How are we doing?

DFAIT reports that Canada’s overall economic activity rebounded in 2010 by 3.1%

December 29, 2011   by Mark Drake

Everyone needs feedback. It either confirms we’re on the right track or acts as an incentive for change and improvement. Foreign Affairs and International Trade (DFAIT) recently published Canada’s “State of Trade” report card, and the Canadian Chamber of Commerce held its annual trade day in Ottawa to coincide with the launch. Government and private sector speakers focused on Canada’s two largest international markets, the US and the European Union. Here are some of their key points:

• US challenges. The US market remains “job one” although it has declined from a peak of 87% of total Canadian exports to around 75% in 2010 (at $334 billion). Much of the decline has been in manufacturing, which has been partly compensated by the energy sector. Gains resulting from NAFTA have been eroded somewhat by US bilateral agreements, and by current US challenges related to debt, unemployment and tightened border security. Many non-tariff barriers remain due to discriminative regulation, delays obtaining approvals and standardization issues.

However massive opportunities remain, particularly in the energy sector where the US is increasingly anxious to escape its dependence on politically unstable countries for supplies. Canadian oil and gas are vital imports for the US, and that helps to explain why around 50% of investment in the Alberta oil patch is from US-based companies.

The thickening of the Canada/US border due to security issues is a concern. Delays are costing billions of dollars every year. Last February Prime Minster Harper and President Barack Obama declared their shared vision for “perimeter security,” although details are sketchy. Supply chain security will be important, with inspectors working as much as possible away from the border, easier crossings for low-risk travellers, and above all, an improvement in the physical, electronic and bureaucratic infrastructure. Regulations need to be simplified and standardized (without risk to sovereignty or compromising health and safety concerns), and security programs made more user-friendly.

One speaker suggested Canada needs to improve its lax intellectual property (IP) laws. Fifty per cent of exports to the US are IP related, and a tightening of legislation will help create more inward investment (and jobs), making the country more competitive.

Trade challenges
• European Union. Although the EU is Canada’s second biggest market, at around $49 billion it accounts for only 10% of total exports. The negotiation of a free trade agreement with the EU is making some progress. The fact that only eight out of 22 chapters have been settled underlines the complexity of the discussions. However, success will be important for Canada, as the World Trade Organization’s Doha Round would appear to be dead in the water, and the EU is the largest single market in the world, with government procurement alone reaching $2.3 trillion. The target is to finish negotiations by the end of 2011.

Remaining challenges include rules of origin for the auto sector, government procurement at the sub-national level, IP, non-tariff barriers and agriculture. Speakers argued for freer labour mobility in Canada, readier recognition of non-Canadian professional qualifications and above all the removal of the remaining barriers to internal trade. How can we genuinely claim to be a free trade nation while our inter-provincial barriers and supply management restrictions hold back trade and investment? Change is in part a question of political courage, but current arrangements do not make any sense in a genuine free trade environment, and that’s what we need in Canada to maximize long term economic growth.

• The 2010 report card. DFAIT reports that Canada’s overall economic activity rebounded in 2010 by 3.1%, after a 2.5% decline a year earlier. Unemployment was down from 8.3% to 7.6% and based on one of the best economic performances among the G7, our dollar rose to parity and higher against the greenback. In Canadian dollar terms, the export of goods and services rebounded by 8.7%, and these gains were spread over most markets, especially by exports to Japan and the EU. Industrial goods and materials, automobiles and energy products performed well, while exports of consumer goods, agricultural and fish products struggled.

What might our report card conclude?  A satisfactory performance, bearing in mind the difficult worldwide conditions but with some challenges and many exciting opportunities remaining.

Mark Drake is former president of Electrovert Ltd. and the Canadian Exporters’ Association. E-mail

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