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Welcome to the wall of supply and demand in international trade.
This wall aims to explain what International Trade is and shed some light on the effect of supply and demand in that form of trade. It also aims to show how the Canadian supply chain has been affected since the beginning of the COVID-19 Pandemic.

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What is International Trade and How Did it Come to be?

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What is International Trade and How Did it Come to be?

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International trade is the trade of goods and services between countries through imports and exports. It is also the supply chain that allows the more intricate goods and services to be created. The video goes on to explain how before the 19th century most European countries prioritized self-sufficiency through mercantilism to increase exports and limit imports to increase the country's gold supply. This brought on the idea of comparative advantage which meant that countries focus on making goods that they are better at than anyone else and import what they don't have time or resources to make. This then lead to the country's worth not being measured by their gold supply but by their productivity (Gross Domestic Product (GDP)). Through this international trade blew up worldwide and lead to the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) that make rules governing intellectual property and the rules and regulations around international trade. The video explains how making the rules and regulations can be a tricky thing as there are always winners and losers when it comes to trade. It then goes to say how Canada, the US and Mexico made the North American Free Trade Agreement (NAFTA) to increase trade between those countries and this agreement was used as a blueprint for other countries around the world.

I chose to use this video for my wall because it quickly and efficiently explains what International Trade is and how the world moved from Mercantilism to International Trade as we know it today. The images and animations also help make the video easy to understand and engaging enough that the information doesn't come out dry and monotonous.

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International trade is the exchange of goods and services between countries. Through international trade, consumers and countries gain the opportunity to be exposed to products that can't be found locally or a too expensive to produce in their own countries.

This is a great article because it briefly and efficiently explains what imports and exports are. The definition of comparative advantage as well as it's origins and some criticisms on the concept. It also goes into the benefits of trading globally and the discussion of free trade vs. protectionism. In short, this is a great introductory article into what International Trade is.

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If you can walk into a supermarket and find Costa Rican bananas, Brazilian coffee, and a bottle of South African wine, you're experiencing the impacts of international trade.

International trade is the purchase and sale of goods and services by companies in different countries. Consumer goods, raw materials, food, and machinery all are bought and sold in the international marketplace.

International trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically. As a result of international trade, the market is more competitive. This ultimately results in more competitive pricing and brings a cheaper product home to the consumer.

Understanding International Trade

International trade was key to the rise of the global economy. In the global economy, supply and demand-and thus prices-both impact and are impacted by global events.

Political change in Asia, for example, could result in an increase in the cost of labor. This could increase the manufacturing costs for an American sneaker company that is based in Malaysia, which would then result in an increase in the price charged for a pair of sneakers that an American consumer might purchase at their local mall.

Imports and Exports

A product that is sold to the global market is called an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in the current account section of a country's balance of payments.

Global trade allows wealthy countries to use their resources-for example, labor, technology, or capital -more efficiently. Different countries are endowed with different assets and natural resources: land, labor, capital, technology, etc.

This allows some countries to produce the same good more efficiently; in other words, more quickly and at a lower cost. Therefore, they may sell it more cheaply than other countries. If a country cannot efficiently produce an item, it can obtain it by trading with another country that can. This is known as specialization in international trade.

Comparative Advantage

For example, England and Portugal have historically been used, as far back as in Adam Smith's The Wealth of Nations, to illustrate how two countries can mutually benefit by specializing and trading according to their own comparative advantages. In such examples, Portugal is said to have plentiful vineyards and can make wine at a low cost, while England is able to more cheaply manufacture cloth given its pastures are full of sheep.

According to the theory of comparative advantage, each country would eventually recognize these facts and stop attempting to make the product that was more costly to generate domestically in favor of engaging in trade. Indeed, over time, England would likely stop producing wine, and Portugal stop manufacturing cloth. Both countries would realize that it was to their advantage to redirect their efforts at producing what they were relatively better at domestically and, instead, to trade with each other in order to acquire the other.

These two countries realized that they could produce more by focusing on those products for which they have a comparative advantage. In such a case, the Portuguese would begin to produce only wine, and the English only cotton.

Each country can now create a specialized output of 20 units per year and trade equal proportions of both products. As such, each country now has access to both products at lower costs. We can see then that for both countries, the opportunity cost of producing both products is greater than the cost of specializing.

Comparative advantage can contrast with absolute advantage. Absolute advantage leads to unambiguous gains from specialization and trade only in cases wherein each producer has an absolute advantage in producing some good.

If a producer lacked any absolute advantage, then they would never export anything. But we do see that countries without any clear absolute advantage do gain from trade because they have a comparative advantage.

