Products with limited international supply for Canada

Kevin Jiang, March 2020

Highlights

• Canada imported nearly ten thousand unique products in 2019, with over 2000 being identified as vulnerable to supply chain disruptions in this report.
• Vulnerable products are mainly concentrated in the agri-food sector but are also commonly found in chemicals & fertilizers and metals & minerals.
• Pharmaceutical products and medical supplies have relatively diverse import sources, but alternative suppliers for certain essential products like defibrillators are still limited.

Background

Following the outbreak of COVID-19, global supply chains are at the risk of major disruptions. This report provides a cursory analysis of products that have limited international supply for Canada. These products could be especially susceptible and may require extra attention from policy makers to ensure minimum operations and necessities. 

In 2019, Canada imported nearly 10 thousand unique products at the 10-digit level under the Harmonized System (HS) classification. However, due to Canada’s unique trading relationship with the United States and the integrated supply chains between the two countries, the U.S. consistently showed up as one of, if not the largest supplier for these products. Out of products with multiple suppliers, the U.S. was the top supplier for over 5000 products and had import shares of more than 90% in nearly a quarter of them. The other dominant supplier for Canada was China, which was not only the largest supplier for nearly 2000 products, but also had over 90% import share in 120 of them. Other major suppliers include Germany, Italy, and Mexico, where each country was the top supplier for approximately 200 products.

In order to focus on the most vulnerable products, this report uses two main criteria, the total number of existing suppliers and the Herfindahl–Hirschman Index (HHI)^{Footnote 1}. The first condition narrows the list down to products with no more than three suppliers. This should be intuitive as products that have fewer existing suppliers are more likely to be exposed to disruptions to supply chains. However, this condition also removes products that have one or more countries accounting for a large proportion of Canadian imports but also have many smaller suppliers (e.g. Canada imported 90% of a product from the U.S. and the remaining 10% from 30 other countries). Thus, the first condition was complemented by an HHI index filter of more than 0.81 to re-include these cases of extreme import supplier concentration. 0.81 was selected as the cut-off because if one country accounted for 90% of the import value, that product’s HHI would be at least 0.9² = 0.81. This step removed over 7600 products, filtering the final list of products down to 2315.

These limited supply products had a total import value of over C$100 billion, representing approximately one-sixth of total Canadian merchandise imports in the past year. The U.S. was again disproportionately present by being the largest supplier for over 1700 products, followed by China (158 products) and Germany (37 products).

More than a third of these limited supply products were in the agri-food sector, primarily concentrated in fish and seafood, meat, dairy, and vegetables. There were over 90 fish and seafood products with limited supply, mostly shipped from the U.S., China, and Vietnam. High value imports include live lobsters and frozen haddock and catfish fillets. Next, there were limited supply of meat (88) and dairy (86) products, which included high value imports like pork and beef from the U.S. and parmesan cheese from Italy. Finally, we also identified 72 vulnerable vegetable products such as lettuce, potatoes, and cabbage, mainly sourced from the U.S. and Mexico.

Pharmaceutical products and medical supplies and equipment are especially likely to run into supply constraints during a pandemic. For Canada, there were 19 limited pharmaceutical products (HS 30) ranging from blood products to influenza vaccines, mainly being imported from the U.S. and Europe. Five scientific instruments and medical equipment (HS 90) were also identified, including defibrillators, which although Canada had 26 different suppliers in 2019, the majority came from the U.S. Other essential products like masks, surgical gloves, and ventilators were not identified as vulnerable in this report due to having a wider range of alternative suppliers. And lastly, while Canada had many suppliers for paper products like paper towels and toilet paper, nearly all its imports came from the United States.

The most dependent products are those for which there is only one supplier. In 2019, there were 394 products for which all imports were sourced from a single country. Again reflecting Canada’s special relationship with the United States; out of all Canadian imports with a single supplier, the United States was the largest sole supplier by far (298 products), with Italy (9 products) and China (8 products) trailing in distant 2nd and 3rd places.

Annex 1. Top 20 imports with single supplier by import value

Annex 2. Top 20 concentrated imports with multiple suppliers by import value