Over the decades the US has been an increasingly important destination for Canadian merchandise exports. Its share has risen from 36% in 1928 to 82% in l996, with increases in the 1990s being stimulated by the Canada-US Free Trade Agreement which came into effect on 1 January 1989. Japan has become the second most significant market, although in taking only 4% of Canadian shipments it lags far behind the US. All the countries of the European Union, including the United Kingdom, together account for only 5.7% of exports.
The remaining 9.2% of exports are to all the other countries of the world. These include cereal grain shipments (mostly wheat) to the People's Republic of China and Brazil; wood, paper and chemical products to Korea and Taiwan; and a range of agricultural products as well as communications and other machinery and equipment to a variety of countries in South East Asia, Latin America and the Middle East.
Canadian exports are dominated by one commodity group - automobiles and parts. These, of which 98% are destined for the US, amounted to $62 billion or 23% of all merchandise exports in 1996. Another 23% of exports consisted of 3 subgroups of machinery and equipment - industrial and agricultural machinery (5%), aircraft and other transportation equipment (4.6%) and other machinery and equipment including telecommunications and office machinery (13.5%).
Apart from these groups, the great majority of Canada's remaining exports are based on the nation's abundant natural resources. These include, in order of their importance in 1996, forest products such as newsprint, lumber and woodpulp (12.5%); energy products such as oil, gas, coal and electricity (9.5%); crude and processed metals and minerals (8.9%); food products such as grains, red meats and fish (8.4%); fertilizers and chemicals (5.2%); and miscellaneous industrial goods and materials (4%).
Over the last decade, the value of merchandise exports has expanded at an average annual compound rate of about 8.3%. Of this, about 2.4% reflects merely the increase in prices, while 5.9% is the growth in the actual volume or quantity of shipments. The most rapidly expanding category in volume or constant 1986 dollar terms has been office machinery and equipment, which has increased by nearly 13 times. Fairly fast export expansion has also occurred in natural gas (up 3.8 times), as well as chemicals and fertilizers, and other manufactured goods (each up about 2.25 times).
Receipts to Canada from sales of services to nonresidents consist of 3 main categories: travel receipts from foreigners coming to Canada for business or pleasure trips (31%), receipts from the use of Canadian-operated transportation systems for exports or shipment of foreign-owned goods and services in Canada or abroad (31%), and commercial services such as engineering or consulting services sold abroad, as well as commissions, insurance, communications and other receipts (36%). This latter group has been the fastest-growing group of the 3 over the past decade.
The remaining 2% of receipts consist of revenues from foreign governments covering costs of their diplomatic offices in Canada and a variety of miscellaneous items. The proportion of total receipts coming from the US is less than for merchandise - only 54%.
Investment income consists of receipts from the export of the services of capital, that is, receipts from Canadians lending and investing abroad, including the value of earnings from Canadian direct investments in other countries which are reinvested there. Because of expanded Canadian share capital investments abroad, dividend receipts have now become the largest component (41.8%) of all investment income. Reinvested earnings of Canadian corporations abroad have risen to nearly 12% and interest receipts make up the balance of investment income.
Author BRUCE W. WILKINSON
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