Origins of Comparative Advantage

The theory of comparative advantage has been attributed to the English political economist David Ricardo. Comparative advantage is discussed in Ricardo's book On the Principles of Political Economy and Taxation, published in 1817, although it has been suggested that Ricardo's mentor, James Mill, likely originated the analysis and slipped it into Ricardo's book on the sly.

Comparative advantage, as we have shown above, famously showed how England and Portugal both benefit by specializing and trading according to their comparative advantages. In this case, Portugal was able to make wine at a low cost, while England was able to cheaply manufacture cloth. Ricardo predicted that each country would eventually recognize these facts and stop attempting to make the product that was more costly to generate.

A more contemporary example of comparative advantage is China's comparative advantage over the United States in the form of cheap labor. Chinese workers produce simple consumer goods at a much lower opportunity cost.

The comparative advantage for the U.S. is in specialized, capital-intensive labor. American workers produce sophisticated goods or investment opportunities at lower opportunity costs. Specializing and trading along these lines benefit each country.

The theory of comparative advantage helps to explain why protectionism has been traditionally unsuccessful. If a country removes itself from an international trade agreement, or if a government imposes tariffs, it may produce an immediate local benefit in the form of new jobs; however, this is rarely a long-term solution to a trade problem.

Eventually, that country will grow to be at a disadvantage relative to its neighbors: countries that were already better able to produce these items at a lower opportunity cost.

Criticisms of Comparative Advantage

Why doesn't the world have open trading between countries? When there is free trade, why do some countries remain poor at the expense of others? There are many reasons, but the most influential is something that economists call rent seeking. Rent seeking occurs when one group organizes and lobbies the government to protect its interests.

Say, for example, the producers of American shoes understand and agree with the free-trade argument but also know that cheaper foreign shoes would negatively impact their narrow interests. Even if laborers would be most productive by switching from making shoes to making computers, nobody in the shoe industry wants to lose their job or see profits decrease in the short run.

This desire could lead the shoemakers to lobby for special tax breaks for their products or extra duties (or even outright bans) on foreign footwear. Appeals to save American jobs and preserve a time-honored American craft abound-even though, in the long run, American laborers would be relatively less productive and American consumers relatively poorer as a result of such protectionist tactics.

Other Possible Benefits of Trading Globally

International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity for foreign direct investment (FDI). In theory, economies can thus grow more efficiently and become competitive economic participants more easily.

For the receiving government, FDI is a means by which foreign currency and expertise can enter the country. It raises employment levels and, theoretically, leads to a growth in the gross domestic product (GDP). For the investor, FDI offers company expansion and growth, which means higher revenues.

Free Trade vs. Protectionism

As with all theories, there are opposing views. International trade has two contrasting views regarding the level of control placed on trade between countries.

Free trade is the simpler of the two theories. This approach is also sometimes referred to as laissez-faire economics. With a laissez-faire approach, there are no restrictions on trade. The main idea is that supply and demand factors, operating on a global scale, will ensure that production happens efficiently. Therefore, nothing must be done to protect or promote trade and growth because market forces will do this automatically.

Protectionism

Protectionism holds that regulation of international trade is important to ensure that markets function properly. Advocates of this theory believe that market inefficiencies may hamper the benefits of international trade, and they aim to guide the market accordingly.

Protectionism exists in many different forms, but the most common are tariffs, subsidies, and quotas. These strategies attempt to correct any inefficiency in the international market.

As international trade opens up the opportunity for specialization, and thus more efficient use of resources, it has the potential to maximize a country's capacity to produce and acquire goods. Opponents of global free trade have argued, however, that international trade still allows for inefficiencies that leave developing nations compromised. What is certain is that the global economy is in a state of continual change. Thus, as it develops, so too must its participants.

What Are the Benefits of International Trade for a Business?

What Creates the Need for International Trade?

What Are Common Barriers to International Trade?

The Bottom Line

The world economies have become more intertwined through globalization and international trade is a major part of most economies. It provides consumers with a variety of options and increases competition so that businesses must produce cost-efficient and high-quality goods, benefiting these consumers.

Nations also benefit through international trade, focusing on producing the goods they have a comparative advantage in. Though some countries limit international trade through tariffs and quotas to protect domestic businesses, international trade has shown to benefit economies as a whole.

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What happens when the leading economies of the world interact?

