The balance of trade is the difference between the value of exports and the value of imports over a given period, and can be calculated from a broad perspective or for specific product categories or trading partners. Trade balance statistics are generally calculated by subtracting the value of imports from the value of exports.
In the context of discussions on Canada's trade balance, different statistics can be referenced. For example, Statistics Canada produces international merchandise trade statistics on two different bases:
- customs, and
- balance of payments (BOP).
These bases allow for the calculation of the balance of trade in goods with the world and with specific countries from these two perspectives. The primary distinction between customs and BOP concepts lies in the focus of the data. Customs-basis statistics reflect the physical movement of goods between Canada and its trading partners, while BOP-basis data track the shifts in ownership between Canadian residents and non-residents.
- Customs-basis data are used to compile net exports (the term used to indicate a "balance" on a customs basis).
- BOP-basis data are used to compile the official merchandise trade balance indicator for goods, as well as the trade balance for goods and services.
Additionally, merchandise trade compilers in other countries produce statistics that often reflect a trade balance with Canada that differs from Statistics Canada's measures.
Although all these statistics are valid measures, they are based on different data, each with their own concepts, definitions and uses. Understanding the key concepts and uses for each basis can help determine which statistic may be most appropriate to use given the objectives of individual data users.
Customs-basis statistics
Customs-basis statistics measure the change in the stock of material resources in Canada that results from goods entering (imports) and leaving (exports) the country. Customs-basis data are therefore useful for understanding the physical movement of goods between countries. These statistics offer highly detailed product categories and several different dimensions, such as province or territory, port, and mode of transport.
Customs-basis data are available for all of Canada's trading partners, with imports attributed to the country of origin of the goods and exports to the country of last known destination. Trade with a given country can be further broken down by product, and by other dimensions as well. Given that customs duties and tariffs are typically calculated based on the country of origin of the goods (the country where the goods were grown, extracted or manufactured), customs-basis data may be more relevant to use in the context of tariffs.
However, customs-basis data are not directly comparable with trade in services data or with other macroeconomic indicators such as gross domestic product (GDP). BOP-basis statistics do offer this compatibility, and with it a broader perspective on Canada's trade activity.
Balance of payments basis statistics
BOP-basis trade data provide a measure of economic transactions in goods between Canadian residents and non-residents that result from a change in ownership. Canada's official measure for the trade balance is calculated by subtracting BOP-basis imports from BOP-basis exports.
Canada's BOP-basis merchandise trade in goods data are sourced from the customs-basis data, which are then adjusted to align with BOP concepts. These adjustments, which are focused primarily on valuation, coverage and timing, allow for the integration of merchandise trade data with other macroeconomic accounts statistics, such as gross domestic product (GDP).
Unlike customs-basis data, which are multidimensional, BOP-basis data are available only by aggregate product category or by principal trading partner (including 27 specific countries). Therefore, it is not possible to break down imports and exports with a specific country by product category.
Imports for the principal trading partners are attributed to the country of export of the goods to reflect the change in ownership concept on a BOP basis. Like the customs-basis data, exports are attributed to the country of last known destination.
In addition to the trade balance for goods on a BOP basis, the trade balance can also be calculated for goods and services combined to get a more complete picture of Canada's trade activity. This is accomplished by adding BOP-basis merchandise trade data for goods with data for trade in services, and then subtracting imports from exports. As principal trading partner details are also available for trade in services data, it is possible to calculate a total trade balance (goods plus services) for Canada's individual principal trading partners.
Comparing bilateral merchandise trade statistics
While it might be assumed that the trade statistics of one country should match the trade statistics of another for bilateral trade between the two, this is not usually the case. There are several reasons why the data produced by one country can differ from those produced by another, with the key factor being the attribution of countries in international merchandise trade statistics.
To illustrate the attribution of partner countries in trade statistics and the impact on the comparability of bilateral trade data, the example of Canada's trade with the United States will be examined.
Comparing customs-basis bilateral trade data
Beginning with customs-basis data, both countries follow international standards for the attribution of trading partners in their statistics. These standards recommend that:
- imports be attributed to the country of origin of the goods; and
- exports, which include both domestic exports and re-exports, be attributed to the country of last known destination.
Re-exports are exports of goods originating in another country that were previously imported and then exported either without significant alteration or after undergoing minor processing (such as packaging), which keeps their essential nature unchanged. The treatment of re-exports in the compilation of merchandise trade statistics is an important factor in bilateral trade balance differences (or asymmetries) between trading partners.
In-transit shipments are different from re-exports and represent exchanges between two countries that rely in part on a third country's transportation infrastructure. Such shipments typically do not clear customs in the third country, and this country would therefore not be listed as either the country of origin or the country of export.
