Where does Canada have a trade advantage over the competition?

  • Nov 14, 2017

Throughout the month of November, we’ll explore global patterns in agricultural and food trade, and the role Canada plays in that trade. These posts will build on the insights from our recently released trade ranking reports for agriculture and manufactured foodWe examine Canada’s rankings as a world exporter, the commodities in which we have an export advantage, and the opportunities ahead for agriculture and manufactured food exports.

Have you ever wondered which Canadian commodities have the export advantage over our competitors? We looked at Canada’s Revealed Comparative Advantage (RCA) to find out. Of all 164 ag and food product commodities, Canada has an RCA in 18 agricultural commodities in 23 manufactured foods. 

Understanding revealed comparative advantage

A country is considered to have a comparative advantage over other countries if its commodity exports represent a greater share of its total exports of that commodity’s class of goods than it does in global trade flows. 

In 2016

Canada’s pork exports were valued at US$2.4 billion. Canada’s exports of total processed food products were valued at US$19 billion. Pork therefore represented 12.6% of Canada’s total processed food product exports ($2.4 billion/$19 billion).

World pork exports were valued at US$25.6 billion. World exports of processed food products were valued at US$602 billion. Pork therefore represented 4.3% of the world’s total processed food product exports ($25.6 billion/$602 billion).

Because pork represented a greater share of Canada’s processed food product exports than it did at the world trade level, Canada has a revealed comparative advantage of 2.9 (12.6:4.3).

Where do we have an advantage over the competition?

Canada has an RCA in 18 agricultural commodities. Many are export markets that are not top dollar exports, nor are growing over last decade (Figure 1). Although, six commodities stand out as they’re better positioned for export growth.

Pulses are particularly well-positioned for growth as:

  • world’s top 15 highest-dollar export
  • world’s top 15 fastest-growing export (accounting for at least 0.5% of global export values in 2016)
  • a commodity that Canada has an RCA producing

Figure 1: Six ag commodities show significant opportunities

Source : UN Comtrade Data, September 2017

The same can be said for food products. Canada produces 23 commodities with an RCA. However, many are not a top dollar export nor growing quickly at the global level.

Although there‘s not a food product that fits in the intersection of the three categories, beef, pork, canola oil, chocolate and bread are well-suited to exploit export opportunities. 

Figure 2: Beef, pork, and canola oil are well poised for growth

Source : UN Comtrade Data, September 2017

There are many commodities that we have the advantage producing compared to the competition. Besides wheat, canola, pulses, beef and pork, many others are showing opportunities for growth. Over time, investments in innovation and productivity will help us develop a comparative advantage.

For the bigger picture check out our FCC Ag Economics trade ranking reports for agricultural commodities and manufactured food.

Amy Carduner
Agricultural Economist

Amy joined the FCC Economics team in 2017 to monitor agricultural trends and identify opportunities and challenges in the sector. Amy grew up on a mixed farm in Saskatchewan and continues to support the family operation. She holds a Master in Applied Economics and Management from Cornell University and a Bachelor in Agricultural Economics from the University of Saskatchewan.