Foreign affiliate trade statistics

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Sales of goods and services of foreign affiliates of Canadian businesses rose for a third consecutive year in 2006, largely as a result of robust growth in the financial as well as the mining and oil and gas sectors. On the other hand, employment of foreign affiliates fell slightly in 2006 after rising for four consecutive years.

Sales of goods and services by foreign affiliates operating abroad increased by $26.4 billion in 2006, up 6.4% from 2005. Over 90% of the sales increase was accounted for by the financial (up $9.3 billion) and mining and oil and gas (up $14.8 billion) sectors. Nevertheless, this represented a slight deceleration from gains of 8.8% in 2005 and 12.9% in 2004.

Sales in the goods-producing industries led the growth in 2006, expanding 7.2% to $288 billion. Service-producing industries sales were up 5.0% to $153 billion, though down from growth of 11.1% in 2005 and 10.1% in 2004.

Employment in the goods-producing industries rose by 10,000 in 2006 to 690,000 workers. This was led by the mining and oil and gas extraction industries, which were up another 7,000 workers, in light of the strong world markets in the resource-based industries in 2006. However, these gains were more than offset in the service-producing industries, as employment fell by 13,000 workers in 2006 to 394,000. Although jobs held steady for most of the service sectors, there was a significant drop in the information and cultural sector.

Sales of foreign affiliates in the European Union declined by $6.6 billion in 2006, barely offsetting a $6.3 billion rise in sales at US affiliates. Accordingly, most of the sales increase of foreign affiliates originated from the "other countries" category, which had a sales gain of $26.7 billion. This reflects strong economic growth in some of these regions.

Currency conversion played a role in the value of foreign affiliate sales in Europe and the United States. The appreciation of the Canadian dollar vis-à-vis the Euro and the British pound partly explain the decline in sales from European Union affiliates, which are denominated in foreign currencies. These sales, when converted back to the Canadian dollar, translated into a 5% decline in their value. The noon average value of the Canadian dollar also appreciated by 6% in 2006 vis-à-vis the US dollar, partly dampening the Canadian dollar sales increase of US affiliates.

In 2006, employment at European Union affiliates had a modest rise of 4,000 to 225,000 workers. However, at US affiliates, employment fell by 30,000 to 595,000. Largely offsetting this decline was an increase of 25,000 jobs at affiliates in "other countries."

Over the longer term, sales of foreign affiliates in "other countries" increased 80.5% in 2006 over 2002, compared with gains of 18.1% in the European Union and 10.1% in the United States. From 2002 to 2006, the strongest growth in employment has been in "other countries" with an increase of 29.3%. The growth in employment and sales of these foreign affiliates is in line with the growth in Canadian direct investment abroad in that part of the world, which increased by over 25% during the same period.

Note: The strong growth in Canadian direct investment abroad, evidenced since the mid-1990s, has given rise to interest in understanding the activities of foreign affiliates of Canadian enterprises. This release provides some perspective on the sales and employment of foreign affiliates, including both industry and geographical detail.

To be consistent with the international practice for measuring foreign affiliate trade statistics, only the data on majority-owned foreign affiliates are included. For operational reasons, depository institutions and foreign branches of firms are excluded from the estimates. Sales and employment figures of majority-owned foreign affiliates represent 100% of the sales and employment, even if the Canadian ownership is less than 100%.

Available on CANSIM: tables 376-0060 and 376-0061.

Definitions, data sources and methods: survey number 1539.

For more information, contact Client Services (613-951-1855; infobalance@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact Bruce Nichols (613-951-5665; bruce.nichols@statcan.gc.ca), Balance of Payments Division.