Economists say that exportation is one of the most important macroeconomic factors in Canada. In 2009, exportation accounted for approximately 30% of Canada’s GDP. But what does this mean for the common Canadian? What is exportation and what are its advantages? Why is it regulated? Who are Canada’s most important trade partners? This article gives you answers to these questions.
What is it?
Exportation consists of transactions in goods and services from residents to non-residents. The value of a country’s exports minus the value of its total imports (consisting of transactions in goods and services from non-residents to residents) is called the net export. It is used to calculate a country’s aggregate expenditures or GDP (in an open economy).
Main Advantages of Exporting
1. When the company exports, it is not dependent on the domestic market. During a long economic recession in the home country, export business suffers less than companies that trade only in a home market.
2. Selling abroad for a long period of time provides additional steady streams of revenue.
3. Some businesses depend on seasonal factors, so their profit fluctuates over the year. Exporting to countries with opposite seasons allows companies to gain stability.
4. When products reach their maturity, companies used to replace them with new products; however, in specific target markets, the mature products may still have potential.
5. Competing in international markets gives valuable experience. It is a great source of learning to gain more competitiveness in the domestic market and to improve quality.
Although a country benefits from exporting, some import and export regulations are necessary for a variety of reasons: to regulate trade in military and strategic dual-use goods, to prevent the supply of military goods to countries that threaten national security, to protect vulnerable national industries (e.g. clothing), to fulfil international obligations, et cetera.
The North American Free Trade Agreement is an agreement signed by Canada, Mexico, and the United States on January 1, 1994. It creates a trilateral trade bloc in North America. NAFTA tries to eliminate barriers of trade and investment between the US, Canada, and Mexico. The implementation of NAFTA brought the immediate elimination of tariffs on more than one half of US imports from Mexico and more than one third of US exports to Mexico. Most US-Canada trade was already duty free. It is said that Canada gained the most from NAFTA, with Canada’s GDP rate growing faster than other signed countries and the boost of agricultural flows between US and Canada.
Export Regulations in Canada
The Trade Controls & Technical Barriers Bureau is responsible for administering the Export and Import Permits Act and delegates to the Minister of Foreign Affairs wide powers to control the flow of goods contained in specified lists provided for under the Act. In Canada, agricultural products, textiles and clothing, military goods, nuclear energy materials and technology, softwood lumber are listed. You can find the total list of controlled goods here.
Canada’s primary export partners are the United States, the United Kingdom, and China. Canada is a net exporter of energy and raw materials, agricultural products, energy, and forestry and mining products — which account for more than half of its total export.
Canadian exportation has a growing trend, but the crisis caused it to fall by more than 3 billions US dollars. Since the last quater of 2009, it has been modestly growing. In 2010, Canada was the 11th largest exporter.
According to Economy Watch, although Canada is heavily involved in international trade, the US is its largest trade partner. The energy trade is another critical element in US-Canada trade relations. Canada is the US’s largest oil importer (about 16 per cent of US oil imports). Fourteen per cent of the natural gas consumed by the US comes from Canada. Their agriculture trade is also highly developed. Therefore, we can say that the US is also Canada’s most important trade partner.