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Demand and Supply in International Trade

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Demand and Supply in International Trade

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This video uses the example of apples to show how supply and demand effect the trade in that product between Canada and the US. It starts by showing how the markets and their equilibrium prices would supposedly look if there were no trade between the countries. Then, by introducing a free trade price it goes to show how the US consumer surplus is negatively affected and the Canadian consumer surplus is positively effected. It also shows how the opposite is true for the producer surplus in both countries, favorable for the US and unfavorable for Canada. It then shows how the Net Gain from the trade positively affects both countries by comparing the consumer surplus to the producer surplus.

This is a great introductory video to the effects of supply and demand in international trade as it is easy to understand and uses an example to show their effects. The graphs highlight the supply and demand in each country and shows how trade affects that graph to emulate the consumer surplus, producer surplus and net gain.

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14.2 - Demand and Supply with International Trade

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In the first few months of the Pandemic, Canada's exports had dropped 28.4% from the previous year hitting the lowest they had been since 2009. Although the numbers did increase drastically by July, by the end of the year the numbers were still lower than they were from before the Pandemic. Imports also saw a decline in April and May but by June and July the numbers were more normalized and by October they had surpassed the pre-pandemic numbers. The demand for energy products, one of Canada's largest exports, had fallen 36.6% in 2020 due to global shutdowns. Crude oil was responsible for more than 75% of that decrease, by the end of 2020 the export of crude oil was down 26.8% from 2019. Similar situations arose in the trade of motor vehicles and parts, first half of the year saw a major decline in demand, production and exports but unlike energy products they did somewhat stabilize by the second half of the year though the numbers were still lower than those of 2019. Unlike the previous two exports, farm products showed strong export growth, even with the pandemic in full swing. The exports of goods in the industry was up 14.9% to a record high of $43.6B. The demand for metallic and non-metallic minerals, mainly gold, also grew globally in 2020. The demand for consumer goods surged to record highs during the Pandemic year. Imports were up 1.4% from 2019 to reach a record high of $127.2B.

I chose this website because it is an official Canadian site showing all the stats from the 2020 year. The site gives a more detailed look at to how the Pandemic and other factors affected International trade for Canada. It was interesting to see how the import numbers were down at the beginning of the pandemic when there was global uncertainty but rose drastically when people started to accept the new norm and the numbers in the demand of consumer goods shows this as well.

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Amid the COVID-19 pandemic, the value of Canada's annual merchandise exports decreased 12.4% in 2020 to $524 billion, while annual imports fell 8.5% to $561 billion. Consequently, the merchandise trade deficit with the world more than doubled from $15.4 billion in 2019 to $37.3 billion in 2020. When international trade in goods and international trade in services are combined, Canada's total trade deficit went from $36.9 billion in 2019 to $44.8 billion in 2020.

To explore Canada's international merchandise trade statistics for 2020 in an interactive format, see " The International Trade Explorer" and the " International merchandise trade monthly interactive dashboard."

Even before the effects of the pandemic, the year 2020 had already been marked by several events that affected Canada's international trade activity. By the end of 2019, a car assembly plant closed in Ontario; a strike in the rail industry impacted the movement of goods; and a pipeline rupture in North Dakota, which lasted for weeks, affected crude oil exports to the United States. Some export products were impacted by global trade tensions, and rail blockades threatened to further constrain Canada's merchandise trade. These events were overshadowed by lockdowns in early spring 2020 and their extraordinary impact on Canada's trade activity.

With the shutdown of several industries in Canada during the first wave of the pandemic in March, April and May, both exports and imports of goods and services fell to historic lows. Merchandise trade then recovered fairly quickly as goods-producing industries, in Canada and abroad, progressively reopened. Global demand for goods also remained strong, with households spending more on goods rather than on services, and with governments investing in infrastructure projects and providing financial assistance to support the economy.

Exports decreased 28.4% or $12.6 billion in April to $31.7 billion, the lowest level since 2009. Three months later, in July, exports were at $46.0 billion, $1.9 billion shy of the pre-pandemic levels in February. Exports continued to grow at a more typical pace for most of the remaining months, though they closed the year below February levels. Imports fell 24.1% in April and 3.4% in May, a combined decreased of $13.1 billion. They resurged in June (+20.1%) and July (+12.6%) and by October, import levels had surpassed February levels.

Canada's total merchandise trade activity (exports plus imports) was down from $1,212 billion in 2019 to $1,086 billion in 2020, a 10.4% decrease. Despite the downturn in merchandise trade activity in 2020, the impact was far below 2009 when the effects of the last major economic downturn were most strongly felt in annual merchandise trade. In 2009, total trade fell 20.4% compared with 2008.

