Imports inched up 0.7% to $34.3 billion. Prices increased 3.4%, while volumes declined 2.7%. Energy products were the main factor behind the gain in imports, offsetting a decline in automotive products.

As a result, the December trade surplus with the world narrowed to $2.4 billion, its lowest level since November 1998. The surplus with the United States narrowed to $6.1 billion, the second lowest level in 2007. At the same time, the trade deficit with countries other than the United States expanded to $3.8 billion, the largest deficit since August 2006.

For 2007 as a whole, Canada's trade surplus with the world narrowed from $51.3 billion in 2006 to $49.7 billion, the lowest level since 1999.

Both exports and imports hit record highs in 2007, and merchandise exports to countries other than the United States rose dramatically. Although it is still Canada's biggest trading partner, the United States accounted for about three-quarters (76.4%) of Canada's exports in 2007, down from 79.2% in 2006. On the other hand, the share of export trade with the rest of the world rose from 20.8% to 23.6%.



Exports fall despite record exports of crude petroleum

Widespread declines overshadowed gains in energy products, the only significant sector to record an increase in December. Industrial goods and materials and automotive products led the decline.

After hitting a record high in July, exports of industrial goods and materials contracted 6.5% to $8.0 billion, the seventh decrease in 2007. Metals and alloys tumbled 10.8%, driven downward by declines in precious metals, copper alloys and nickel alloys as volumes for all three declined. Metal ores plunged 18.0% as copper and nickel ore exports slumped. Declining volumes of copper stemmed from the ongoing weakness in the US housing market, while nickel prices fell in the face of mounting inventories. By contrast, exports of chemicals and plastics increased 3.7% on the strength of organic chemicals and synthetic rubber and plastics.

Falling to their lowest level in almost a decade, exports of automotive products shrank 8.7% to $5.7 billion, reflecting significant declines in both passenger autos and motor vehicle parts. Passenger autos declined for the second month in a row, sinking 13.5% to $2.9 billion, while motor vehicle parts declined 5.2% to $1.9 billion. Temporary plant shutdowns, production cutbacks and retooling limited the production. Although trucks and other motor vehicles rose 1.2% in December, they were on the decline throughout 2007.

Machinery and equipment slid 4.6% to $7.3 billion, the sector's lowest level in three years. Other machinery and equipment fell to its lowest level since March 1998, with lower exports of television, telecommunications and related equipment accounting for more than two thirds of the decline. Aircraft and other transportation equipment also weakened, declining 6.0%. Industrial and agricultural machinery fell 2.7% to its lowest level in 2007, yet on an annual basis this group remained at a record level.

Faced with diminished demand from the United States and increased pressure from the strong Canadian dollar, the forestry sector continued its downward trend for the ninth consecutive month, falling 2.1% to $2.1 billion and hitting its lowest level since February 1994. With companies coping with curtailed production, temporary shutdowns and permanent closures, lumber and sawmill products fell 5.9% and wood pulp exports slipped 2.8%. However, newsprint and other paper and paperboard rose 3.2%, ending eight straight months of declines.

Agricultural and fishing products fell 1.3% to $2.8 billion in December, yet were up 10.1% on an annual basis, the second annual increase in a row. Exports of canola and wheat were the strength behind this annual rise, overshadowing declines in fish and meat preparations.

Energy products advanced 4.4% to $8.2 billion, the second consecutive monthly increase. Natural gas soared 13.7% as prices rose and as volumes remained relatively flat. Crude petroleum increased 3.5%, also largely due to price movements, to reach a record of $4.3 billion, continuing the upward trend that began in the latter part of 2007. Weakened electricity exports, however, mitigated the gain.

Imports inch up, fuelled by record energy products

With most sectors increasing in December, imports edged up for the second consecutive month. Energy products registered the strongest growth, offsetting significant declines in automotive products.

Energy products soared 19.4% to a record high of $3.7 billion. Crude petroleum gained 13.6% to $2.3 billion, the highest level since the record set in August 2006. Imports of other energy products also increased dramatically, as coal, and petroleum and coal products rose due to mounting volumes.

