Canada Incurs Record $14 Billion Automotive Trade Deficit in 2008

February 16, 2009, 10:41 AM EST

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Data newly released from Statistics Canada confirms that Canada experienced its worst-ever year in international trade in automotive products in 2008, according to an analysis from the Canadian Auto Workers union.

Canada's automotive trade deficit more than doubled last year, to almost $14 billion - an all-time record. The 2007 deficit was $6.6 billion.

Canada's exports of finished vehicles declined dramatically (by almost one quarter) as a result of the financial crisis and resulting collapse of U.S. auto sales. Imports of auto parts (which are used in Canadian auto factories) also declined.  But imports of finished vehicles from offshore grew again (for the fifth straight year), despite the economic crisis.

The aggregate data reveal several worrying trends. For the first time in decades Canada experienced a net auto trade deficit within North America. Canada's traditional auto trade surplus with the U.S. plunged to just $4 billion (barely one-fifth the level of three years ago).  That surplus with the U.S. no longer offsets Canada's long-standing auto trade deficit with Mexico (which equaled $4.5 billion last year), leaving a small combined deficit for the NAFTA region as a whole.

Canada's auto trade with offshore (non-NAFTA) producers remains very unbalanced as well.  Canada's automotive exports to countries outside of NAFTA plunged 30 per cent last year (to just over $1 billion).  However, despite slowing auto sales in Canada, auto imports from outside of NAFTA continued their steady growth, reaching a record $15 billion. Those imports have doubled in the past decade.  For every dollar of automotive imports that Canada accepts from outside of NAFTA, Canada exports just seven cents back in the other direction.  Since Canada no longer can rely on a trade surplus within the North American market to offset this offshore deficit, Canada's overall trade deficit has widened dramatically.

"This data confirms that Canada's unbalanced trade with Asia and Europe is a major cause of the industrial carnage we see around us today," said CAW President Ken Lewenza, reacting to the new data.

The collapse of Canada's automotive trade position has contributed substantially to the deterioration in Canada's overall merchandise trade balance.  Aggregate statistics released last week confirmed that Canada slipped into an overall trade deficit in December for the first time since 1976.

"For years we tolerated a growing offshore imbalance, because our strong position in the U.S. market bailed us out," Lewenza said.  "But clearly we can't count on the U.S. market to prop up our trade numbers anymore, which makes it all the more essential to address those trade imbalances with the rest of the world."

"For years we have relied on exports of petroleum and other resources to subsidize a growing manufacturing trade deficit, but this is no longer possible either," Lewenza added.  "Our collapsing performance in autos and other manufactured goods now translates into a bottom-line trade deficit."

Lewenza reiterated the CAW's position that the federal government must address the growing auto trade imbalance as part of a broader national auto strategy.  The CAW has made its willingness to engage in contract renegotiations with the Detroit Three automakers conditional on the implementation of a national auto strategy.

The CAW estimates that the $14 billion automotive trade deficit in 2008 corresponds to the loss of 22,500 direct auto jobs (based on the average job intensity of automotive shipments).

"Because of this trade deficit, Canada now has far less than its share of auto jobs, even within North America. Canadians deserve to have a proportional share of good jobs, and implementing a national auto strategy is a pre-requisite for stabilizing and rebuilding the industry," said Lewenza.

Click here for a detailed table summarizing the 2008 auto trade data.


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