The impact of the COVID-19 pandemic on merchandise trade varied significantly by product in 2020. On one hand, there were never-before-seen monthly declines in imports and exports of products such as motor vehicles and parts, which fell drastically in April when nearly all North American auto assembly plants were shut down for weeks. On the other hand, imports of consumer goods reached a record in 2020, supported mainly by rising imports of personal protective equipment.

The following sections include an overview of trade for products most affected by the 2020 pandemic. Products that not only weathered the effects of the pandemic, but also showed significant growth will also be reviewed.

Exports and imports of energy products had not fully recovered at the end of 2020

The COVID-19 pandemic created a vacuum in the demand for energy products. Activities that required energy products, such as commuting, travelling, powering office buildings and producing goods and services, were heavily affected by the restrictions put in place to fight the pandemic. This sudden drop in demand led to significant decreases in exports and imports of energy products in 2020.

Exports of energy products fell 36.6% in 2020 to $74.3 billion. The $42.9 billion annual decline represented the largest drop of all product sections in 2020. Exports of crude oil were responsible for more than three-quarters of that decrease.

Unlike other traded products that started to decline in March and April, crude oil exports began to fall in January, driven mainly by lower prices. Rail blockades in Canada, as well as the pandemic that began to unfold in some Asian and European countries, were already applying downward pressure on Canadian crude oil prices. Then, in March and April, exports of crude oil fell further when new restrictions were imposed across North America.

From December 2019 to April 2020, crude oil exports lost 83.8% of their value, mainly on lower prices. However, while prices rebounded partially in May and June, lower export volumes moderated the growth in export values. From May to December, exports of crude oil increased every month but one. However, by December 2020, exports of crude oil were still down 26.8% compared with December 2019. In nominal terms, this represented a $1.9 billion decrease, almost equalling the year-over-year gap in total exports for December.

Canadian refineries, which are the primary importers of crude oil, as well as the largest exporters of refined petroleum products, were also affected by the pandemic in 2020. Not only did energy prices decrease drastically in general, but refinery output was also affected by shutdowns and lower demand. As a result, imports of crude oil fell 39.4% in 2020, settling at $11.5 billion. Meanwhile, exports of refined petroleum products decreased 40.1%.

The declines in exports and imports of energy products were much stronger than those observed for total exports and imports. In fact, non-energy product exports decreased 6.5% in 2020, representing roughly half of the overall percentage decrease in total exports. In December 2020, exported volumes of energy products were almost back to December 2019 levels, but the gap in prices was stark.

With the introduction of vaccines suggesting a more positive economic outlook for 2021, demand for energy products may continue to rise. Meanwhile, tightening global supply and extreme weather events in the United States in early 2021 may also contribute to higher prices and values for Canadian energy products.

Trade in motor vehicles and parts decreases significantly

In the months after restrictions were first imposed in response to the pandemic, trade in motor vehicles and parts declined to historic lows. After dealing with sporadic closures in early March, the majority of North American vehicle manufacturers began shutting down operations indefinitely in the second half of the month. Engines and parts suppliers followed suit, with some adapting their operations to manufacture medical equipment.

Exports of motor vehicles and parts, which stood at $7.5 billion in February, before the restrictions began, settled at $1.1 billion in April, losing approximately 86% of their monthly value. Imports of motor vehicles and parts, originating in a lesser proportion from the United States, reached their lowest in level in May, down 81.8% compared with February.

Most North American production did not resume until the second half of May; however, production was slowed because of physical distancing measures and temporary shutdowns in response to positive COVID-19 tests. By July, exports of motor vehicles and parts had returned to levels similar to those reported before the pandemic.

Exports of motor vehicles and parts reached $8.2 billion in July, surpassing February levels by more than $700 million, as motor vehicle production ramped up to compensate for large losses in the previous months. Following that peak, exports of motor vehicles and parts declined every month but one, settling at $6.8 billion in December and ending the year below the pre-pandemic level.

In the second half of the year, assembly plants caught up with lost output and were back to producing at a pace that aligned with demand. With the low values of March, April, May and June, and the slow decline at the end of the year that followed the July recovery, exports of motor vehicles and parts totalled $74.2 billion in 2020, down 20.3% compared with 2019.

The situation was similar on the import side. Imports of motor vehicles and parts reached $8.4 billion in July, 9.2% below the prepandemic level of $9.2 billion in February. Despite this recovery in July, imports of motor vehicles and parts did not reach the February mark again in 2020. As was the case with exports, production levels tapered off in the latter part of 2020 to align with lower demand, which was reduced by the effects of the pandemic. Imports of motor vehicles and parts totalled $87.4 billion in 2020, down 24.0% compared with 2019.

