Mark Carney, as governor of the Bank of Canada, used to urge Canadians to export their way to greater prosperity, especially by selling more to emerging markets, particularly China and India.
Prime Minister Stephen Harper seemed to agree. His government launched trade negotiations, or floated the idea of trade negotiations, in various parts of the world.
None of these talks has yet succeeded, and in most cases, it’s doubtful they ever will. Negotiations with the European Union are stalemated. Talks with India are going nowhere. And the Trans-Pacific Partnership with the United States and many Pacific countries is complicated, particularly given Japan’s recent decision to join the talks. Meanwhile, whatever hopes there are for a sturdier recovery for the Canadian economy rest with that old standby – the U.S. economy.
Despite all this trade talk, the sad fact is that Canada now has a billion-dollar trade deficit. Throw in services and a chronic travel deficit, and Canada is running a current account deficit of about 3 per cent of gross domestic product, higher than any country in the G8, including the United States and Britain.
Canadians in general, and the Harper government in particular, have given themselves repeated pats on the back for weathering the 2008 recession and its aftermath better than any country. This narrative has become a fixture in government speechifying. The Prime Minister repeated it in a mild form at last week’s G20 summit. The narrative plays to the country’s self-esteem and therefore represents an excellent political message.
Canada’s strong fiscal situation, created by the governments of Jean Chrétien and Paul Martin, certainly helped when the financial meltdown arrived. So bad were the fiscal imbalances of the United States and European countries (except Germany) that Canada did indeed compare favourably, and still does (again, except for Germany).
We are five years from that recession now, and unemployment in Canada has been above 7 per cent since 2008. Yet strangely, there is little hue and cry about this new normal, which includes a youth jobless rate of more than 14 per cent.
In the past half-year, job creation has been about 12,000 per month, compared to 29,000 a month for the previous half-year. That lower rate reflects the overall sluggishness of economic growth.
The government’s mantra remains that it is focused on “jobs and the economy,” while other parties chase marginal issues such as legalization of marijuana and Senate abolition. The Conservatives are right about the marginality of the issues being talked up by their opponents. But if the government is indeed fixated on “jobs and the economy,” statistics show that a large gap remains between bragging and reality.
All the provinces, save Saskatchewan, remain in deficit. So does the federal government, although it appears to be heading toward a balanced budget in time for the 2015 election, an accomplishment the Conservatives will highlight during the campaign.
Economic growth remains below 2 per cent, not enough to make a dent in the unemployment rate. Next year looks somewhat better, courtesy of a recovery of sorts in the United States, the train that still pulls along the Canadian economy. But it’s hard to see unemployment ducking below 7 per cent for quite a while.
Quick growth isn’t going to come from trading with emerging markets, most of which have slowed down. It won’t come from trade deals, since even if they happen, they won’t produce results until years down the road.
Domestic demand will remain sluggish, with some of that demand built on debt, as in the housing market. Pumping more bitumen to other places is fraught with uncertainties, and it will take many years for a pipeline to be ready to pump crude from the west to Quebec and New Brunswick. As for the “ring of fire” metal deposits in Northern Ontario, these will be snarled in aboriginal claims and politics for many years.
Five years after that brutal recession, Canada remains fiscally weaker, saddled with a much higher rate of unemployment, a slower growth rate, trade and current account deficits, sputtering or failing trade negotiations, an aging population, uncertain energy exports – but a lot of political bragging about how wonderfully we are performing.