Halting a four-month slide, machinery and equipment rose 1.6% to $9.6 billion on the strength of aircraft and other transportation equipment, which rose 4.8% to $1.4 billion and represented almost half of the increase. Industrial and agricultural machinery rebounded as excavating machinery jumped 19.8%, resulting from the continued boom in the oilsands industry.

Agricultural and fishing products increased 1.0% to reach a record level of $2.2 billion. Sugar and sugar preparations contributed to the rise (+26.9%), increasing for a third consecutive month. Volumes for these products have been on the rise for the last six months, while prices have been on the decline. The agricultural sector as a whole has been trending upward for the last two years.

Automotive products fell 9.1% to $6.0 billion, the lowest level since January 2004, following widespread declines in all product groups. Motor vehicle parts registered the biggest drop, falling 12.5%, reflecting extended temporary plant shutdowns and production cutbacks. This is the sub-sector's third consecutive monthly decline, reaching its lowest level since December 1996. After its peak in November, the trucks and other motor vehicles group fell 9.9% to its lowest level since November 2006. Passenger autos declined 4.4%, falling for the third time in the latter half of 2007. Overall in 2007, passenger autos grew 4.6% over 2006. Despite the annual increase of passenger autos and trucks and other motor vehicles, total imports of automotive products remained relatively unchanged as imports of motor vehicles parts declined.

Industrial goods and materials dipped 0.8% to $6.9 billion due to falling imports of metals and metals ores, the only sub-sector to register a decline. Other non-ferrous metals and alloys fell 21.0% with significant volume declines primarily in copper, following strong shipments in November. Chemicals and plastics grew 4.2%, boosted by imports of medications, active agents and chemical additives for gasoline.

Annual 2007: Surplus shrinks as import growth outpaces exports

In 2007, Canada's merchandise trade surplus with the world narrowed as the growth in imports outpaced the growth in exports.

Exports rose 2.1% to a record $465.4 billion, while imports increased 2.8% to $415.7 billion, also a record.

Nearly one-quarter of exports consisted of industrial goods and materials, which reached $104.5 billion. This was a result of both strong world prices for metals as well as increased volumes. Likewise, energy products hit a record $91.8 billion, led by increased shipments of crude petroleum.

In contrast, automotive and forestry products were sluggish. Both sectors struggled against the effects of a strong Canadian dollar as well as the weak US housing market.

Imports increased in the wake of a stronger Canadian dollar that helped to make foreign imports relatively cheaper. In addition, the ongoing boom in the Western provinces continued to fuel investment and consumer spending.

Other consumer goods led the gain in imports in terms of value. Demand was strong for items such as pharmaceutical products, toys, clothing and house furnishings, which propelled imports of other consumer goods upward 5.3% to a record $54.8 billion. Energy products followed, rising 6.0% to $36.7 billion. Agricultural and fishing products rose 8.7% to $25.5 billion, reflecting higher volumes and prices. Machinery and equipment also grew, topping $116.6 billion, spurred by rising imports of aircraft and other transportation equipment.

The shrinking trade deficit with countries other than the United States reflected higher exports to China and Europe, particularly the United Kingdom.