In the wake of the events of 2020, recent announcements appear likely to shape automotive manufacturing in Canada going forward. The Oshawa plant reopened at the end of 2020 to build pick-up trucks, and new investments were announced by automotive producers, alongside federal and provincial governments, for the production of electric powered commercial vehicles and passenger cars in Canada.

This situation contrasts significantly with the one that occurred in response to the 2009 downturn, when Canadian automotive plants were shuttered and exports experienced a structural decline. In 2021 however, headwinds created by the global shortage of semi-conductor chips could limit production capacity and trade of motor vehicles and parts.

Exports of farm products increase on higher global demand

In contrast to motor vehicles and parts and energy products, farm, fishing and intermediate food products showed strong export growth despite the pandemic. Notwithstanding the economic downturn that was caused by the pandemic, high global demand and advantageous market conditions for grain, oilseeds, pulse crops and soybeans benefitted Canadian exporters, who shipped record volumes abroad in 2020.

Following a decrease in 2019-a year marked by a rail strike and trade tensions- exports of farm, fishing and intermediate food products rebounded strongly in 2020, up 14.9% to a record high $43.6 billion. Higher prices had an impact in 2020, but the growth in nominal terms was mainly volume-driven. Exports of canola, wheat, pulse crops (such as peas and lentils) and other crop products (such as soybeans) all posted strong increases and contributed to the overall growth.

The Canadian agriculture sector is highly dependent on rail movements within the country, as grain and oilseed are loaded onto rail cargo containers from inland terminals and transported to major export ports. The 2020 growth coincided with a recent increase of availability in the rail system in Canada, partly attributable to lower shipments of other products during the pandemic. For example, on a customs basis, exports of crude oil to the United States by rail fell 41.7% in quantity in 2020 compared with 2019. Other factors, such as limited international supplies (caused by trade disputes and bad crop years in other countries, for example), a good crop year in Canada in 2020 and an upgrade of the capacity of the rail system, also contributed to favourable conditions for Canadian exporters.

One-third of the gain in exports of farm, fishing and intermediate food products in 2020 was attributable to higher exports to China, which rose 38.0%. This increase follows a year in which China drastically reduced its imports of canola and soybeans from Canada. In 2020, exports of farm, fishing and intermediate food products to China were still 23.1% below the record levels observed in 2018. Higher exports to Europe also contributed the overall gain in exports of farm, fishing and intermediate food products in 2020.

Canada's Outlook for Principal Field Crops, published by Agriculture and Agri-Food Canada's in February 2021, reported that the 2021/2022 crop year (August 2021 to July 2022) may be characterized by lower Canadian production and inventories, as well as by higher global production. Combined, these factors could result in lower exports of farm products. However, exports for this product section remained strong at the beginning of 2021, with increases in the two first months of the year, including a record high in February.

High demand for gold in times of economic uncertainty

Imports of metal and non-metallic mineral products surged 25.6% in 2020. Imports of unwrought gold, silver, and platinum group metals and their alloys-a subcategory mainly composed of gold - reached $15.3 billion in 2020, almost five times higher compared with the previous year. This more than offset the widespread decreases in the other subcategories of the product section. Although prices were up, this increase was mainly volume-driven. Gold is a safe haven asset in times of economic uncertainty, and this surge in imports reflected higher Canadian demand for gold amid the turbulence caused by the pandemic. In 2009, during the last major economic downturn, annual imports of unwrought gold, silver, and platinum group metals and their alloys increased 49.6%.

Roughly two-thirds of the 2020 increase in gold imports was attributable to higher purchases of gold for which a change in ownership occurred without the gold being physically brought into the country. The growth in these imports was mainly with the United States and Switzerland. The remainder of the increase was on higher imports of gold physically entering the country. These types of imports are mainly the result of banks acquiring assets, but refiners also import and process gold to a higher degree of purity, often subsequently exporting it again. The growth in physical imports of gold was mainly the result of higher imports from Brazil.

Exports of metal and non-metallic mineral products (+2.5%) also increased in 2020 despite the pandemic. Again, exports of the product subcategory unwrought gold, silver, and platinum group metals and their alloys (+16.0%) more than offset the widespread declines within the product section. As with imports, the growth in exports was mainly attributable to higher gold transactions without the physical movement of the goods, with higher exports to the United States and Switzerland. Physical exports of gold also increased, in large part because of higher exports to the United States and the United Kingdom.

International trade in gold is highly volatile and dependent on multiple factors. While a brighter economic outlook for 2021, ushered in by COVID-19 vaccines and the easing of restrictions, could lead to lower global demand for gold, other factors, such as prolonged low interest rates, could help sustain high demand.

