PPE, e-commerce and U.S. relations

by Christian Siviere

Covid-19 was officially declared a pandemic on March 11, 2020. Let’s look at how the lockdowns and resulting slow-down of economic activities impacted our international trade.

This is an interesting measure of our economy’s performance. According to World Bank data, exports of goods and services account for about 32 percent of Canada’s GDP, while imports of goods and services account for about 34 percent. For the purposes of this column, I will look only at imports and exports of goods.

In 2020, Canada’s international merchandise exports fell 12.3 percent, while imports were down 8.6 percent, reflecting in a vivid way the pandemic-related economic downturn.

This led to an international trade deficit of $36.2 billion, more than double the 2019 deficit. If we compare to the dip created by the 2008/2009 financial crisis, these figures are modest: in 2009, our annual merchandise exports dropped 24.6 percent and our imports fell 15.7 percent.

Canadian exports reached $522.5 billion in 2020 and exports to the U.S. represented US$383.8 billion or 73.5 percent of the total. In 2019, total exports amounted to $592.6 billion, of which the U.S. accounted for $446.68 billion, equivalent to 75.4 percent of the total. Our dependence on the U.S. market went down a little, possibly through more utilization of our other main Free Trade AgreementsCETA with Europe, and the TPP with 11 countries including Japan.

On the other hand, motor vehicles and energy products were the industries most affected by the decrease in exports. These industries export primarily to the United States.

In 2020, our imports amounted to $542 billion, with U.S. imports accounting for $264.1 billion or 49 percent of the total. Our 2019 imports amounted to $601.7 billion, and $305.2 billion. Of that, 51 percent came from the U.S.

Sporting goods and PPE

Our imports of clothing, footwear and textile products fell, while personal protective equipment, sporting goods and pharmaceuticals went up. Overall imports of consumer goods rose 1.1 percent, driven, in good part, by the growth of e-commerce.

Interested in the boom in demand for sporting goods? Find out how one Canadian small business coped with a tidal wave of orders.

How did 2021 begin for Canada’s international trade? The year started with a bang, as we posted a trade surplus of $1.4 billion in January, the first since May 2019 and the largest since July 2014, thanks to a sharp 8.1 percent increase in merchandise exports, while our imports were up a mere 0.9 percent.

The U.S. market was behind the gain as our exports there rose 11.3 percent in January, the highest since September 2019, while our imports from the U.S. were up 0.4 percent. Canadian exports to other countries increased only 0.3 percent in January, and imports were up 1.7 percent.

Losing the trade war

In the U.S. meantime, 2020 exports decreased 15.7 percent and 2020 imports were down 9.5 percent. Following several years of “tariff wars” initiated by the Trump administration against China, the U.S. trade deficit with that Asian powerhouse reached new heights, illustrating the failure of that policy.

Canadian businesses watch developments south of the border very closely and two positive factors augur well for the post-pandemic recovery: CUSMA, which replaced NAFTA on July 1, 2020, and the election of Joe Biden as president.

Both Canada and Mexico are relieved to have the new agreement in place. It will now allow them to focus on business development. The orderly transition of power between the 45th and the 46th presidents couldn’t be taken for granted but did happen, if a little roughly.

With the change of guard in the White House, Canada now has a more predictable partner who spends more time working and less time golfing. He has placed U.S. interests first, with the strengthening of the Buy American Act and the cancellation of the Keystone XL pipeline.

But he is also putting the U.S. back on the map, encouraging multilateralism, working with allies to contain China, rejoining the Paris Accord on the environment and the World Health Organization, working with the World Trade Organization, rejoining OECD discussions on a digital tax (the Google, Amazon, Facebook and Apple tax, also known as GAFA), all actions that affect Canada positively.

In economic news, the massive US$1.9 trillion stimulus bill will inject vast federal resources into the economy with direct payments to Americans, jobless aid, vaccine funding, relief for states, cities, schools and small businesses, all helping the post-pandemic recovery south of the border.

When things get better in the U.S., it’s always good for our international trade and for Canada.