OTTAWA—The Conference Board of Canada is crediting the rise of emerging economies like China for what it calls a decade of virtually no growth rather than a strong Canadian dollar.
In a new report, the think-tank explores Canada’s shift to a “two-gear” trade model which it says puts emerging economies ahead of the United States in terms of offering the greatest opportunity for growth.
In fact, the Conference Board stresses that pressures on the nation’s trade would have happened no matter the strength of the Loonie, though its performance likely accelerated the pace.
“Focusing on the value of the dollar as a key cause of Canada’s changing trade patterns, and thus a tool to change them, is counter-productive,” Conference Board director of industrial economic trends Michael Burt said in a statement.
“Canadian policy-makers have very limited influence on the value of the currency. Thus, ‘managing’ the value of the Canadian dollar would be difficult and unlikely to produce the desired revival in some industries.”
The report highlights the fact the Canada-U.S. trade relationship is waning in importance, with the nation’s trade strengths shifting away from some manufactured products toward professional services and products related to our natural resource wealth.
According to the Conference Board, Canada’s overall export volumes (both goods and services) changed little in the 2000s, with exports to the U.S. remaining stagnant since the since the turn of the century.
Meanwhile, it says exports to emerging markets grew by 80 per cent.
The strong Loonie alone does not explain this trend, the think-tank says.
While Canadian exports to the U.S. stagnated at the turn of the century, Canadian imports from the U.S. should have risen with the higher dollar but haven’t, according to Conference Board.
Yet, over the same period, the Canadian dollar also rose against many other currencies, such as the Euro, the British pound, the Chinese yuan, and the Mexican peso.
And in each case, Canada’s bilateral trade increased.
A decade ago, five key products—transportation equipment, pulp and paper, electronic products, plastics and wood products—accounted for almost half of Canadian exports.
Today, the top five consists of oil and gas, mineral products, chemicals, primary metals and food products.
The emergence of China on the world stage has led to a realignment of North American trading patterns, according to the Conference Board, with a new trade equilibrium developing among China, Canada and the U.S.
Canada is losing market share in the U.S. to China, and Chinese imports are capturing market share in Canada from the U.S.
However, the Chinese market provides massive opportunities for Canadian firms.
The report, Walking the Silk Road: Understanding Canada’s Changing Trade Patterns, is available on the Conference Board website.