Imports of consumer goods reach record highs on a surge in imports of personal protective equipment

Imports of consumer goods reached a record high $127.2 billion in 2020, up 1.4% from 2019. The main contributors to the gain were imports of carpets, textile furnishings and other textile products, as well as miscellaneous goods and supplies. The increases in these commodity groups resulted from the pandemic, as many types of personal protective equipment are classified under these categories.

From 2019 to 2020, imports of carpets, textile furnishings and other textile products climbed 42.6% to reach $5.8 billion, making this the largest increase in a decade. The surge was led by imports of face masks of textile materials, mainly from China, which skyrocketed from $2.0 million in 2019 to $1.5 billion in 2020, a 750-fold increase.

Imports of miscellaneous goods and supplies increased 10.8% to $21.0 billion in 2020. The gains were attributable to imports under a category that includes respirator masks. In addition, imports of protective suits surpassed $600 million in 2020, up from $36 million the previous year.

These increases were partly offset by lower imports of clothing, footwear and accessories, which fell by 19.2% in 2020 to $15.7 billion. This was the first annual decrease for imports of this product group in 10 years. The most significant declines were in the second quarter of 2020, when imports of clothing, footwear and accessories fell 32.8% compared with the first quarter. This coincided with the beginning of restrictions to curtail the spread of COVID-19, such as the closure of non-essential businesses.

Imports of consumer goods reached a record in 2020, but if Canada becomes less dependent on other countries for personal protective equipment, such as face masks, and as supplies for these goods stabilize to meet demand, this could drive imports of consumer goods down in 2021. On the other hand, if retail activity, especially clothing, recovers as vaccines become more widely available and restrictions ease, this could contribute to higher import values.

Lower trade surplus with the United States, and lower deficit with other countries

Exports to the United States fell 15.7% to $376.2 billion in 2020, the lowest annual value since 2013. Most of this decline was attributable to lower exports of energy products and motor vehicles and parts. Imports from the United States were down 10.9% to $349.3 billion, also the lowest annual value since 2013. Similar to exports, lower imports of motor vehicles and parts and energy products accounted for most of this decline.

Exports to countries other than the United States decreased by 2.6% to $147.9 billion in 2020. Lower exports to Hong Kong (gold), Mexico (various products) and Saudi Arabia (other transportation equipment) were partially offset by higher exports to Switzerland (gold) and China (iron ores and concentrates and farm products).

Imports from countries other than the United States fell 4.3% to $212.1 billion. The decrease was led by lower imports from Mexico (motor vehicle engines and parts) and Japan (passenger cars and light trucks). Higher imports from China (personal protective equipment and other consumer goods) and Switzerland (gold) partly offset the overall decline.

The difference in the annual results for trade between the United States and the other countries is primarily because the two product sections hardest hit by the pandemic in 2020-motor vehicles and parts, as well as energy products-are mainly traded with the United States.

Canada's merchandise trade deficit with the world more than doubled, widening from $15.4 billion in 2019 to $37.3 billion in 2020. This was entirely attributable to Canada's trade surplus with the United States, which narrowed from $54.4 billion in 2019 to $26.9 billion in 2020, the lowest surplus in over a decade. By comparison, Canada's trade deficit with the rest of the world narrowed from $69.7 billion in 2019 to $64.2 billion in 2020.

Exports to the United States represented 71.8% of Canada's exports to the world in 2020, down from 74.6% in 2019. Meanwhile, the share of Canada's imports from the United States decreased from 63.9% in 2019 to 62.2% in 2020. The share of Canada's imports from the United States peaked at 77.0% in 1998, while the share of Canada's exports to the United States peaked at 83.9% in 2002.

Using the Herfindahl-Hirschman concentration index ( HHI), Canadian goods sold abroad were more diversified in terms of market of destination in 2020 ( HHI=0.53) than in 2019 ( HHI=0.56). The HHI was at its lowest since 2011, meaning that, according to this index, Canadian exports were more diversified than in any year since then. A stronger decline in exports to the United States versus exports to countries other than the United States was the reason for the higher diversification of Canadian exports in terms of market of destination.

Canada's international trade in services falls in 2020

As was the case for Canada's international trade in goods, Canada's international trade in services was affected by the pandemic in 2020. On an annual basis, Canada's international imports of services declined 24.0% to $122.3 billion, and exports were down 17.7% to $114.7 billion. In comparison, during the economic downturn of 2008-2009, Canada's international trade in services declined for exports (-2.2%) and imports (-0.3%) from 2008 to 2009.

