The growing importance of foreign affiliate sales

Canadian foreign affiliate (FA) sales¹ increased from $350 billion in 2002 to $500 billion in 2012, gaining importance relative to Canadian exports of goods and services over this period.

Canadian Foreign Affiliate Sales and Exports
Goods and Services (2002 to 2013)

* FA sales data are released with a lag; the latest data released from Statistics Canada is for the year 2012.

Source: Statistics Canada, Foreign Affiliate Trade Statistics

In 2012, FA sales were equivalent to 93 percent of exports, up from 74 percent in 2002. Although the growth of FA sales varied over this period, FA sales held up better than exports during the global financial crisis (2008 to 2009). During the crisis, exports plummeted 21.4 percent, while FA sales fell only 8.4 percent. In the post-crisis period (2009 to 2012), exports rebounded quicker than FA sales; however, FA sales continued to rise as a share of exports.

During the past decade, growth in FA sales of services outpaced growth in goods, growing at an annual average rate of 4.8 percent, while FA sales of goods grew at only 2.9 percent. FA sales of services weathered the crisis better than sales of goods. In fact, FA sales of services expanded 5.1 percent during the crisis, while FA sales of goods fell 14.5 percent. FA sales of services also play a prominent role in Canada’s international services trade relative to services exports; in 2012 FA sales of services were equivalent to two and a half times the value of services exports.

The strong growth in FA sales during the past decade has been driven by growth in non-OECD countries. From 2002 to 2012, FA sales in non-OECD countries grew at an annual average rate of 12.3 percent, compared to only 1.4 percent in the U.S., 1.3 percent in the EU, and 5.8 percent in other OECD countries. Additionally, in all regions outside the U.S., FA sales already outweigh Canadian exports: a trend that has occurred since Statistics Canada began tracking the sales of foreign affiliates in 1999.

The Upshot

Reflecting the substantial increase in CDIA, growth in Canadian foreign affiliate sales has outpaced export growth over the past decade, increasing the relative importance of foreign affiliate sales as a means for Canadian companies to serve foreign markets, especially in non-OECD countries.

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¹ Canadian Foreign Affiliate Sales data consists of the sales of goods and services of affiliates abroad that are majority-owned (i.e. more than 50 percent of the voting shares) by a business that resides in Canada.