Asia has seen significant change since the middle of the 20th century. Central Asian countries began the transition from central planning to the free market between the 1920s and 30s. Other countries, mainly China and Korea, began much later. The rapid industrialization of China and the outsourcing of manufacturing there by Western countries have created large trade deficits, echoing what happened in Japan. China's economy has become the second biggest in the world, surpassing Japan's, and is now second only to the United States. Analysts predict it will be number one and a key driver of Asia-Pacific trade expansion as early as 2020. India, too, is looming as a major economic power. Canada, which traditionally focused on the American market, is increasingly positioning itself as a Pacific Rim nation, not only in trade and investment, but culturally as well.
Economic Importance
Canadian business has viewed Asia as a source of growth and prosperity only partially and with hesitation. Because Canada will be affected by what happens “over there,” it is necessary that the Canadian perspective should be more global and pay particular attention to Asian countries.
Canada’s bilateral trade with Asian markets is significant. Canada’s top export market is China, followed by Japan. Together with South Korea, India, Hong Kong and Australia, these other economies each buy over $1 billion of Canadian goods annually. Philippines, Malaysia, Thailand and Vietnam have become increasingly important trade partners. China is Canada’s top import supplier, followed by Japan and South Korea. China is also Canada’s top Asian trading partner overall, valued at over $40 billion annually.
Volatile Trade
Canada’s trade with Asia is quite volatile. This variability is due largely to the nature of our commodities. Canadian exports to Asia rely heavily on natural resources such as wood and on big-ticket, infrastructure-related items such as telecommunications equipment and aircraft. The market for natural resource-based goods, besides being affected by environmental conditions, is competitive and therefore subject to changes in monetary exchange rates and changes to regulatory barriers imposed by Canada, a customer or a competitor. Sales of infrastructure-related goods are affected by business conditions. Many of Canada’s imports comprise electronics from Asia, including computers and computer components, semiconductors, etc. This sector is also subject to fluctuating demand, which is reflected in our demand for products imported from Asia.
An additional contributing factor to the variability of trade with Asia is Asia’s ongoing process of integration, both within the region and into the global trade system, which applies particularly to China.
Learn more:
Asia Pacific Foundation of Canada
Foothold in Asia-Pacific set to be lost?