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Despite years of wooing Chinese market, Canada is falling behind rest of world in trade with China

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Release Date: February 19, 2009

VANCOUVER, BC-Canadian trade with China represents just a miniscule portion of Canada's overall international trade and the country has a long way to go to fully take advantage of the opportunities presented by one of the world's fastest growing markets, concludes a new study released today by independent research organization the Fraser Institute.

Just two per cent of Canadian exports were sent to China in 2007 (the last year of available data at the time the report was written) compared to 80 per cent of Canadian goods exported to the United States. In terms of imports, Canada imported nine per cent of its goods from China, with more than 50 per cent originating in the United States.

"For many years now, we've been hearing about the opportunities presented by the Chinese market. Yet so far, Canadian companies have failed to fully capitalize on these opportunities," said Mark Mullins, Fraser Institute executive director.

"And while many Canadians may think everything we buy is 'Made in China,' the reality is far from the truth. Even though China's share of Canadian trade has tripled in the past decade, it is relatively small and narrowly based."

The study, Canada's Economic Relations With China, is the first attempt to quantify the flows of goods, services and people between Canada and China.

"While Canada enjoys a robust trade relationship with the United States, and this should not be neglected, the economic recession experienced by our neighbour and largest trading partner shows the necessity for Canada to find expanded markets for its goods and services," Mullins said.

The study paints an even worse picture when it looks at trade in services and direct foreign investment.

Canadian services trade with China represented only 1.2 percent of Canada's overall services trade in 2005 (the last year of available data at the time the report was written), while its services trade with the United States accounted for 58 per cent of overall services trade in the same year.

Similarly, Canada's direct foreign investment in China is just 0.3 per cent of the total while China's direct foreign investment in Canada is a paltry 0.1 per cent. By comparison, almost 44 per cent of Canada's worldwide investments went to the United States in 2007 with 58 per cent of overall investments in Canada coming from the U.S.

David Emerson, Canada's former industry minister and minister of international trade, points out that Canada has a long history of friendship with China and while commercial relations have grown significantly, Canada has fallen short of the vast potential for mutually beneficial trade, investment, and broader bilateral opportunities.

"Many countries have seized the opportunity and realized substantial benefits from a strategy of friendship and engagement with China," said Emerson, who wrote the foreword to the study.

"This excellent study provides important quantification and analysis of our trade with, and investment in, China. I hope that senior Canadian decision makers in business and in government will take advantage of this information to encourage further engagement and an intensification of Canada's economic relations with China."

Emerson is prescient in sounding the alarm that Canada is falling behind other nations in terms of competing for a share of China's market.

The study notes that Australia, which has a similar resource and economic base as Canada, has established much stronger ties with the Asian super power. And China's neighbour Japan has a far larger share of the Chinese market.  In 2007, 2.7 per cent of China's overall imports came from Australia, while 14 per cent came from Japan. Just 1.1 per cent of China's overall imports came from Canada.

The study also points out that at present, Canadian exports to China consist mainly of natural resources such as minerals and forestry products. Within that trade envelope, Alberta stands out with its trade surplus and a concentration on chemicals and petroleum products.

"If Canada is to be more than hewers of wood and providers of minerals, we need to expand and focus on finding Chinese markets for our retail trade and services sector among China's growing middle class and its burgeoning cities," Mullins said.

The study concludes that Canada has a number of advantages that it is not fully utilizing in its quest to gain a larger share of the Chinese market; among them the country's varied natural resources, superior technology, an energetic business sector, and a growing local Chinese population.

"The Chinese market offers great opportunities but Canada is competing with every other nation on the globe to reach that market. If Canada is to strengthen its trade relations with China, it needs to make better use of its comparative advantages," Mullins said.

News Release - Chinese Translation



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