Thaindian News

Ottawa, Jan 20 (IANS) Canadians over-estimate the value of their country’s trade with the US, a major think tank says in a report.

The Conference Board of Canada report, released Thursday, uses a “value-added” methodology of tracking the flow of goods. It says this new analysis system takes into account the different steps of the production process a product is made from with parts created in more than one country.

It uses the example of a chair made in Canada that would be worth $10. If the chair is shipped to the US to be painted, its value increases to $12. Using the Canadian government’s trade statistics, the chair is shown as a $10 export and a $12 import.

The Conference Board says its system eliminates this double-accounting and simply deals with the value added to a product by each country. Using this system, it found the Canadian government over-estimated its foreign trade by 31.1 percent in 2004. Canada’s portion of global trade was 2.9 percent rather than 3.1 percent, reported Xinhua.

Using its system, the Conference Board found trade accounted for just 24 percent of Canada’s gross domestic product, rather than the 35 percent reported by the government.

This dropped Canada from 17 to 20 on the list of the world’s largest trading nations.

“Using value-added trade measures, the description of Canada as a ’small, open economy’ may be less accurate than previously believed,” Michael Burt, the board’s director of industrial economic trends, said in a statement.

“Value-added trade may also help to explain in part why Canada was less affected by the recent global recession than other countries.”

The report found Canada’s trade with Europe and Asia was more extensive than was generally believed. It noted the lack of newer trade data prevented it from commenting on Canada’s increased trade with China in the past seven years.

The Conference Board acknowledged that using data from 2004 might not fully reflect recent changes in the world economy, particularly the increased importance of emerging markets such as China.

Under the value-added system, the study found transactions with the US to account for 62 percent of Canada’s overall trade, down from 69 percent when using traditional measures.

The Conference Board said service industries contributed to 40 percent of Canada’s trade value, compared to just 16 percent calculated by government statistics experts.

“Business and financial services, as well as trade, transportation and communications services, are much more important trade contributors than conventional trade measures suggest,” the study says.