Business Council of British Columbia – The Sad Tale of Canadian Exports
BC, Business, News
Monday December 3, 2018
The Sad Tale of Canadian Exports
Canada’s Exports in 2017
|Goods Exports: Detail|
|Metals and ores||$78.3|
|Chemicals and plastics||$43.1|
|Source: Export Development Canada.|
In 2017, the value of Canada’s exports of goods reached a record high — $501 billion. We also exported another $113 billion worth of services that year – everything from engineering, communications and professional services to tourism, web-based services and royalties earned on Canadian-owned intellectual property. Table 1 summarizes the composition of Canada’s exports.
At first glance, $500 billion of merchandise exports looks impressive. But in some respects, it’s a disappointing number.
To see why, consider what’s happened to Canada’s export prowess since 2000. By any measure, the story is sobering: we rank near the very bottom among both the G20 countries and the advanced economies in the growth of exports. Annual export growth has averaged 2.5% in US dollar terms, barely keeping pace with (domestic) inflation. Over the same period, world trade has been expanding by roughly 6% per year. US exports have grown by 4.1% per year, Germany’s by around 6%, South Korea’s by more than 7%, etc. Among the major economies, only Japan has come close to “matching” Canada’s underwhelming export performance since 2000.
Given the above trends, it’s not surprising that Canada’s global market share in traded goods has plummeted since 2000 (see Figure 1 below). Canada’s share of total US imports has also trended lower over time; indeed, we now trail both China and Mexico as suppliers of American merchandise imports.
In some ways the picture is even worse than these numbers suggest. That’s because Canada has been producing and selling vastly more crude oil in the last decade-and-a-half. In fact, as recently noted by the Canadian Manufacturers and Exporters, the bulk of Canada’s overall export gains since 2000 reflect steadily rising shipments of crude oil, all of which is destined for the United States. If we remove oil from the statistics, the value of Canada’s merchandise exports has been rising by a meagre 1.0-1.5% per year since 2000. No wonder Canada’s presence in global markets has been diminishing.
Canada’s Share of Global Exports (%)
|Source: Canadian Manufacturers and Exporters.|
The hard reality is that, apart from oil and bits and pieces of agri-food, Canada has been losing market share, both globally and within North America, across almost the entire spectrum of traded goods, including virtually all manufactured products as well as high technology, minerals/metals, and pulp and paper, among many others. This is strong evidence that Canada’s overall international competitiveness is waning.
The federal government’s Fall 2018 Economic Statement goes some way toward recognizing the country’s export development and competitiveness challenges. Ottawa is allocating $1.1 billion to support an “export diversification strategy” that aims to boost Canada’s exports by 50% by the mid-2020s. That’s a start. Now, federal government decision-makers and their counterparts in the provinces need to get to work tackling the array of tax, regulatory, infrastructure and policy issues that are holding back investment and business growth in the industries that produce Canada’s traded goods and services.