According to Statistics Canada, Canada imported $373.7 billion (all values are in Canadian dollars) of goods from the United States in 2023. For the same year, the US-compiled data showed US exports to Canada of $478.1 billion. Partner country attribution is behind most of the difference (or asymmetry) between these two statistics. Canada's import statistics, as mentioned, are attributed to the country of origin. This includes goods of US origin that were directly shipped from countries other than the United States. In the US export data, these would not appear as exports to Canada, but as exports to a third country. In addition to this, the US data for total exports include re-exports of foreign-origin goods to Canada, which in the Canadian import data are attributed to the country of origin. Of the $104.4 billion difference between these bilateral trade statistics, US re-exports of foreign-origin goods were $86.3 billion, accounting for about 83% of the difference.
Trading partner attribution also leads to asymmetry when looking at southbound trade: Canada's exports to the United States and US imports from Canada. In 2023, Canadian data showed that Canada exported $594.5 billion in goods to the United States, while the US data showed $564.9 billion in imports from Canada. Again, country attribution is the main factor behind the difference, mainly Canada's re-exports of foreign-origin goods to the United States. Consistent with international standards, total exports include both domestic exports and re-exports of foreign-origin goods. On the import side, these re-exports are attributed to the country of origin of the goods, not the country from which the goods were directly shipped. In 2023, Canada's re-exports of foreign-origin goods to the US were valued at $25.0 billion, accounting for 85% of the asymmetry between the bilateral statistics. In addition, the US import data also include imports of Canadian-origin goods from countries other than Canada, which are attributed to other countries of destination in Canadian export data.
These asymmetries between the bilateral trade statistics published by countries are normal and reflected in customs-basis net exports. In the case of Canada-US trade, the 2023 Canadian surplus in net exports ($220.8 billion) is larger in Statistics Canada's customs-basis statistics than it is in the equivalent statistics published by the United States ($86.8 billion).
Comparing balance of payments basis bilateral trade data
Asymmetries in bilateral trade statistics are also evident within BOP-basis data, with differences resulting mainly from country attribution and BOP adjustments. The BOP standards recommend that compilers identify the country that last owned the goods for attribution in import statistics. However, specific methods for doing so are not prescribed.
In 2023, the Canadian data showed $592.9 billion in exports to the United States, while the US data showed $576.6 billion in goods imported from Canada. As with the customs-basis data, and in contrast with the Canadian approach for BOP-basis imports, US imports on a BOP basis are attributed to the country of origin and include Canadian-origin goods imported from countries other than Canada. Also, Canadian total exports include re-exports of foreign-origin goods to the United States. The resulting asymmetry is therefore essentially in line with customs-based data for Canadian exports to the United States and US imports from Canada.
In the reverse scenario—Canada's imports from the United States and US exports to Canada—trading partner attribution is less significant. Unlike customs-basis data, Canada's BOP-basis imports are attributed to the country of export rather than the country of origin. In 2023, Canada's imports from the United States were valued at $484.6 billion, while the United States reported $478.9 billion in exports of goods to Canada.
Although some BOP adjustments are shared between the two countries, these are largely compiled independently from different data sources. This may result in differences between the reported imports of one country and the reported exports of the other, and vice versa. BOP adjustments that may lead to asymmetries include trade definition (like repairs), valuation and residency, and timing.
As with the customs-basis data, the asymmetries between the bilateral trade statistics published by countries are normal and reflected in the balance of payments basis trade balance. In the case of Canada-US trade, the 2023 Canadian trade surplus ($108.3 billion) is larger in Statistics Canada's BOP-basis statistics than it is in the equivalent statistics published by the United States ($97.7 billion).
|
Customs-basis values |
BOP-basis values |
|
|
Northbound trade: Canadian imports |
$373.7 billion |
$484.6 billion |
|
Northbound trade: US exports |
$478.1 billion |
$478.9 billion |
|
Southbound trade: Canadian exports |
$594.5 billion |
$592.9 billion |
|
Southbound trade: US imports |
$564.9 billion |
$576.6 billion |
|
Canadian data: net exports/trade balance |
+$220.8 billion |
+$108.3 billion |
|
US data: net exports/trade balance |
-$86.8 billion |
-$97.7 billion |
All values are in Canadian dollars
Source: Table 12-10-0005-01 Canada and United States bilateral trade in goods, customs and balance of payments-basis, by currency and direction of trade, quarterly
Detailed explanations of the concepts and definitions related to comparisons of bilateral trade data, both on a customs basis and on a BOP basis, can be found in the article Comparing Canadian and US bilateral trade in goods data, 2014, 2015 and 2016.
Statistics Canada tracks published statistics for the two countries in its table Canada and United States bilateral trade in goods, customs and balance of payments-basis, by currency and direction of trade, quarterly, which presents data in both Canadian and US dollars.
More information on data sources, concepts and definitions for customs-basis and BOP-basis statistics can be found in the Guide to Canadian International Merchandise Trade Statistics.