Imports

Imports consist of goods or services purchased from residents of foreign countries by Canadian residents. For 1996 these totalled $331 billion, or $1.7 billion more than all receipts from EXPORTS. The 3 major import divisions were merchandise of $233 billion (70.3%), services of $48 billion (14.6%) and payments for foreign lending to and investing in Canada of $46 billion (13.8%). (Unilateral transfers such as foreign aid by Canada make up the balance of this category - $4.1 billion or 1.2%.)

Merchandise

The share of Canadian imports coming from the US remained at about 69% for nearly 6 decades, but largely as a result of the Canada-US Free Trade Agreement, it has increased to nearly 76% for 1996. Apart from the US, Canadian imports are from widely diverse places, 8.7% from the European Union (including the UK), 3% from Japan, 2.6% from Mexico, 2.1% from China, and about 7.5% from a wide variety of other nations.

As with exports, commodity imports are dominated by automotive products, which account for 22% of all merchandise bought abroad. Of these, about 84% come from the US, largely as a consequence of the Canada-US Autopact of 1965 (see CANADA-US AUTOMOTIVE PRODUCTS AGREEMENT). Japan has become the most important alternative source of supply. Most remaining automotive products come from the European Union, Mexico and South Korea.

Another large component of imports, amounting to 33% of the total, is machinery and equipment of many types - computers and other office equipment, industrial machinery, communications and electronic equipment, aircraft and other transportation equipment, and miscellaneous equipment. The overwhelming proportion of this category comes from the US, although Japan and the other Southeast Asian countries are significant suppliers, particularly in electronic equipment, construction machinery, and small equipment and tools.

Other important purchases from abroad comprehend a wide range of industrial goods (20.5% of all imports) including metals, chemicals and plastics, and a variety of other fabricated materials. Miscellaneous consumer goods (11%), food and beverages (6%) and energy products, mostly petroleum (4%), make up most of the balance.

Imports have been growing at a somewhat slower pace than exports over the last 10 years, about 7.8% compounded annually. Of this expansion 97% is attributable to the growth in the volume of imports and only 3% is due to price increases. By far the most rapidly increasing import category in volume terms since 1986 has been computers and other office equipment, which has expanded to over 10 times its 1986 level. Far behind, with imports only about doubling over the period, have been industrial materials, other machinery and equipment, and crude petroleum.

Services

The major purchases of services abroad by Canadians consist of foreign travel expenses (32.5% of total services); payments for the use of foreign transportation services (25.5%); and outlays for a wide variety of business services such as payments for management fees and technology by foreign subsidiary firms in Canada to their parent firms, royalties, patents and trademarks, film rentals, financial services and equipment rentals (39.5%). Payments by governments for diplomatic and military people abroad make up the remaining 2.5% of service outlays. About 70% of business services and 60% of other service outlays go to the US.

Investment Income

Canada also uses foreign capital and must therefore pay for the services of this capital through large annual outflows of interest, dividends and miscellaneous charges to the foreign holders of these debts. The retained earnings of foreign corporations in Canada (which are reinvested in Canada) are also a payment for the services of foreign capital.

Canada has been a net international borrower for many decades. This borrowing - by provincial governments, the federal government and corporations - was particularly heavy in the late 1980s and early 1990s, so that for 1996 payments for the use of foreign capital amounted to nearly $46 billions. Of this amount 74% was interest payments, 14% was dividends, and the remaining 12% was reinvested earnings.

See also BALANCE OF PAYMENTS; FOREIGN INVESTMENT; FREE TRADE; INTERNATIONAL TRADE.