53 billion in imports (50 per cent of Canada's imports from countries other than the United States). Air ranked second, capturing a 24 per cent share for both exports and imports. While the trucking mode recorded a 30 per cent share, it is largely overestimatedNote 11 due partly to transshipments via the United States. Some of this truck traffic should be allocated between the marine and air modes. In terms of value, the increase in the air mode's share, which started in the early 1990s, underlines a growing trend toward moving high-value traded commodities, such as electronic and telecommunications equipment, by air. From 1997 to 2000, electric and electronic material products imported to Canada from countries other than the United States and shipped by air grew at an annual rate of 30 per cent, rising from $4.9 billion to $11.1 billion.

In 2001, the value of Canada's trade with overseas countries shipped by the air and marine modes decreased by six per cent. In terms of volume, the marine mode, which was already capturing over 90 per cent of the tonnage shipped between Canada and countries other than the United States, registered an increase of 4.3 per cent in 2001. Table 7-11 shows the value and volume of Canada's trade with countries other than the United States by mode from 1997 to 2001.

Direction of Trade Flows

From 1997 to 2000, all provinces had a negative trade balance with countries other than the United States, except Prince Edward Island, the Prairie Provinces and the Northwest Territories. In 2000, Canada's exports to other countries originated almost equally from eastern provinces and western provinces. However, most exports to other countries originating from western provinces were shipped through British Columbia ($23 billion), mainly through Vancouver, which captured 86 per cent of this total.

Figure 7-12 shows Canada's exports to countries other than the United States in 2000 by province of origin and by province of export (e.g. Ontario generated exports valued at $13.9 billion, but only $7.6 billion left the country directly from points in Ontario).

Major Trade Flows

In 2000, six trade flows worth approximately $10 billion accounted for nearly 75 per cent of Canada's total trade with countries other than the United States. Four of these flows were two-way flows between eastern provinces and Europe ($15.4 billion in exports and $41.2 billion in imports) and flows between western provinces and Pacific Rim countries ($14.9 billion in exports and $16 billion in imports). The two other trade flows were import-oriented: from Pacific Rim countries to eastern provinces ($34 billion), and from Mexico to eastern provinces ($11 billion).

Trade flows between eastern provinces and Europe totalled $57 billion and were mainly carried by the marine (54 per cent) and air (34 per cent) modes. Exports from eastern provinces to Europe amounted to $15 billion and were composed of machinery/equipment products and electronic/electrical materials, and high-value telecommunication and air equipment shipped by air. There were also a variety of manufactured products (non-ferrous products, paper, machinery, chemicals) shipped by the marine mode. Imports to eastern provinces from Europe totalled $41 billion. Imports shipped by air totalled $13 billion and consisted of $5.1 billion in machinery/equipment and electronic materials, $4 billion in telecommunication and air equipment, and $3 billion in chemical products. Marine shipments from Europe included $8.3 billion in mineral fuels, $3.2 billion in machinery/equipment, and a variety of manufactured products such as automobiles and parts, food products and chemicals.

Trade flows between western provinces and Pacific Rim countries in 2000 totalled $31 billion and were divided almost equally between exports ($14.9 billion) and imports ($16 billion). Most of this trade was carried by the marine (80 per cent) and air (nine per cent) modes. The main exports were forest and paper products at $5.5 billion, food products at $3.4 billion, and metallic/non-metallic ores at $1.5 billion. Imports consisted of $4.3 billion in automobiles products, plus machinery/equipment, steel and food products (mainly carried by the marine mode), and electronic materials/equipment (mainly carried by air).

Tables 7-12 and 7-13 show the major trade flows between Canada and countries other than the United States in 2000.

Recent Trends

The years 1997 to 2000 were a period of strong economic growth for the United States with positive results on worldwide trade. However, an economic slowdown started in the last quarter of 2000 and continued through 2001, affecting United States trading partners. The September 11 terrorist attacks aggravated this economic slump in the last quarter of 2001. As a result, in 2001 Canada's trade with the US experienced a decline (-3.2 per cent) for the first time in a decade, led by a decrease in imports from the United States of nearly five per cent. Exports to the United States dropped from $359 billion to $351 billion, while imports fell from $230 billion to $218 billion.

Figure 7-13 shows monthly variations in Canada's trade with the United States between 2000 and 2001.

On the world economic scene, the period between 1997 and 2000 was marked by financial crises and a recession that started in Japan in 1998 and then spread to neighbouring Asian countries and Latin America. The economies of these countries were slow to recover, and the 2001 US economic slowdown just accentuated financial and economic problems in countries such as Japan and Argentina. Consequently, Canada's trade with countries other than the United States registered a three per cent decline as Canada's exports to these countries decreased by nearly five per cent from 2000 to 2001. Imports to Canada from countries other than the United States were relatively stagnant, as their value fell from $127 billion to $125 billion.

Figure 7-14 shows monthly variations in Canada's trade with countries other than the United States between 2000 and 2001.

On a country basis, Canada's trade with selected Asian economies such as Japan, South Korea, Malaysia and Taiwan declined on average by 13 per cent from 2000 to 2001, with the exception of the Peoples Republic of China registering an increase of 12 per cent. Canada's trade with western European countries experienced a decline in exports (-5.2 per cent) and a marginal increase (1.3 per cent) in imports in 2001. Trade with the United Kingdom decreased by 13 per cent and Norway showed a 17 per cent decrease, compared with 2000.

Tables 7-14 and 7-15 show Canada's external trade by country groupings in 2000 and 2001.

TRANSPORTATION AND TRADE

Domestic Trade

International Trade

NOTES

6. In the absence of recent "input-output" data, 2000 data on "Exports/Imports of goods and services" are used from Statistics Canada, National Income and Expenditure Accounts, Cat.13-001, 2001.

7. Preliminary data for 2001.

8. The four US regions include: the US Central, which includes the states bordering the Great Lakes (Central East), as well as North Dakota, South Dakota, Nebraska, Kansas, Iowa, Minnesota and Missouri (Central West); the US North East, which refers to the New England and Atlantic states, including New Jersey, New York and Pennsylvania; the US South, which includes southern states from the Atlantic coast to the Gulf of Mexico; and the US West, which includes US mountain and Pacific states. Data related to unknown states were left in a residual category called "US Other."

9. Adapted by Transport Canada, from Statistics Canada, International Travel Section, Tables 1A and 1B.

10. This region includes states bordering the Great Lakes area, i.e. Michigan, Ohio, Illinois, Indiana and Wisconsin. In 2000, Ontarioís trade (exports and imports) with these states totalled $167 billion, including Michigan ($98 billion), Ohio ($30 billion), Illinois ($18 billion), Indiana ($13 billion) and Wisconsin ($8 billion).

11. In the case of exports, truck and rail information can be used to estimate the importance of Canadaís trade with countries other than the United States, routed through the United States. With imports, however, such an estimate is more difficult to determine, as information from customs cargo-control documents may lead to some underestimation of Canadian imports by the marine and air modes.