Exports slump despite gains to U.S. market Review

The Globe and Mail: 01/11/2013

BT1.01 - Define the basic terminology of international business (e.g. international trade, multinational enterprise, global company, exports, imports)

Summary

‘Slumping sales’ of Canadian exports around the world have led Canada’s trade deficit to its fourth highest ever. The deficit grew from a $600 million gap recorded in October 2012 up to a $2 billion one. In terms of gains to the U.S. market, the exports to the U.S. actually rose by 3.9% in November - led by energy and autos - but exports to everywhere else in the world fell 13.4%. This hit Canada’s lowest level of exports to countries other than U.S. in over two years. The imports rose 2.7% in November - led by commodities, autos, and electronics while imports of machinery and equipment sank 1.7%. This rise in imports though, suggests that consumers may have been buying more foreign goods rather than domestic goods. Canadian exports overall fell 0.9% which will have an impact on the mainly export- dependent economy. Farm product exports fell quite significantly by 14.6% as the drought in the U.S. started to slow. The rise in exports to the U.S., where their economy is starting to grow again, is a good sign however because it may contribute a ‘substantive improvement’ for Canada by the second half of this year, predicted Toronto-Dominion Bank economist, Leslie Preston. In other words, because the U.S. and Canada are interdependent on one another, the growth of one economy can provide some support to the other.

As the American drought slowed, Canadian agriculture export levels sank
Source: Bigthink.com

Connection

The basic terminology of international business used in this article consists of ‘imports’, ‘exports’, ‘merchandise trade deficit’, and more specific words like ‘commodities’. Most importantly to understand what this article is about, imports and exports must be differentiated between. An ‘import’ is a product or a service that a country is receiving from another. The opposite, an ‘export’ is a product or a service that a country is providing for another. For example, the article states that Canada had imports led by electronics and autos, while exports of Canadian farm products had fallen sharply. This means that Canada has imported more than it has exported, thus resulting in the ‘merchandise trade deficit’, (when the value of imports exceeds the value of exports) which is not always negative for a country’s economy as one might assume. More imports can allow consumers to have a better selection of unique products and can further encourage them to buy, yet fewer exports can leave Canadians with more domestic products to choose from - domestic means they are made in the home country - contributing to economic growth. The other term used when classifying Canadian imports was ‘commodities’ which usually refers to raw materials or other resources of higher value that can often be used in the process of creating new products. Since Canada is known as an export-based economy, it is recognized internationally as a country that is rich in commodities such as fresh water, agriculture, fish and various types of meat. This is why it seems rare for Canada’s exports to decrease internationally - because it is known to have a large range of commodities.

Source: http://www.ats-sea.agr.gc.ca/