The role of intermediaries in international trade is increasing. Broadly defined, intermediaries act as a link between different parties in an agreement or transaction. This may include links in supply chains or specialized firms that assist manufacturers dealing with foreign markets. The purpose of this study is to analyze the importance of wholesalers, a specific type of intermediary, in terms of imports in Canada. In the United States 56% of firms that import are in fact intermediaries, accounting for the purchase of 24% of total imports. Information regarding intermediaries in Canada is scarce. Firm-level imports, either intermediate or finished products, can be categorized into direct and indirect imports. Direct imports are: (1) inputs purchased by manufacturers that are to be used in the production process, and (2) finished products purchased by retailers for the purpose of being sold to consumers. Indirect imports are intermediate products and finished products bought by wholesalers for resale to manufacturers or retailers. Thus, importing firms can be allocated to one of the four following bins: (1) direct importer – manufacturer, (2) direct importer – retailer, (3) indirect importer – wholesaler, and (4) mixed importer (i.e., both direct and indirect importer). This research paper will document the importance, characteristics, and determinants of each bin. As a secondary goal, this paper will investigate intermediation with respect to the United States and the North American Free Trade Agreement (NAFTA). This aspect is relevant since intermediaries possess a greater advantage over direct importing when the barriers to trade are more significant.
Data link: T2-Leap combined with import trade data, 2002-2012