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| The Economy 2004- Newfoundland and Labrador |
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Trade |
| A jurisdiction’s dependence on trade can be illustrated by its exports and imports as a percent of GDP. Compared to other provinces, Newfoundland and Labrador ranks fifth in terms of reliance on exports, with exports as a percent of GDP at about 62%. Our reliance on imports (67%) is even higher with only New Brunswick and Prince Edward Island imports being a larger percent of GDP. |
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The Province’s Trade Balance |
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The province has traditionally imported more than it has exported. The trade deficit was more than $2 billion in every year between 1988 and 2001. In 2002, however, the trade deficit was substantially reduced—at $816 million it was the lowest deficit in recent history. This improved trade balance was the result of a record value of exports (over $10.2 billion) which helped offset ever growing imports. The province’s trade deficit results entirely from interprovincial trade as Newfoundland and Labrador imports more from other provinces than it exports. In terms of international trade, the province generally exports more than it imports. This situation is explained by the fact that most consumer goods are imported from other provinces while most of the province’s commodity exports (e.g., fish, newsprint, iron ore and oil) are destined for other countries. The existence of a trade deficit implies that the province is spending in excess of what it is receiving for its goods and services. This is possible through borrowing of funds by consumers, businesses and government and the transfer of federal government funds to the province.
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Exports |
Imports |
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The province has experienced rapid growth in exports in the last ten years (tripled since 1993) due in large part to crude oil production. Oil exports now account for 46% of the total value of exports. While the province exports goods and services to nearly 100 countries, the U.S. is the province’s major market. This reliance on the U.S. market increased with the advent of oil production, since a significant portion of oil exports are destined for the U.S. Exports to other countries have also increased. China, for example, is now the province’s second most important international market (22nd position in 1993). Export growth to China has resulted primarily from the expansion of the province’s shellfish industry; semi-processed shrimp and crab account for over 60% of all exports to China. Exports recorded solid gains again last year, following a sharp increase in 2002 (as Terra Nova oil production began). Gains were mainly due to higher prices for and increased production of crude and refined petroleum. The value of exports is expected to decline modestly in 2004, the result of a higher dollar, lower oil prices and a decline in crude oil production. Beyond 2004 exports will be boosted as White Rose and Voisey’s Bay production comes on stream in 2006. Exports are expected to begin declining in 2007 with lower production from both Hibernia and Terra Nova. |
Imports account for about 60% of all goods and services consumed within the province. Imports reached a record value of $11 billion in 2002, up 109% since 1992. About 55% of imports were from other provinces while the remaining 45% came directly from other countries. Some products, such as crude oil and frozen whole cod, are imported for reprocessing but most imports, such as food, motor vehicles and electronic goods, are for direct consumption by households and businesses. In recent years, imports have grown substantially, driven by increased consumer spending and record levels of business investment. Activity on mega-projects requires significant inputs that are imported (e.g., the hull of the White Rose FPSO will be imported from South Korea). While the investment occurs in the province, import leakages associated with mega-projects, are very high, in the range of 70%. In some cases, this is unavoidable as the province does not have the capacity necessary to service these needs. Continued investment in the White Rose and Voisey’s Bay projects as well as moderate growth in consumer spending should continue to support high levels of imports in 2004.
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Photo Credit: Dept. of Fisheries and Aquaculture Dept. of Natural Resources Newfoundland Transshipment Ltd. |
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| This information was current as of March 16, 2004. | |
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