International Trading Partnership between Canada and China

Posted: August 13th, 2013

International Trading Partnership between Canada and China

Table of Contents

Introduction……………………………………………………………………….2

Overview of China Trade Relations……………………………………………………………..2

Exports to China…………………………………………………………………………………..……3

Canada-China Investment and Trade……………………………………………..5

Conclusion………………………………………………………………………..5

Name:

Instructor:

Course:

Date:

International Trading Relationship between Canada and China

Introduction

The economic relations between Canada and China have possessed a considerable impact on Canada’s economy. Macroeconomic indicators based on the open relationship between the two partners have illustrated the economic value arising from a diplomatic bilateral association within the two countries point to open trade relations. This is evidenced by the fact that six percent of the total global trade carried out by Canada is facilitated by the Republic of China. Over the past 15 years, China’s trade with Canada has evolved based on the milieu of the wide modifications in China’s trade globally. The direct impact of greater exports to China and the increasing demands on commodity prices from China’s rapid industrialization has benefited Canada’s economy. Concerning the macroeconomic issues facing the country of Canada, it is important to assess the foreign trading relationship between Canada and China.

Overview of China Trade Relations

The trade between Canada and China has had tremendous effects on both countries, especially Canada. This is based on China’s increasing consumption and importation rate regardless of the fact that it is one of the world’s largest exporters. In the late 1990s, imports from China increased considerably concluding China’s access into the World Trade Organization (WTO) in 2001. After the imports increased to 8.2 percent in 2001, in 2002, the imports increased again to 21.2 percent and in 2003, increased to 39.9 percent regardless of the stagnant global trade. Consequently, the trade surpluses decreased by US$ 4.9 billion in 2003 to US$ 25.5 billion and then initiated a deficit of US$ 8.4 billion in 2004’s first quarter. The increase in imports was facilitated by low tariffs regarding imports, enhanced household demand and requirement for energy and raw materials[1].

Lately, China has developed as an increasing supply of export requirement for the resurgence of its neighbors, specifically Japan and other Asian nations that suffered immensely from the 1997 Asian currency predicament. The exports from the United States increased by double the rate between 1999 and 2003, fronted by electronic paraphernalia. Furthermore, Canada’s exports increased when commodity prices decreased. The exports to China to Canada are typically facilitated by resource commodities, which account for nearly 80 percent of the country’s consignments to China.

Exports to China

At one point, wheat dominated exports from Canada to China accounting for 60 percent of Canadian consignments to China. However, wheat shares have decreased to 10 percent of the export consignments to China. In addition, wheat shares have been supplanted by augmented gains for manufacturing materials and forestry commodities. Over the past 15 years, capital commodities continue to comprise a share of exports. However, exports of autos, consumer and energy products have remained significantly small over the past period. Based on agricultural products, the constant decrease in wheat exports has necessitated drastic gains for seafood exports, oilseeds and meat. This is marked by the entry of seafood exports to China from Canada in 2003, which led to Canada receiving US$ 250 million from the exports. This is equal to half of the exports of agrarian products to China[2].

Furthermore, the dietary drift within China led to a 40 percent decrease in the consumption of grain in domestic urban households while the rate of consumption of meat augmented as well as the rate of consumption of seafood. In total, Chinese seafood imports increased from US$1.8 billion to US$ 4.1 billion. Alternately, Canadian exports based on industrial products have increased based on the increase in Chinese production. The increase was headed by metals, which accounted for 15.8 percent of Canada’s exports to China in the beginning of 2004. Currently, steel, nickel and iron materials dominate Canadian exports to China. Additionally, irrespective of the three metals being the dominant industrial materials within Canadian exports, there has been increasing demand for metals such as aluminium and copper. On another note, the shift within the Chinese agriculture sector towards grain farming has increased fertilizer exports and chemical commodities from Canada to the country.

Currently, Canada is the greatest supplier of pulp globally while China is the greatest importer of the product. As such, forestry products have dominated Canadian exports to China representing one-third of the total exports to China. Recently, pulp exports solely accounted for a fifth of Canadian exports. Lumber exports to China from Canada have also increased leading to China becoming a part of the greatest importers of the product. Such increase in the demand for lumber and pulp exports to China have been facilitated by rapid urbanization and increased forestry management in the country. The augmented banking reforms also enhanced the availability of credit and house ownership hence increasing China’s need for pulp and lumber[3].

Canada-China Investment and Trade

In 2009, the trade of merchandises between Canada and China amounted to US$ 50.8 billion, which was actually a 4.3 percent decrease based on the trade reports between the two countries for 2008. The Canadian exports to China accounted for US$ 11.2 billion whereas the imports from China accounted for US$ 39.6 billion. Irrespective of the Global Recession, the trade relations between the two countries remained significant regardless of the fact that the global exports and imports from and to Canada decreased. In comparison, the imports to Canada from China decreased by 7 percent and exports increased to 7 percent, which facilitated trade growth amid the recession. In addition, the increase in investments in Canada have further improved Canada-China trade relations based on the increase of Foreign Direct Investment (FDI) to the country[4].

Over the last current years, FDI between the two countries has increased considerably. Starting from 2009, the FDI in China from Canada amounted to US$ 3.3 billion. For China, the rate of FDI to Canada was greater in 2009 amounting to US$ 8.9 billion. In addition, the takeovers of numerous mining and energy significances have increased Chinese trade with Canada leading to a significant increase in Chinese investment within Canada. In 2012, China invested US$ 11 billion in Canada. However, the rate of Canadian investment to China is, in comparison, different from China’s trade investments. This is indicated by the fact that Canada has invested US$ 4.6 billion in China as of 2012.

Conclusion

The trading relationship between Canada and China has indeed proved to an economic boost for both nations in the global scene. The flexibility of bilateral trade associations have led to increase in trade relations for both countries. Currently, China is the second greatest trading partner with Canada. In addition, the increase in Foreign Direct Investment in Canada has facilitated the increase in employment opportunities further enhancing the Canadian economy. However, Canada’s investment within China has decreased and as such, contributed deficiently to China. However, with the introduction of novel multilateral trade deals, both countries are set to experience increased gains based on their formidable trading associations.

Works Cited

Department of Finance. Canada’s New Government Promotes Stronger Links between Canada and China. Ottawa: Department of Finance, 2007. Print.

Department of Foreign Affairs and International Trade. New Opportunities in a Vast Market: Canada, China and the WTO. Ottawa: Dept. of Foreign Affairs and International Trade, Canada, 2002. Print.

Roy, Francine. Canada’s Trade with China. Ottawa: Statistics Canada, Micro-economic Analysis Division, 2004. Print.

Zelai, Xu, and Zhu Nong. “Urban Growth Determinants in China.” Chinese Economy. 41.1 (2008): 7-35. Print.