Merchandise trade
	November 2007r	December 2007	November to December 2007	December 2006 to December 2007	January to December 2006	January to December 2007	January–December 2006 to January–December 2007
	Seasonally adjusted, $ current
	$ millions		% change		$ millions		% change
Principal trading partners
Exports
United States	28,434	28,056	-1.3	-10.8	360,964	355,475	-1.5
Japan	880	777	-11.7	-13.2	10,457	10,095	-3.5
European Union1	3,340	3,063	-8.3	3.4	32,830	39,602	20.6
Other OECD countries2	1,778	1,476	-17.0	-16.3	17,563	20,491	16.7
All other countries	3,441	3,325	-3.4	-3.2	33,886	39,744	17.3
Total	37,873	36,698	-3.1	-9.4	455,698	465,409	2.1
Imports
United States	22,117	21,931	-0.8	-5.5	264,891	270,318	2.0
Japan	998	1,031	3.3	3.2	11,883	11,975	0.8
European Union1	3,528	3,510	-0.5	6.0	42,038	42,416	0.9
Other OECD countries2	2,117	2,150	1.6	6.1	23,684	25,010	5.6
All other countries	5,354	5,722	6.9	0.6	61,902	65,991	6.6
Total	34,113	34,346	0.7	-2.5	404,394	415,711	2.8
Balance
United States	6,317	6,125	...	...	96,073	85,157	...
Japan	-118	-254	...	...	-1,426	-1,880	...
European Union1	-188	-447	...	...	-9,208	-2,814	...
Other OECD countries2	-339	-674	...	...	-6,121	-4,519	...
All other countries	-1,913	-2,397	...	...	-28,016	-26,247	...
Total	3,760	2,352	...	...	51,304	49,698	...
Principal commodity groupings
Exports
Agricultural and fishing products	2,882	2,845	-1.3	1.9	31,327	34,486	10.1
Energy products	7,819	8,160	4.4	8.1	86,782	91,799	5.8
Forestry products	2,189	2,144	-2.1	-20.4	33,261	29,005	-12.8
Industrial goods and materials	8,575	8,016	-6.5	-7.2	93,957	104,492	11.2
Machinery and equipment	7,685	7,333	-4.6	-11.0	94,672	95,194	0.6
Automotive products	6,190	5,653	-8.7	-25.8	82,539	77,492	-6.1
Other consumer goods	1,472	1,466	-0.4	-15.7	17,959	18,922	5.4
Special transactions trade3	616	647	5.0	-12.6	8,733	8,179	-6.3
Other balance of payments adjustments	445	433	-2.7	-14.4	6,462	5,841	-9.6
Imports
Agricultural and fishing products	2,135	2,157	1.0	4.8	23,455	25,493	8.7
Energy products	3,077	3,674	19.4	36.0	34,580	36,660	6.0
Forestry products	241	243	0.8	-9.3	3,083	2,989	-3.0
Industrial goods and materials	6,952	6,893	-0.8	-3.2	83,982	85,020	1.2
Machinery and equipment	9,414	9,562	1.6	-4.7	114,639	116,620	1.7
Automotive products	6,618	6,015	-9.1	-16.0	79,781	79,971	0.2
Other consumer goods	4,462	4,529	1.5	-2.4	52,034	54,780	5.3
Special transactions trade3	447	497	11.2	-4.2	4,766	5,304	11.3
Other balance of payments adjustments	766	776	1.3	7.0	8,078	8,873	9.8
r revised ... not applicable 1. Includes Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United Kingdom. 2. Other countries in the Organisation for Economic Co-operation and Development (OECD) include Australia, Canada, Iceland, Mexico, New Zealand, Norway, South Korea, Switzerland and Turkey. 3. These are mainly low-valued transactions, value of repairs to equipment, and goods returned to country of origin.

Note to readers

Merchandise trade is one component of the current account of Canada's balance of payments, which also includes trade in services, investment income, transfers, capital and financial flows.

International merchandise trade data by country are available on both a balance of payments and a customs basis for the United States, Japan and the United Kingdom. Trade data for all other individual countries are available on a customs basis only. Balance of payments data are derived from customs data by making adjustments for items such as valuation, coverage, timing and residency. These adjustments are made to conform to the concepts and definitions of the Canadian System of National Accounts.

Constant dollars referred to in the text are calculated using the Paasche Price indices.

At the end of each quarter, The Daily includes a section describing trends and topics of interest relating to Canadian international merchandise trade. This section typically discusses data presented on a customs basis and not seasonally adjusted.

Revisions

In general, merchandise trade data are revised on an ongoing basis for each month of the current year. Current year revisions are reflected in both the customs- and balance of payments-based data.

Beginning with the January 2008 reference month (to be released on March 11, 2008), the previous year's customs and balance of payments data (i.e., 2007) will now be revised with the release of the January, February and March data months. Revisions to customs-based data for the previous year will continue to be released on a quarterly basis. Revisions to customs-based data for the three previous years (i.e., 2004, 2005 and 2006) will be available when the December reference month is released (February 14, 2008).

Revisions to balance of payments based data for the three previous years will be available when the April reference month is released, on June 10, 2008.

Factors influencing revisions include late receipt of import and export documentation, incorrect information on customs forms, replacement of estimates with actual figures, changes in classification of merchandise based on more current information, and changes to seasonal adjustment factors.

Revised data are available in the appropriate CANSIM tables.