Canada's international trade in services deficit narrowed significantly from $21.5 billion in 2019 to $7.6 billion in 2020. However, the declines in 2020 related to the pandemic did not affect every service category equally.

COVID-19 restrictions lead to large declines in travel services and transportation services

Imports of travel services fell 65.9% to $16.2 billion in 2020, while exports decreased 59.4% to $15.1 billion. Imports of transportation services declined 27.9% to $23.4 billion in 2020 and exports were down 26.6% to $13.6 billion.

To help prevent the spread of COVID-19, travel restrictions and border closures were enacted in March 2020. On March 13, the Government of Canada advised all Canadians to avoid all non-essential travel abroad. Further restrictions were implemented for entry into the country by non-residents, other than those of the United States, on March 18, and these were extended to United States residents on March 20.

These measures contributed to large monthly decreases in March 2020 for both imports and exports of travel services, as well as to declines for imports and exports of transportation services. This was followed by further declines in April, so that travel services imports had fallen from $4.7 billion in February to $331 million in April, and exports had decreased from $2.2 billion to $1.2 billion. Imports for transportation services fell from $2.5 billion to $1.7 billion, while exports fell from $1.4 billion to $949 million. Travel services imports remained well below their February level for the rest of the year.

Education-related travel services were less affected by the pandemic than other travel services, declining 14.5% on an annual basis for imports and 11.3% for exports. The smaller decline for education-related travel services reflected, in part, non-resident students studying in Canada and Canadian resident students already studying abroad choosing to remain in the countries in which they studied during the pandemic and thus continuing to receive education services to some extent. The tuition fees portion of the expenses of students who remained in their country of residence while studying remotely at institutions in other countries are counted as commercial services as opposed to travel services, specifically the personal, cultural and recreational services sub-category.

The impact of the pandemic on transportation services differed by component, specifically between transportation services related to the transportation of travellers and those related to the transportation of goods. The former experienced large declines in March and April, and did not experience much, if any, rebound during the rest of the year.

Transportation services related to the transportation of goods declined at the onset of the pandemic (April and May for imports, and March and April for exports), but recovered in subsequent months such that exports in December were above their February level and imports were slightly below their February level.

Overall, transportation services imports in April were 33.9% below their February level and exports were 32.1% below their February level. Imports and exports partially rebounded the rest of the year, such that, in December they were still 27.7% and 17.2% below February levels, respectively.

It is unlikely that significant increases will be seen for either travel services or passenger fares until COVID-19 related travel restrictions and border closures are lifted. For additional information on the international movement of travellers entering into and returning to Canada in 2020, please see Crossing the border during the pandemic: 2020 in review.

Commercial services increase and government services decline in 2020

In contrast to the large annual declines for travel services and transportation services, exports of commercial services increased 3.3% to $84.5 billion in 2020, while imports rose 2.5% to $81.3 billion.

As was the case for many other countries, imports and exports of commercial services were not as affected by the COVID-19 pandemic as other service categories. Unlike travel services and transportation services, many commercial services can be delivered remotely, something that likely contributed to their greater resilience. For additional information on commercial services by mode of supply, please see Canada's services exports through the lens of digital trade.

At the onset of the pandemic there were increases in the financial services component of commercial services for both imports and exports. These increases reflected, in large part, higher commissions on securities trading linked to increased financial market activity during the early stages of the pandemic. Trade in non-financial services components declined during the first half of 2020, before more than recovering in the second half to end up with an annual increase for 2020 as a whole. Education services delivered online to international students who chose not to, or were unable to, travel to Canada for school and instead stay in their home countries contributed to the increase in exports the last part of the year.

Exports of government services fell 17.5% to $1.4 billion in 2020, while imports declined 11.5% to $1.4 billion.

Contact information

For more information, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca).

To enquire about the concepts, methods or data quality of this release, contact Benoît Carrière (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca), International Accounts and Trade Division

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Canadian international trade in 2020: A year without precedent

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Amid the COVID-19 pandemic, the value of Canada's annual merchandise exports decreased 12.4% in 2020 to $524 billion, while annual imports fell 8.5% to $561 billion. Consequently, the annual merchandise trade deficit with the world more than doubled from $15.4 billion in 2019 to $37.3 billion in 2020.

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This image shows the supply demand graph with highlights around the consumer and producer surpluses as well as where the losses and tarrifs are on the graph.

