Figure 32-8 Canada’s Terms of Trade, 1961–2017
terms of trade. The opposite was true for oil-importing economies like the
United States and the European Union.
Canada’s terms of trade since 1961 are shown in Figure 32-8. As is clear,
the terms of trade are quite variable, reflecting frequent changes in the
relative prices of different products. Note the dramatic improvement in
Canada’s terms of trade in the early 1970s, reflecting the large increase in
oil prices caused by OPEC’s output restrictions. Since Canada is a net
exporter of oil, its terms of trade improve when the price of oil increases.
An even larger increase occurred in the 2002–2008 period, when the
world prices of most commodities, especially energy-related commodities,
increased sharply.