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This panel goes in and looks at the issues with the current supply chain in Canada including but not limited to the surge of imports, loss of productivity due to social distancing and full shutdowns from COVID,  shortages in transportation (truckers), issues with globalization, climate change and over-reliance on products from China. The panel then proceeds to look into possible solutions to alleviate the supply chain crisis not only in Canada but on the global scale. This includes updating infrastructure of ports to utilize blockchain and artificial intelligence technologies like they do in Dubai for logistics and warehousing. They also speak on how Canada should begin to look at securities for the next potential crisis, be that re-shoring in Canada or at least North America, diversifying our sources to not rely on a single source, in this case China and also strengthening the North American supply chain so that it is more resilient by relying on each other. They also speak to how globalization today is skewed and there is no true global supply chain but a Chinese dominant supply chain and to resolve some the issues we need to shift towards true global and regional supply-chains. Finally, they speak on how the Canada needs to find a way to create demand for local products to grow the local market and reduce the reliance on other countries in the supply chain.

I personally love this panel, it lets us hear from experts in the field on issues in the supply chain on a global scale. I particularly like how they look into some possible solutions for the crisis that isn't just simply re-shoring everything because it's not feasible in the world today.

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Solving Canada's Supply Chain Crisis | The Agenda

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Since the beginning of the pandemic, bottlenecks in the supply chain has led to congestion at ports around the world. In Canada, this means that there is a limited supply of goods in stores that is causing an increase in prices and this is not going to change anytime soon. To paraphrase Finance Minister Chrystia Freeland, "Shutting down an economy is a lot easier than turning it back on." Since 65% of Canada's GDP comes from trade, the blockages in the supply chain impacts both the economic activity within Canada and the living standards of all Canadians. The low to nonexistent demands in some commodities during the closures caused by pandemic, which are now seeing surges due to global re-openings, are causing bottlenecks at ports around the world including the L.A. port in the US and the port of Vancouver in Canada. These bottlenecks coupled with the limited supply of trucks for transportation are causing massive delays in the chain and ports are now filled with shipping containers. The imbalance of supply and demand are causing problems globally, there are too many of some products and not enough of others. This problem doesn't only affect products coming from other countries but to those manufactured in North America as well. Products that require a specific part from elsewhere in the world are also dealing with the consequences of the strained supply chain.

I really appreciate this article as it not only looks at how the supply chain crisis is affecting Canada but also how some of these problems are being seen worldwide. Sometimes we forget about the fact that not all imports are consumer goods and that bottlenecks in the supply chain can inhibit or delay the production of some local commodities.

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Finance ministers the world over have discussed supply chain crisis, Freeland says

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Supply and demand ‘out of balance,’ an expert says, with excess of some products and dearth of others — and a lack of workers compounding it all

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This News segment shows how the surge of imports in Canada has affected the supply chain. The amount of shipping containers being left in yards has increased nearly 50% since the start of the Pandemic. Because of the of the lock downs, the surge in demand for imported items has increased which has increased the amount of containers being used for imports. Shipping companies have since limited the amount of containers that are being used to export Canadian goods and taking empty containers back to Asia where the demand for them is higher. There is now a delay in when consumers get their products and the higher demand for the imported products is driving up prices.

I chose this video because it was interesting but also how it shows the effect high importation can throw supply chains out of balance. One thing I learned that really struck me is that shipping companies are opting to return empty containers to countries with high export rates instead of doing what used to be the norm in filling those containers with goods from the country they are in to ship elsewhere.

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Import surge straining Canada’s supply chain

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Canada Inter-provincial and International Trade Flows

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Canada Inter-provincial and International Trade Flows

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This site is a breakdown of trade in Canada from the choice range of 2007 to 2018. It allows us to look at the trade numbers of Canada internationally and internally as well as the breakdown by province / territory. It allows us to look at the total numbers but also lets us look a little deeper in and look at the trade for the different product categories as well as goods and services.

I chose this website because it lets us look at real numbers and the change of imports and exports through the years. I particularly like how you can look at the numbers for specific sectors of the trade market.

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Interprovincial and international trade flows, basic prices, summary level

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The interprovincial and international trade flows shows the origin and destination of trade flows by product among Canadian provinces and territories and from and to the rest of the world. The information is available at the Summary level of hierarchy of the Supply and Use Product Classification (SUPC).

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This image is to show how the supply chain crisis is causing an increase in the number of shipping containers being left at ports and shipping yards in Canada and around the world.

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1. That the increase in imports from China since the beginning of the pandemic has worsened an already skewed global supply chain.

2. This topic is relevant to me because the rise in demand of consumer products means that now there is a delay in receiving those products as well as price increase. This means a lot to me since I order products online a lot.

3. I would tell my family and friends to expect longer delays in receiving their items ordered online, especially if they're ordered from over-seas.